Macquarie Bank Limited v Shilpi Cable Technology Ltd, (Civil Appeal No. 15135 of 2017) - Synopsis
Team SoOLEGAL 28 Oct 2020

In the judgement in Macquarie Bank Limited v Shilpi Cable Technology Ltd, (Civil Appeal No. 15135 of 2017) the Supreme Court recently construed some parts of the Insolvency and Bankruptcy Code, 2016 ("Code") in a favourable way for international operating creditors. Three appeals with equivalent factual situations have been resolved by the Judge. In one illustrative event, Hamera International Private Limited ('Hamera International') executed an agreement with Macquarie Bank Limited, Singapore ('Macquarie Bank'), whereby Macquarie Bank obtained the right, title, and equity in the supply arrangement of the initial supplier. The respondent, Shilpi Cable Technologies Ltd. ('Shilpi Cable'), owes a certain amount of money to Macquarie Bank, which led to the present dispute. The NCLT considered that the application should be dismissed because, first, it failed to comply with Section 9(3)(c) of the Code because Macquarie Bank had failed to send a certificate from a financial institution as provided by the provision; and, second, that Shilpi Cable challenged the presence of the debt in its reaction to an earlier statutory notice submitted by Macquarie Bank pursuant to Sections 433 and 434 of the Code.
It has been held that the term 'confirming' in Section 9(3)(c) of the Code makes it clear that, although the certificate is a very valuable piece of documentation, it merely confirms that there is no reimbursement of the operating debt which is not paid. Even Form 5 under Rule 6 of the Adjudicating Authority Rules clarifies that only one of the documents to be sent as proof of default is item 7 of Part V. In addition, Annex III in the Form also applies to copies of the related accounts maintained by the banks/financial institutions holding the operating creditor's accounts, confirming that there is no reimbursement of the operating debt outstanding, only if available. A certificate, thus, under S. 9 is not a precondition for the code to be triggered. The true structure of Section 9(3)(c) is that it is a procedural clause and, as the Adjudicatory Authority Rules read in the Code clearly show, is a directory in nature. A supplier from overseas may have an international banker who is not protected by Section 3(14) of the Law. The fact that such a foreign supplier is an operational creditor is identified by reading the definition of individual contained in section 3(23) of the Code, including persons residing outside India, along with the definition of operational creditor contained in section 5(20), which is, in turn, defined as an individual to whom the operational debt is owed and includes any person to whom the operational debt is effective.

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