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Team Code (23)

MNLUA INTRAMOOTCOURT COMPETITION,2019

BEFORE

THE HON’BLE SUPREME COURT OF INDIA

CIVIL PETITION

No. _____

IN THE MATTER OF:

THANOS BANK --------------------------------------------------------------PETITIONER

Versus

HULK---------------------------------------------------------------------------RESPONDENT

SUBMISSION ON BEHALF OF RESPONDENT TO THE HON’BLE JUDGES OF

THE SUPREME COURT OF INDIA
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TABLE OF CONTENTS

Table of contents…………………………………………………………………2
Table of abbreviations…………………………………………………………...3
Index of authorities………………………………………………………………4
 Cases referred
 Statutes
 Web References
Statement of jurisdiction………………………………………………………….6
Statement of facts………………………………………………………………….7
Issues raised………………………………………………………………………..9
Summary of arguments…………………………………………………………..10
Arguments advanced……………………………………………………………..11

Issue I: Whether Constitutional validity of said contract is not valid

Issue II: Whether Section 9(c)(3) of the IBC, 2016 is mandatory

Issue III: Whether recourse to IBC is maintainable if existence of debt is disputed

Prayer……………………………………………………………………………..16
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LIST OF ABBREVIATIONS

ABBREVATION TERM
& and
AIR All India Reporter
NCLT National Company Law Tribunal
Bom Bombay High Court
NCALT National Company Appellate Law Tribunal
Pvt. Private
Ltd. Limited
IBC Insolvency and Bankruptcy
U.P Uttar Pradesh
Govt. Government
GOI Government of India
i.e. that is
No. Number
para Paragraph
Page/pg. Page Number
SC Supreme Court
SCC Supreme Court Cases
SCR Supreme Court Reperts
CIRP Corporate Insolvency Resolution Process
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INDEX OF AUTHORITIES

I. Cases referred

1. Taylor v. Taylor (1875) 1 ch. D. 426

2. Smart timing steel Ltd v. national steel and agro industries Ltd (2019)
3. Surendra trading company V. Juggilal kamlapat jute mills company Ltd and ors
(2017)
4. State of U.P. v. Babu Ram 1961v 2 scr 679
5. Desh Bandhu Gupta v. Delhi Stock Exchange (1979) 4 SCC 565
6. Baleshwar Bagarti V. Bhagirathi Dass [ILR 35 Cal701]
7. Mathura Mohan Saha V. Ramkumar Saha AIR 1916 Cal 136
8. Sree Metaliks Ltd. & Anr. v. Union of India & Anr.), 2017 SCC 1025
9. (Mobilox Innovations Private Limited v. Kirusa Software Private Limited)
10. (M/S. Innoventive Industries Ltd. v. ICICI Bank & Anr.), 2017 SCC
11. (Bhavesh D. Parish & Ors. v. Union of India) 2008 Volume 4 SCC 720
12. (R.K. Garg v. Union of India)
13. (State of Madhya Pradesh v. Rakesh Kohli & Anr.
14. Kumar Batra & Ors. v. State of Haryana)
15. (Government of Andhra Pradesh & Ors. v. P. Laxmi Devi
16. Macquarie Bank Limited vs. Shilpi Cable Technologies Ltd, 2017

II. STATUTES

1. Insolvency and bankruptcy code, 2016

2. Indian Companies act 1956
3. Indian Advocates act 1961
4. Indian contract act 1872
5. Sales of goods act 1930
6. Bill of Lading act 1856
7. Sick Industrial Companies (Special Provisions) Act, 1985,
8. Provisional Insolvency Act, 1920
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III.Web references

1. www.scconline.co.in (SCC ONLINE)

2. www.judis.nic.in(SUPREME COURT OF INDIA OFFICIAL)
3. www.manupatra.com(MANUPATRA ONLINE)
4. www.lexinexis.co.in(LEXISNEXIS INDIA)
5. www.casemine.com(CASEMINE)
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STATEMENT OF JURISDICTION

The Respondent herein has preferred an appeal to this Honourable Supreme Court of India
under Section 62 of the Insolvency and Bankruptcy Code, 2016 in favour the order passed by
the NCLT and NCALT of India.
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STATEMENT OF FACTS

On 2/2/2015, Avengers Pvt. Ltd. Company executed an agreement with Petitioner. Petitioner
is a forign bank. On the same date (i.e. 2/2/2015) purchased all the original suppliers right,
title and interest from Avenger Pvt. Ltd company. As the rights purchased by Petitioner was
a supply agreement in favour of Respondent. Therefore Petitioner became a original
supplier .

II

On 05-05-2015 there was another agreement between Petitioner and Respondent. The said
agreement was for the supply of goods worth US$5,00,000. After agreeing to the said terms
and conditions which was made in accordance with the sales contracts. Petitioner issued three
invoices dated 12-05-2015, 18-05-2015 and 23-05-2015 . So the payment term given under
the said invocies was 90 days from the date of bills of lading.

III

As agreement between petitioner and Avenger Pvt. Ltd. was not valid. So the respondent did
not paid payment under the bills of lading, petitioner sent an Email dated 27/08/2015 to
respondent. Because the code was constitutionally invalid respondent did not paid any
attention towards the mail . Ultimately due to the non-payment of outstanding amount by the
respondent petitioner issued a statutory notice on 28/01/2016 under section 433 and 434 of
Companies Act 1956. The reply for the said notice issued on 9/03/2016, Respondent denied
such liability

IV

Further enactment of insolvency and bankruptcy code 2016 Petitioner issued a demand notice
under section 8 of the code on 18/07/2016 at the registered office of petitioner calling upon
for the payment of outstanding amount

Respondent again denied the said demand notice by replying on 1/10/2017 for the payment of
outstanding amount. The Respondent also questioned the validity of agreement which was
done between Avenger Pvt. Ltd and Petitioner on 02/02/2015.
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VI

Because respondent denied notice sent by petitioner. Petitioner initiated insolvency

proceedings under section 9 of the Code before the NCLT on 12/10/2017. According to
NCLT there was non compliance of the mandatory provision of section 9(3)(c) of the code on
the part of petitioner requiring that the certificate specified therein must accompany the
application under section 9 of the Code and, therefor , application must be dismissed at the
threshold. So NCLT rejected the insolvency application made by Petitioner. Petitioner did not
submitted the mandatory copy of certificate so the result given by NCLT and NCALT was
from the respondents side

VII

NCLAT also agreed with NCLT and dismissed the appeal of petitioner. And also added that
an Advocate cannot issue a demand notice under section 8 on behalf of the operational
creditor

VIII

After the dismissal of said appeal by NCLT and NCLAT, Petitioner filed an appeal under
section 62 of the Code before Supreme Court of India
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ISSUES RAISED

I. Whether Constitutional validity of said contract is not valid

II. Whether Section 9(c)(3) of the IBC, 2016 is mandatory

III. Whether recourse to IBC is maintainable if existence of debt is

disputed
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Summary of Argument

I. Whether Constitutional validity of said contract is not valid

To challenge the said actions the petitioners have, instead of invoking, having regard to the
nature, cause and source of dispute and the contractual relations, ordinary civil remedy,
invoked prerogative jurisdiction. The learned respondent has raised objection against
maintainability of writ petition on the ground that the dispute relates to and arises from and in
view of the terms of the contract and that therefore writ petitions should not be entertained for
adjudicating and resolving such dispute. Thus, the question arises as to whether present
petitions are maintainable and having regard to the fact that dispute is raised in light of terms
and conditions of the contract.

II. Whether Section 9(c)(3) of the IBC, 2016 is mandatory

The operational Creditor has failed to annex copy of the said Certificate as required under
Section 9(3) of the Code, this petition is liable to be rejected.

III.Whether recourse to IBC is maintainable if existence of debt is disputed

IBC is not intended to be substitute to a recovery forum. It is also laid down that whenever
there is existence of real dispute, the IBC provisions cannot be invoked
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ARGUMENTS ADVANCED

I.Constitutional validity of said contract is not valid

The Code is an extremely draconian piece of legislation and must, therefore, be construed
strictly. If this is kept in mind, it is clear that Section 9(3)(c) is mandatory and requires to be
complied with strictly or else the application should be dismissed at the threshold. He stated
that in the context of it being recognized by our judgments that a financial creditor and
operational creditor are completely, differently and separately dealt with in the Code, and that
so far as an operational creditor is concerned, it is important to bear in mind that a very low
threshold is required in order that an operational creditor’s application be rejected, namely,
there being a pre-existing dispute between the parties. According to Section 9(3)(c) is a
jurisdictional condition precedent, which is clear from the expression “initiation” and the
expression “shall”, both showing that the Section is a mandatory condition precedent which
has to be satisfied before the adjudicating authority can proceed further. According to a copy
of the certificate from a financial institution is a very important document which makes it
clear, almost conclusively, that there is an unpaid operational debt. According to the principle
has been followed by a number of judgments and is applicable inasmuch as when a statute
requires a particular thing to be done in a particular manner, it must be done in that manner or
not at all1. There are various Sections of the Code, the Insolvency and the Adjudicating
Authority Rules, Form 5 in particular, together with the Viswanathan Committee and report
Joint Committee report of the Parliament2. It is clear from the definition of “financial
institution” contained in Section 3(14) that certain foreign banks are 10 included within the
expression “scheduled banks” under Section 3(14)(a) and that, under Section 3(14)(d), the
Central Government may, by notification, specify other foreign banks as financial
institutions. It is only where operational creditors have dealings with banks which fall within
Section 3(14), that they can avail the opportunity of declaring a corporate debtor as insolvent
under Sections 8 and 9 of the Code. Person’s who may be residents outside India and who
bank with entities that are not contained within the definition of Section 3 (14) would,
therefore, be outside the Code.

1
Taylor v. Taylor (1875) 1 Ch. D. 426
2
29095_2017_Judgement_15-Dec-2017.pdf
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II. Section 9(c) (3) of the IBC, 2016 is mandatory

The scheme under Sections 8 and 9 of the Code, appears to be that an operational creditor, as
defined, may, on the occurrence of a default (i.e. on non-payment of a debt, any part whereof
has become due and payable and has not been repaid), deliver a demand notice of such
unpaid operational debt or deliver the copy of an invoice demanding payment of such amount
to the corporate debtor in the form set out in Rule 5 of the Insolvency and Bankruptcy
(Application to Adjudicating Authority) Rules, 2016 read with Form 3 or 4, as the case may
be [Section 8(1)]. Within a period of 10 days of the receipt of such demand notice or copy of
invoice, the corporate debtor must bring to the notice of the operational creditor the existence
of a dispute and/or the record of the pendency of a suit or arbitration proceeding filed before
the receipt of such notice or invoice in relation to such dispute [Section 8(2) (a)]. What is
important is that the existence of the dispute and/or the suit or arbitration proceeding must be
pre-existing i.e. it must exist before the receipt of the demand notice or invoice, as the case
may be. In case the unpaid operational debt has been repaid, the corporate debtor shall within
a period of the self-same 10 days send an attested copy of the record of the electronic transfer
of the unpaid amount from the bank account of the corporate debtor or send an attested copy
of the record that the operational creditor has encashed a cheque or otherwise received
payment from the corporate debtor [Section 8(2) (b)]. It is only if, after the expiry of the
period of the said 10 days, the operational creditor does not either receive payment from the
corporate debtor or notice of dispute, that the operational creditor may trigger the insolvency
process by filing an application before the adjudicating authority under Sections 9(1) and
9(2)3. This application is to be filed under Rule 6 of the Insolvency and Bankruptcy
(Application to Adjudicating Authority) Rules, 2016 in Form 5, accompanied with
documents and records that are required under the said form. Under Rule 6(2), the applicant
is to dispatch by registered post or speed post, a copy of the application to the registered
office of the corporate debtor. Under Section 9(3), along with the application, the statutory
requirement is to furnish a copy of the invoice or demand notice, an affidavit to the effect that
there is no notice given by the corporate debtor relating to a dispute of the unpaid operational
debt and a copy of the certificate from the financial institution maintaining accounts of the
operational creditor confirming that there is no payment of an unpaid operational debt by the
corporate debtor4. Apart from above information, the other information required under Form

3
Mobilox Innovations Private Limited v. Kirusa Software Private Limited, Civil Appeal No. 9405 of 2017
4
Civil Appeal No. 9597 of 2018 Page 14 of 19
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5 is also given. Once this is done, the adjudicating authority may either admit the application
or reject it. If the application made under subsection (2) is incomplete, the adjudicating
authority, under the proviso to sub-section (5), may give a notice to the applicant to rectify
defects within 7 days of the receipt of the notice from the adjudicating authority to make the
application complete. Once this is done, and the adjudicating authority finds that either there
is no repayment of the unpaid operational debt after the invoice [Section 9(5)(i)(b)] or the
invoice or notice of payment to the corporate debtor has been delivered by the operational
creditor [Section 9(5)(i)(c)], or that no notice of dispute has been received by the operational
creditor from the corporate debtor or that there is no record of such dispute in the information
utility [Section 9(5)(i)(d)], or that there is no disciplinary proceeding pending against any
resolution professional proposed by the operational creditor [Section 9(5)(i)(e)], it shall admit
the application within 14 days of the receipt of the application, after which the corporate
insolvency resolution process gets triggered. On the other hand, the adjudicating authority
shall, within 14 days of the receipt of an application by the operational creditor, reject such
application if the application is incomplete and has not been completed within the period of 7
days granted by the proviso [Section 9(5)(ii)(a)]. It may also reject the application where
there has been repayment of the operational debt [Section 9(5)(ii)(b)], or the creditor has not
delivered the invoice or notice for payment to the corporate debtor [Section 9(5)(ii)(c)] 5. It
may also reject the application if the notice of dispute has been received by the operational
creditor or there is a record of dispute in the information utility [Section 9(5)(ii)(d)]. Section
9(5) (ii)(d) refers to the notice of an existing dispute that has so been received, as it must be
read with Section 8(2)(a). Also, if any disciplinary proceeding is pending against any
proposed resolution professional, the application may be rejected [Section 9(5) (ii) (e)]

5
Smart Timing Steel Ltd. v. National Steel and Agro Industries Ltd 05 Sept. 2018
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III.Recourse to IBC is not maintainable if existence of debt is disputed.

A lawyer’s notice cannot be given under Section 8, read with the Adjudicating Authority
Rules and Form 5 therein. Either the operational creditor himself must send the requisite
notice, or a duly authorized agent on his behalf should do so, and such authorized agent can
only be an “insider”, namely, a person who is authorized by the operational creditor, being an
employee, director or other person from within who alone can send the notice under Section 8
and sign the application under Section 9.It is clear, from Forms 3 and 5, that only a person
authorized to act on behalf of the operational creditor can send the notice and/or sign the
application. The word “position” with or in relation to the operational creditor and stated that
this would also indicate that it is only an insider who can be so authorized by 12 the
operational creditor and not a lawyer. According to learned senior counsel, the provisions
contained in certain statutes such as Section 434(2) of the Companies Act, 1956 and Rule 4
of the Debts Recovery Tribunal (Procedure) Rules, 1993 under the Recovery of Debts Due to
Banks and Financial Institutions Act, 1993 (“Debts Recovery Rules”) would also make it
clear that where a lawyer can do things on behalf of a party, it is expressly so mentioned
unlike the present case.

A very detailed reference has been made by the Supreme Court held that: "IBC is not
intended to be substitute to a recovery forum. It is also laid down that whenever there is
existence of real dispute, the IBC provisions cannot be invoked."6

The Court also gave due reference to the previous orders by the Hon’able NCLT, Hyderabad
High Court, Punjab & Haryana High Court and the Arbitral Council order and also gave due
deliberation to the provisions of Sec. 9 of IBC. While setting aside the order of National
Company Law Appellate Tribunal (NCLAT), the Supreme Court reiterated that "From the
aforesaid, it follows that existence of an undisputed debt is sine qua non of initiating CIRP. It
also follows that the adjudicating authority shall satisfy itself that there is a debt payable and
there is operational debt and the corporate debtor has not repaid the same."

The intent of the Court is that the provisions of IBC are not to be used in a handheld manner
and IBC is not to be used for recovery of money of any kind but rather only particularly
mentioned debts. Moreover, the use of the phrase 'wielded threat' by the Court speaks

6
Mobilex Innovations Private Limited vs. Kirusa Software Private Limited
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volume. The pre-requisite of "dispute" under IBC remained to be appreciated at the end of the
NCLAT7.

The Supreme Court also stated that since the NCLAT had already dealt with the merits of the
case and the Arbitral Award, therefore, it would serve no object to send the matter back to the
NCLAT and hence, the Supreme Court went on to quashing the order of the NCLAT and
allow the appeal. From this judgment of the Apex court, read with Mobilex supra8, it can be
inferred that IBC cannot be a substitute of a recovery forum and the sine qua non of a debt
and acid test of a dispute has got to be satisfied at the first instance itself.

7
Innoventive Industries Ltd. v. ICICI Bank & Anr., Civil Appeal Nos. 8337-8338 of 2017
8
Mobilex Innovations Private Limited vs. Kirusa Software Private Limited
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PRAYER

In the light of facts stated, issues raised, arguments advanced and authorities cited, the
respondent -

Most humbly and respectfully pray and request the Honourable Supreme Court:-

1) TO PASS AN ORDER THAT PROCEEDINGS UNDER THE SAID CODE ARE

INVALID AND SHOULD BE RENDERED INAPPLICABLE

2) TO PASS AN ORDER OF ACQUITTAL OF THE RESPONDENT.

3) TO GRANT ANY OTHER RELIEF WHICH THE HON’BLE COURT MAY DEEM
THINK FIT IN THE EYES OF JUSTICE, EQUITY AND GOOD CONSCIENCE.

All of which is respectfully submitted and for such act of kindness the Respondent shall be
duty bound as ever pray.

Sd/-

COUNSEL FOR THE RESPONDENT