Facts of the Case
Smart Timing Steel Limited (STSL) is an operational creditor of National Steel and Agro Industries Limited (NSAIL). A petition under Section 9 of Insolvency and Bankruptcy Code, 2016 i.e. Application for initiation of corporate insolvency resolution process by operational creditor was filed at the National Company Law Tribunal, Bombay bench.
However, copy of “the certificate from the Financial Institution maintaining account of the ‘Operational Creditor’ which shall substantiate proof of default was not produced by the appellant.
The learned Counsel contended that the appellant is a foreign company of Hong-Kong having no office or account in any scheduled bank or ‘Financial Institution’ as defined or notified under any law for the time being in force. Hence the providing a copy of the same is impossible.
The National Company Law Tribunal rejected the application.
An appeal was preferred by the appellant to the National Company Appellate Tribunal.
Clause(c) of subsection (3) of Section 9 The Insolvency and Bankruptcy Code, 2016.
The operational creditor SHALL, along with the application furnish a copy of the certificate from the financial institutions maintaining accounts of the operational creditor confirming that there is no payment of an unpaid operational debt by the corporate debtor.
Are the provisions stipulating list of documents required for filing an application under Section 9 of the Insolvency and Bankruptcy Code, 2016, mandatory or directory in nature?
Contention of the Appellant
The learned Counsel appearing on behalf of the appellant submitted that the foreign companies and multi-national companies having no office or having no account in India with any of the ‘Financial Institution’ will suffer to recover the debt as due from ‘Corporate Debtors’ of India.
He further submitted that the word ‘shall’ used in sub-section (3) of Section 9 for furnishing documents etc. should be read as ‘may’, and hold that sub-section (3) of Section 9 is directory in nature.
He also made a reference a Supreme Court Judgement Decided in the year 2005 in case of Kailash Vs. Nanhku and Others”
- The Honorable Court held that ‘Kailash Vs. Nanhku and Others’ is not applicable in the present case, as the question of Law in the said case does not relate to prescription of time.
- It referred to a case Manilal Shah Vs. Sardar Sayed Ahmed (1955), wherein the Hon’ble Apex Court held that where statute itself provide consequences of breach or noncompliance, normally the provision has to be regarded as having mandatory in nature.
- It further clarified that the argument that the foreign companies having no office in India or no account in India with any “Financial Institution” will suffer in recovering the debt from Corporate Debtor cannot be accepted as apart from the ‘I & B Code’, there are other provisions of recovery like suit which can be preferred by any person.
Date of Judgement: 19th May 2017 Court: NCLT
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