Rajani Associates have recently acted for, and advised, Ahinsa Buildtech Private Limited (“Corporate Debtor”), in relation to proceedings filed by Ultra Tech Cement Limited (“Operational Creditor”) against the Corporate Debtor under Section 9 of the Insolvency and Bankruptcy Code, 2016 (“Code”).

Brief details of the transaction are as under:

Advisor: Rajani Associates.

Client:  Ahinsa Buildtech Private Limited.

Deal Description:  The present proceedings were filed by Operational Creditor against Corporate Debtor before the Hon’ble Bombay High Court for non-payment of the invoices raised by Operational Creditor on the Corporate Debtor under the winding up provisions of Companies Act, 1956.

With the introduction of the Code and notification dated December 1, 2016 (“Transfer Rules“) issued by the Central Government, all pending winding up cases before the High Courts were transferred to the NCLT, and the matters were to be dealt in accordance with the provisions of the Code. Pursuant to the said Transfer Rules, as mentioned above, the Operational Creditor filed the requite Form 5 under the provisions of the Code and Transfer Rules. The legal question which was raised before the NCLT was, whether section 8 Notice is mandatory in a transferred winding up petition from the High Court ?

Rule 5 of Transfer Rules is reproduced below:-

(1) All petitions relating to winding up under clause (e) of Section 433 of the Act on the ground of inability to pay its debts pending before a High Court, and where the petition has not been served on the respondent as required under Rule 26 of the Companies (Court) Rules, 1959 shall 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 shall be treated as applications under Sections 7, 8 or 9 of the Code, as the case may be, and dealt with in accordance with Part II of the Code:

Provided that the petitioner shall submit all information, other than information forming part of the records transferred in accordance with Rule 7, required for admission of the petition under Sections 7, 8 or 9 of the Code, as the case may be, including details of the proposed insolvency professional to the Tribunal within sixty days from date of this notification, failing which the petition shall abate.

We on behalf of the Corporate Debtor, vehemently argued the maintainability of the transferred petition from the Hon’ble Bombay High Court, on the ground that the Operational Creditor did not serve upon the Corporate Debtor the statutory Demand Notice as mandated under section 8 of the Code. We on behalf of Corporate Debtor also argued that in the absence of Demand Notice not been issued to the Corporate Debtor in the transferred petition, Operational Creditor has not submitted the required information (in this case the required information being the non- serving on Demand Notice), for admission of the petition under Section  9 of the Code. In view of the Demand Notice not been issued, we submitted that the transferred petition should be dismissed.

In view of the submissions, the NCLT dismissed the petition as abated on the premise that the section 8 notice was not issued to the Corporate Debtor in accordance with Rule 5 of Transfer Rules and gave the Operational Creditor liberty to file fresh proceedings under the Code.

Transaction Team:  Mr. Ashish Parwani (Partner) and Mr. Dikshat Mehra (Senior Associate)