(Civil Appeal No. 15135 of 2017, decided on December 15, 2017)
In this judgment, SC interpreted certain sections of the Insolvency and Bankruptcy Code, 2016 (“Code”) in a favourable manner for foreign operational creditors.
Facts: – Certain amounts became due from the Respondent, Shilpi Cable Technologies Ltd. (“Shilpi Cable”) to Macquarie Bank, which gave rise to the present dispute. Macquarie Bank issued a demand notice through their Advocates under Section 8 of the Code, following which it initiated Corporate Insolvency Resolution Process (“CIRP”) by filing a petition under Section 9 of the Code.
Issues before the Supreme Court (‘court’):-
- Whether S. 9 (3) (c) of the Code is mandatory or directory in nature, especially in context of foreign operational creditors.
- Whether a demand notice of an unpaid operational debt under S. 8(1) can be issued by a lawyer on behalf of an operational creditor.
Supreme Court observed:-
- A Certificate by a Financial Institution is merely a confirmatory evidence
It was held that the expression “confirming” appearing in Section 9(3) (c) of the Code, makes it clear that although the certificate is a very important piece of evidence, it only confirms that there is no payment of an unpaid operational debt.
Therefore, a certificate under S. 9 is not a pre-condition to trigger the Code. The true construction of Section 9(3) (c) is that it is a procedural provision, which is directory in nature, as the Adjudicatory Authority Rules read with the Code clearly demonstrate.
- The Code cannot be made discriminatory
A foreign supplier may have a foreign banker who does not fall within Section 3(14) of the Code. That such person may be banking with an institution which falls outside the scope of Section 3(14) of the Code cannot be construed in a discriminatory fashion so as to include only those foreign operational creditors who happen to bank with financial institutions which are included under Section 3(14) of the Code.
Such a discriminatory interpretation would be violative of the right to equality enshrined in Article 14 of the Constitution of India, which applies to all persons including foreigners.
- Issuance of notice by lawyers
By reading Section 30 of the Advocates Act and Sections 8 and 9 of the Code together with the Adjudicatory Authority Rules and Forms thereunder harmoniously, the Court concluded that a notice sent on behalf of an operational creditor by a lawyer would be valid, proper and “in order”.