MANU/NC/0330/2017

Equivalent Citation: [2017]139C LA67, [2017]143SC L196

IN THE NATIONAL COMPANY LAW TRIBUNAL

PRINCIPAL BENCH, NEW DELHI
C.P. No. 790/2016
Decided On: 12.05.2017
Appellants: Prem Sarup Narula
Vs.
Respondent: Bycell Telecommunications (I) Pvt. Ltd.
Hon'ble Judges/Coram:
M.M. Kumar, C.J. (President) and R. Varadharajan, Member (J)
Counsels:
For Appellant/Petitioner/Plaintiff: Praveen Agarwal, Advocate
For Respondents/Defendant: Satinder Kapur, Shobhit Nanda and Saaduzzaman,
Advocates
ORDER
1. This application was initially filed in the Hon'ble High Court of Delhi on
16.07.2016 under Section 433 (b) (c) (e) and (f) read with Section 434 of
Companies Act, 1956. On the issuance of Rules on 07.12.2016 known as Companies
(Transfer of Pending Proceedings) Rules, 2016 (for brevity Transfer Rules') the
petition was transferred to this Tribunal and it was received on 02.03.2017.
According to the Rule 5 of the Rules all Company petitions filed under Section 433
(e) of the Companies Act, 1956 were required to be transferred to the National
Company Law Tribunal provided the notice of the petition has not been served on the
respondent in accordance with Rule 26 of the Companies (Court) Rules, 1959. All
such petitions after transfer to the respective NCLT Benches enjoying territorial
jurisdiction, were required to be treated as the one file under Section 7, 8, 9 or 10 of
the Code as per the claim of the petitioner and were to be dealt with in accordance
with part II of the Insolvency and Bankruptcy Code, 2016. As per the proviso to Rule
5 the petitioner was obliged to submit complete information in that regard necessary
for admission of the petition to the Tribunal within sixty (60) days from the date of
the issuance of notification failing which the petition was to abate. The information
was to include details of proposed insolvency professional. It is appropriate to
mention that the period of sixty (60) days was later increased to six (6) months vide
notification dated 28.02.2017.
2 . In accordance with the Transfer Rules and the subsequent notification dated
28.02.2017 the petitioner filed application on 10.04.2017 on the proforma prescribed
for such application praying that the petition may be considered as one under Section
9 of the Code.
3. Now let us have facts of the case which have led to the initiation of proceedings
by the petitioner, Shri Prem Sarup Narula. The Bycell Telecommunications India
Private Limited-Respondent No. 1 (for brevity 'Bycell India') was incorporated on
13.10.2005 under the Companies Act, 1956 as a private company with limited
liability by shares. It was duly registered with the Registrar of Companies, NCT Delhi
and Haryana (Annexure P/1). Its registered office is situated at Shop No. G-8, Plot

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No. A-6786, Left portion, Ground Floor, Smrat Bhawan, Community Centre, Ranjit
Nagar, Delhi 11000. The authorized share capital of the Bycell India is Rs.
30,00,00,000/- (Rupees Thirty crores only) divided into 300,00,000 (Three crores
only) equity shares of Rs. 10/- each and the total paid-up capital is Rs.
27,00,00,000/- (Rupees Twenty Seven Crores only). The object of the Bycell India is
to carry out the business to manufacture, produce, assemble, repair, install,
maintain, convert, export, import etc., in all kinds of items, system, equipment,
plants, machines, or things of communications of different models and uses in all
branches such as telecommunications, radio communications, satellite
communications, wireless communications, space communications etc. The detailed
objects are available in the Memorandum of Association which has been placed on
record (Annexure P/3).
4 . The petitioner claims that he is one of the few experts in the field of
Telecommunication in this country and he has acquired rich experience of 54 years in
the aforesaid field. He rendered 34 years' service in the Department of
Telecommunication, Government of India and at the time of superannuation he was
holding the designation as Advisor to the Department of Telecommunication,
Government of India.
5 . Bycell India is the part of Russain Group of Companies which are operating
Telecom services in Russia and it was incorporated in India with the object of
providing telecom services in this country. The services of the petitioner were
engaged by Bycell India with the object of obtaining all governmental permissions
and taking all other steps leading to obtaining telecom license. It was expected that
the petitioner would be able to set up a telecom infrastructure on which voice, data
and video services may operate. In that regard, a request was made to the petitioner
to join with the Bycell India as a consultant. Accordingly, the petitioner joined as
consultant w.e.f. 01.04.2008 on a monthly fee of Rs. 4,25,000/- per annum as is
evident from the appointment letter (Annexure P/4). Within a period of four months
Bycell India realized the worth of the petitioner and upgraded him from the position
of a consultant to that of a Senior Advisor on the yearly emoluments of Rs. 37.08
lacs plus reimbursement of expenses, mobile phone, conveyance and travel expenses
actually incurred. A copy of the letter dated 01.04.2008 upgrading him to the post of
Senior Advisor has been placed on record (Annexure P/5). The petitioner continued
to work with Bycell India as such till 04.10.2009 thereafter the petitioner was given
the highest position in the Bycell India as one of its Director on the same
emoluments. A copy of the letter to that effect was issued on 05.10.2009 which has
been placed on record (Annexure P/6). The necessary formalities of sending
information to the Registrar of Companies and other statutory authorities were duly
carried out by Bycell India and the petitioner assumed the position as a Director in
Bycell India.
6. On account of continuous efforts made by the petitioner, Bycell India succeeded to
secure Letter of Intent from the Government of India to operate Mobile service in five
service areas. However, Bycell India was not able to fulfil the terms and conditions of
the Letter of Intent and failed to obtain a formal license for operating mobile service
in this country. The fee paid by the Bycell India for obtaining license has been
withheld. In that regard arbitral proceeding between the Bycell India and the
Government of India are pending adjudication before International Arbitral Tribunal
in London.
7. On account of refusal of license to Bycell India it could not commence its business
ever since its inception. There was no major cash inflow in respect of Bycell India
which resulted in deterioration of its financial health. The petitioner was paid less

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salary for the month of May and June 2011. However, the Bycell India requested the
petitioner to continue to render his services to it although it was not in a position to
make payment of full salary. It had promised as and when it would receive the sum
of Rs. 23 crores from the Govt. of India it would make good the dues of the
petitioner (Annexure P/7). Accordingly, the petitioner continued rendering services to
Bycell India.
8. According to the averments made by the petitioner a settlement was entered into
between him and the Bycell India. In the settlement Bycell India had agreed to pay to
the petitioner USD 33,000/- (US Dollar Thirty Three Thousand Only) as part payment
and the balance was payable on receipt of the proceeds of the award resulting from
on-going International Arbitration. Accordingly, USD 33,000/- (US Dollar Thirty
Three Thousand Only) were paid on 03.02.2014 as is evident from the entry of the
passbook made around 03.03.2014 (Annexure P/4). An attempt was made to involve
the petitioner in the Arbitration proceeding by citing him as a witness but eventually
he was dropped (Annexure P/9).
9 . On 14.01.2016 the petitioner resigned and Bycell India accepted resignation by
appreciating the outstanding role played by the petitioner in the project. It was
further stated that because of his involvement best possible outcome could be
achieved while dealing with the Indian authorities as is evident from the email dated
14.01.2016 (Annexure P/10). The petitioner ceased to be Director of Bycell India
w.e.f. 10.02.2016 (Annexure P/2). The details of his dues have been summed up in a
tabulated form which amounts to Rs. 6637286/-. The table Annexure P/11 would read
as under:-

1 0 . The petitioner eventually served a statutory legal notice on Bycell India on

07.05.2016 by speed post, courier service and electronic communication (email). The
statutory legal notices were returned back with the endorsement "left". Even the
email bounced back with the comments "Domain name of email address not valid".
The original return envelope containing statutory legal notice has been placed on
record (Annexure P/12).
11. Bycell India however sent a reply through its advocate on 24.05.2016 for not
making balance payment (Annexure P/13). The company master data establishes the
fact that its financial health is extremely weak as it has not even filed its annual
return with the Registrar of Companies subsequent to the year 2010-11. A copy of
the latest balance sheet for the financial year 2010-11 has been placed on record
(Annexure P/14). Therefore, it has been prayed that Bycell India is liable to be wound
up in accordance with the provisions of Section 4334(b), (c), (e) and (f).
12. The petitioner has also made disclosure of order dated 31.12.2016 passed by
Hon'ble High Court of Delhi which read as under:-
"For the reasons stated in the application, the delay which is stated to be of
35 days in refiling the petition, is condoned. The application stands disposed
off. CO.PET. 790/2016 & CO. APPL. No. 3255/2016. This petition seeks
winding up of the respondent No. 1/company, inter alia, on the ground of
non-payment of Rs. 66,37,286/-, despite service of notice of winding up on
the registered office of the company, to which a reply is stated to have been
received disputing the said amount. However, according to counsel for the
petitioner, the defence raised by the respondent to the said notice is not
sustainable either in law or in fact, and appears to have been raised merely
with a view to avoiding winding up. In addition, it is also urged that the

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 company, which was incorporated in 2005, has failed to commence business
and is incapable of pursuing its main object because the relevant telecom
license sought by the company has been refused by the Department of
Telecommunication. The dues claimed by the petitioner are towards unpaid
salary. Issue notice to the respondents to show cause as to why the company
be not wound up, returnable on 14th February, 2017. In addition to the reply
to the notice to show cause, the Managing Director, or in his absence, all the
directors of the respondent company are directed to file their affidavits within
six weeks from today enclosing therewith;
(i) the Profit& Loss Account and the Balance Sheets of the
Respondent Company for the last three years;
(ii) the list of the bank accounts of the Respondent Company;
(iii) the names and residential addresses of the Directors along with
their PAN No. ;
(iv) The particulars of assets held in the name of all the directors of
the respondent company along with the dates of acquisition as well
as the nature of their right, title and interest therein; to be disclosed
in a sealed cover for the time being;
(v) the address of the Registered Office and the Corporate or branch
offices, if any, of the Respondent Company;
(vi) the location of the statutory records and books of account of the
company and;
(vii) the list of immovable assets, land and building etc. of the
respondent along with full particulars thereof sufficient to accurately
identify & locate the said assets."
A copy of the company petition filed before the Hon'ble Delhi High Court and a copy
of the instant petition filed before this Tribunal have been sent by speed post to the
respondent on 22.02.2017. The petition has, however, not named any insolvency
professional.
13. In the reply/objection filed by the Operational debtor the stand taken is that the
Hon'ble High Court of Delhi transferred the winding up petition on 14.02.2017 by
virtue of provisions of Rule 5 of the Companies (Transfer of Proceedings) Rules,
2016. On the hearing of the petition by this Tribunal the petitioner was directed to
file compliance affidavit in terms of the aforesaid Transfer Rules within two weeks
from the date of the order dated 29.03.2017. The application purporting to show
compliance of the various provisions of Insolvency and Bankruptcy Code, 2016 was
filed by the petitioner on 07.04.2017. In the aforesaid background the respondent
has raised objection that the requirements of Rule 5 (1) of the Transfer Rules have
not been met and the petition had abated. According to proviso to Rule 5 of the
Transfer Rules in the event the petitioner fails to submit the requisite information as
prescribed under the Code within sixty days then the petition was to abate. The
period of sixty (60) days came to an end on 07.02.2017 and the petition stand
abated. It cannot be resurrected and considered as an application under Section 9 of
the Code.
14. Even the requirement of the Section 9 (1) of the Code have not been satisfied as
the petitioner did not send any demand notice in Form 3 or 4 as prescribed under the

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Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016.
Delivery of a demand notice under Section 8 of the Code is a condition precedent and
no application can be filed under Section 9 of the Code unless the aforesaid
mandatory provisions are complied with. It is a very valuable right given to the
corporate debtor. The petitioner cannot place reliance on the notice dated 07.05.2016
(Annexure P/12) which was issued under Section 271 of the Companies Act, 2013
which was not even in force at the time of its issuance because Section 271 of the
Companies Act came into force on 15.12.2016. The notice issued by the petitioner on
07.05.2016 (Annexure P/12) cannot be regarded at par with demand notice as
envisaged under Section 8 of the Code as the effect of both the notices is entirely
different. The petitioner has failed to furnish an affidavit stating that no notice has
been given by the operational creditor regarding the existence of a dispute relating to
the operational debt. The petitioner has to comply with requirements of Section 9 (3)
(c) of the Code which required the petitioner to furnish a certificate from the financial
institution maintaining its accounts. The claim of the petitioner has been controverted
by pointing out that the offer letter for Directorship does not mention any
remuneration offered to him for working on the post of Director. It has been claimed
that the petition is grossly defective and incomplete and is thus liable to be rejected
under provisions of Section 9 (5)(ii) of the Code. It has further been claimed that the
substantial portion of the debt claimed by the petitioner is time barred under the
provisions of the Limitation Act, 1963. The claim has been made in respect of the
amounts due from 2011-2016.
15. There is a dispute as the claim of the petitioner has already been disputed by
Bycell India. The respondent has settled all the outstanding dues with the petitioner
by making payment of Rs. USD 33,000 on 03.02.2014 and no further amount is due
and payable to the petitioner. There is a fatal defect as no notice has been given by
the corporate debtor relating to a dispute of unpaid operational debt as per the
requirement of Section 9 (3) (b) of the Code.
16. Learned counsel for the petitioner has raised two principal argument before us.
Firstly, it has been submitted that the provisions of Section 433 of the Companies
Act, 1956 would continue to apply and the relief must be given under that provisions.
It has also been suggested that the amended provisions of Companies Act, 2013 as
substituted by the Insolvency and Bankruptcy Code, 2016 would not be applicable
because the rights of the petitioner stand crystalized and vested on the date when the
Company petition was filed before the Hon'ble Delhi High Court in July, 2016.
According to the learned counsel law as was applicable on the aforesaid date would
continue to apply and not any subsequent provisions notified which include
Companies Act, 2013 and Insolvency and Bankruptcy Code, 2016.
17. In support of his submission learned counsel has placed reliance on a judgment
of the Hon'ble Supreme Court in the case of R. Radhakrishnan & others v. Secretary,
State of Tamilnadu & others, MANU/SC/0112/2015 : (2015) 16 SCC 604 and has
highlighted the observations made by their lordships in para 2 & 3. According to the
aforesaid paras the procedural rights in the absence of any express provision in the
statute are presumed to be retrospective whereas substantive and vested rights are
considered to be prospective unless by express provision or by necessary intendment
it could be presumed so.
1 8 . Learned counsel has then submitted that the provisions of Insolvency and
Bankruptcy Code, 2016 were notified on 01.12.2016 whereas the provisions of
Companies Act, 2013 were notified on 15.12.2016 and therefore, the substantive
rights which have arisen to the petitioner on the filing of the petition in July 2016
could not be altered or modified by any subsequent notification.

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19. In the alternative, it has been argued that assuming that the provisions of the
Insolvency and Bankruptcy Code, 2016 apply then the petitioner is covered by the
expression 'Operational Creditor' as used in Section 5 (20) read with Section 5 (21)
and Section 8 & 9 of the Code. According to the learned counsel the notice of
demand issued under Section 433 of the Act, 1956 should be deemed to be a notice
under Section 8 (1) as it substantively satisfies all the requirements laid down under
Section 8 (1) of the Code, 2016.
20. On the other hand, learned counsel for the respondent has pointed out that there
is no compliance of the provisions of Section 8 (1) of the Code as no notice of
demand has been delivered to the respondent. Learned counsel has also placed
reliance on the proviso to Rule 5 of the Transfer Rules' and argued that on the date of
filing the compliance affidavit in March, 2017 the petition had abated as the period of
sixty (60) days have come to an end in February 2017 itself. Once the petition had
abated the notification issued subsequently extending the period to six months would
not infuse a new life in an abated petition. According to the learned counsel the
provisions of Section 9 of the Code are mandatory and requires the filing of a copy of
invoice demanding payment or demand notice sent by the petitioner and delivered to
the respondent. Even affidavit has not been filed which was required to the effect that
there is no notice given by the Corporate debtor relating to a dispute of the unpaid
operational debt.
21. Having heard learned counsel for the parties and after perusing the record with
their able assistance the first question which needs determination is whether the
provisions of Section 433 of the Companies Act, 1956 continue to apply or the
provisions of Insolvency and Bankruptcy Code, 2016 would come applicable. Learned
counsel for the petitioner has vehemently argued for continued application of the
provisions of the Companies Act, 1956 by placing reliance on a judgment of the
Hon'ble Supreme Court rendered in the case of R. Radhakrishnan & others (supra).
2 2 . In that regard, it would first be appropriate to examine the changes brought
about in the provisions of Section 433 (e) which deals with winding up of a Company
in the circumstance of inability to pay its debts. The provisions have been deleted
from the Companies Act and in the new Companies Act, 2013 there is no provision
made for winding up of a company parallel to the one available under Section 433
(e) of the Companies Act, 1956. A perusal of Section 271 and 272 would show that
the inability to pay debt by the Company is no longer a ground for passing of an
order of winding up as was the provisions made under Section 433 (e) of the
Companies Act, 1956. The new provision of Sections 271 & 272 has been enforced
w.e.f. 15.12.2016 and the powers have been conferred to that extent on the
'Adjudicating Authority' under the Code. In that regard reference may be made to
Clauses 10 and 12 of the notification given in Schedule XI of the Insolvency and
Bankruptcy Code. It would be appropriate to make a reference to the aforesaid
provisions which have been enforced w.e.f. 15.12.2016. Clauses 10 & 12 of Schedule
XI have not notified. Sections 271 and 272 which are in the following terms :-
"10. For section 271, the following section shall be substituted, namely:-
"271. Circumstances in which company may be wound up by
Tribunal-A company may, on a petition under section 272, be wound
up by the Tribunal,-
(a) if the company has, by special resolution, resolved that
the company be wound up by the Tribunal;
(b) if the company has acted against the interests of the

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 sovereignty and integrity of India, the security of the State,
friendly relations with foreign States, public order, decency
or morality;
(c) if on an application made by the Registrar or any other
person authorised by the Central Government by notification
under this Act, the Tribunal is of the opinion that the affairs
of the company have been conducted in a fraudulent manner
or the company was formed for fraudulent and unlawful
purpose or the persons concerned in the formation or
management of its affairs have been guilty of fraud,
misfeasance or misconduct in connection therewith and that
it is proper that the company be wound up;
(d) if the company has made a default in filing with the
Registrar its financial statements or annual returns for
immediately preceding five consecutive financial years; or
(e) if the Tribunal is of the opinion that it is just and
equitable that the company should be wound up.".
12. For section 272, the following section shall be substituted, namely:-
"272. Petition for winding up. - (1) Subject to the provisions of this
section, a petition to the Tribunal for the winding up of a company
shall be presented by-
(a) the company;
(b) any contributory or contributories;
(c) all or any of the persons specified in clauses (a) and (b);
(d) the Registrar;
(e) any person authorised by the Central Government in that
behalf; or
(f) in a case falling under clause (b) of section 271, by the
Central Government or a State Government.
(2) A contributory shall be entitled to present a petition for the
winding up of a company, notwithstanding that he may be the holder
of fully paid-up shares, or that the company may have no assets at
all or may have no surplus assets left for distribution among the
shareholders after the satisfaction of its liabilities, and shares in
respect of which he is a contributory or some of them were either
originally allotted to him or have been held by him, and registered in
his name, for at least six months during the eighteen months
immediately before the commencement of the winding up or have
devolved on him through the death of a former holder.
(3) The Registrar shall be entitled to present a petition for winding
up under section 271, except on the grounds specified in clause (a)
or clause (e) of that sub-section:
Provided that the Registrar shall obtain the previous sanction

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 of the Central Government to the presentation of a petition:
Provided further that the Central Government shall not
accord its sanction unless the company has been given a
reasonable opportunity of making representations.
(4) A petition presented by the company for winding up before the
Tribunal shall be admitted only if accompanied by a statement of
affairs in such form and in such manner as may be prescribed.
(5) A copy of the petition made under this section shall also be filed
with the Registrar and the Registrar shall, without prejudice to any
other provisions, submit his views to the Tribunal within sixty days
of receipt of such petition."
A perusal of the aforesaid paras would make it patent that the provisions concerning
inability to pay its debts as incorporated under Section 271 (2) under the 2013 Act or
in Section 433 (e) stand deleted. The aforesaid provisions have now been substituted
for paving the way and to allow access to a financial creditor or to an operational
creditor to approach the adjudicating authority under the Code (i.e. NCLT) either
under Sections 7, 8 or 9. It was with this object in view that Transfer Rules (supra)
were notified with a specific provisions in Rule 5 (1) stipulating that all petitions,
relating to winding up under clause (e) of Section 433 of the 1956 on the ground of
inability to pay its debts pending before the High Court and where the petition has
not been served on the respondent as required under Rule 26 of the Companies
(Court) Rules, 1959, were to be transferred to the Bench of the Tribunal established
under sub-section (4) of Section 419 of the Act exercising territorial jurisdiction and
such petitions are to be treated as applications under Section 7, 8 or 9 of the Code. It
further provides that all such petitions were required to be dealt with in accordance
with part II of the Code.
2 3 . It was in pursuance of the amendment made in Section 271 and 272 of the
Companies Act, 2013 and Rule 5 of the Transfer Rules that this petition has been
transferred by Hon'ble High Court of Delhi to the NCLT which is adjudicating
authority. On behalf of the petitioner, firm reliance has been placed on para 3 of the
judgment rendered in the case of R. Radhakrishnan & others (supra) by Hon'ble the
Supreme Court. In para 3 their Lordships have placed reliance on earlier judgment of
the Constitution Bench of the Supreme Court rendered in Shyam Sunder v. Ram
Kumar, MANU/SC/0405/2001 : (2001) 8 SCC 24 and on behalf of the petitioner
reliance has been placed on the proposition culled out in that judgment which is
evident from the following paras :-
"28. From the aforesaid decisions the legal position that emerges is that
when a repeal of an enactment is followed by a fresh legislation, such
legislation does not affect the substantive rights of the parties on the date of
suit or adjudication of suit unless such a legislation is retrospective and a
court of appeal cannot take into consideration a new law brought into
existence after the judgment appealed from has been rendered because the
rights of the parties in an appeal are determined under the law in force on
the date of suit. However, the position in law would be different in the
matters which relate to procedural law but so far as substantive rights of
parties are concerned, they remain unaffected by the amendment in the
enactment. We are, therefore, of the view that where a repeal of provisions
of an enactment is followed by fresh legislation by an amending Act, such
legislation is prospective in operation and does not affect substantive or

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 vested rights of the parties unless made retrospective either expressly or by
necessary intendment. We are further of the view that there is a presumption
against the retrospective operation of a statute and further a statute is not to
be construed to have a greater retrospective operation then its language
renders necessary, but an amending Act which affects the procedure is
presumed to be retrospective, unless amending Act provides otherwise."
A perusal of the aforesaid para makes it evident that new legislation cannot be
presumed to apply retrospectively if it affects the substantive or vested rights of the
parties unless it is expressly provided or it becomes evident from necessary
intendment. In case the new legislation is procedural then it is presumed to operate
retrospectively. In the present case, the petitioner has filed the company petition
before the Hon'ble High Court of Delhi on 16.10.2016 and therefore, it is claimed that
the petition continued to be one for winding up under Section 433 (e) of the
Companies Act, 1956 as all the rights of the petitioner are deemed to have crystalized
and vested on the aforesaid date.
24. We are afraid that no such interpretation of general application as sought to be
claimed on behalf of the petitioner is acceptable because there is no substantive or
vested right with the petitioner to seek winding up of the respondent company till the
time the process of winding up has been initiated. The aforesaid aspect has been
taken care of by the Transfer Rules which provide that all those cases where notices
have been served were to be retained by the Hon'ble High Court and in rest of the
cases where notices could not be served were to be transferred to this Tribunal.
Moreover, the nature of the remedy in sum and substance continues to be available in
the form of Insolvency and Bankruptcy which may eventually results into liquidation
of the respondent company. Thus the result is similar to the one which would be
achieved in case of winding up. It needs to be further added that right becomes a
vested right only when its acquired and is enjoyed by a litigant. Merely by filing a
petition no right is acquired leave aside the enjoyment of such a right. Therefore, we
are unable to persuade ourselves to accept first contention raised by the petitioner.
25. On the basis of principles enunciated by the Constitution Bench in the case of
Shyam Sunder and Ors. v. Ram Kumar and Anr., MANU/SC/0405/2001 : (2001) 8
SCC 24, S. Paripooran v. State of Kerala, MANU/SC/0200/1995 : (1994) 5 SCC 593,
R. Rajagopal Reddy (dead) by L.Rs. and Ors. v. Padmini Chandrasekharan (dead) by
L.Rs., MANU/SC/0061/1996 : AIR 1996 SC 238 and the judgment rendered in R.
Radhakrishnan & others (supra) it cannot be concluded that the omission of Section
433 (e) of the Companies Act and its substitution by the provisions of Insolvency and
Bankruptcy Code, 2016 has taken away any substantive or vested right of the
petitioner. By virtue of the provisions of the Insolvency and Bankruptcy Code, 2016
the right has been reregulated and the procedure for its adjudication has undergone
some changes. Even the forum of adjudication has undergone change. Such a course
is available to the legislature has already been affirmed by a judgment of the
Constitution Bench of Hon'ble the Supreme Court rendered in the case of Madras Bar
Association v. Union of India and Anr., MANU/SC/0610/2015 : (2015) 8 SCC 583
upholding the constitutional validity for setting up the National Company Law
Tribunal and National Company Law Appellate Tribunal. It has been held that the
creation of Tribunal and vesting in them, the powers and jurisdiction exercised by the
High Court in regard to company law matters, were not unconstitutional. In that
regard reference was made to the observation made in the earlier Constitution Bench
judgment rendered in Union of India v. R. Gandhi, President, Madras Bar Association,
MANU/SC/0378/2010 : (2010) 11 SCC 1. Once the aforesaid position is clear in law it
will not lie in the mouth of the petitioner to argue that this Tribunal would not be
competent to adjudicate the dispute raised in the petition like the one before us

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therefore, we have no hesitation to reject the argument.
26. On the second contention that the insolvency resolution process is liable to be
triggered by virtue of provisions made under Section 9 of the Code because default
has occurred and the petitioner is an operational creditor for having rendered
services in terms of Section 5 (20) read with Section 5 (21) of the Code, learned
counsel for the respondent has pointed out that no demand notice under Section 8(1)
was issued and has controverted the argument of the petitioner that notice of demand
issued under Section 433 (e) of 1956 Act must be regarded equivalent to notice
under Section 8 (1) of the Code. The aforesaid argument would also not be
acceptable because a similar argument was raised and has been rejected by National
Company Law Appellate Tribunal in the case of Era Engineering Ltd. v. Prideco
Commercial Projects Pvt. Ltd. (Company Appeal) (AT) (Ins) No. 31/2017. After
recoding a finding that no notice was given. The Appellate Tribunal has held as
under:-
"4. Insolvency resolution by an Operational Creditor can be initiated only on
the occurrence of a default which is to be followed by a demand notice of
unpaid Operational Debtor as stipulated sub-section (1) of Section 8, as
quoted below:
"8(1) An operational creditor may, on the occurrence of a default,
deliver a demand notice of unpaid operational debtor copy of an
invoice demanding payment of the amount involved in the default to
the corporate debtor in such form and manner as may be
prescribed."
5. Rule 5 of I & B Rules also mandates an Operational Creditor to deliver the
Corporate Debtor a demand notice in Form 3 or a copy of an invoice attached
with a notice in Form 4, as quoted below:
5 . Demand notice by operational creditor.- (1) An operational
creditor shall deliver to the corporate debtor, the following
documents, namely.-
(a) a demand notice in Form 3; or
(b) a copy of an invoice attached with a notice in Form 4.
(2) The demand notice or the copy of the invoice demanding
payment referred to in sub-section (2) of section 8 of the Code, may
be delivered to the corporate debtor,
(a) at the registered office by hand, registered post or speed
post with acknowledgement due; or
(b) by electronic mail service to a whole time director or
designated partner or key managerial personnel, if any, of
the corporate debtor.
(3) A copy of demand notice or invoice demanding payment served
under this rule by an operational creditor shall also be filed with an
information utility, if any.
6 . The application for initiation of corporate insolvency resolution process,
thereafter can be filed by Operational Creditor after expiry of period of 10
days from the date of delivery of notice or invoice demanding payment, as

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 provided under sub-section (1) of section 9.
8. Admittedly, no notice was issued by Operational Creditor under section 8
of the I & B Code, 2016. Demand notice by Operational Creditor stipulated
under Rule 5 in Form 3 has not been served. Therefore, in absence of any
expiry period of tenure of 10 days there was no question of preferring an
application under section 9 of I & B Code, 2016."
It is thus evident that in the absence of demand notice under Section 8 (1) of the
Code, the petitioner could not have approached this Tribunal for initiation of
insolvency resolution process against the respondent company. In the present case,
there are many other defects pointed out by the learned counsel for the respondent.
Therefore, we find that the present application is incomplete as the same is liable to
be dismissed.
2 7 . As a sequel to the above discussion this application fails and the same is
dismissed as being premature. The petitioner is at liberty to file fresh application
after complying with all the statutory provisions including the one stipulated in the
Code, 2016.
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