Era Infra Engineering Limited V/s Prideco Commercial Services Private Limited (Company Appeals (AT) (Ins) No. 31 of 2017) - Synopsis
Team SoOLEGAL 1 Dec 2020
The issue before the Hon'ble National Company Law Appellate Tribunal in the case of Era Infra Engineering Limited V/s Prideco Commercial Services Private Limited (Company Appeals (AT) (Ins) No. 31 of 2017), was if the Corporate Insolvency Procedure Order issued by the Hon'ble Adjudicating Authority and subsequent appointment of Insolvency Resolution Professional and declaration of a moratorium term on the basis of an application filed by Operational Creditor under Section 9 of Insolvency and Bankruptcy Code 2016, was proper as the Operational Creditor had failed to issue demand notice as required under Section 8 of the Insolvency and Bankruptcy Code 2016. The creditor had in the past served demand notice under Section 271 of Companies Act, 2013 and was relying on the aforementioned demand notice. On receipt of the application pursuant to Section 9 of the I&B Code 2016, from the operational creditor that is Prideco Commercial Services Limited, the Adjudicating Authority initiated Corporate Insolvency Resolution Process against the Corporate Debtor that is Era Infra Engineering Limited, and an Insolvency Resolution Specialist was appointed and the moratorium under Section 14 of the I&B Code was proclaimed. In the appeal, NCLAT had set aside the order given by the Adjudicating Authority and quashed all decisions, including the declaration of moratorium and the appointment of Insolvency Resolution Practitioner. It also concluded that after passing the decree, all acts taken by Interim Resolution Professional were unconstitutional. The Appellant Tribunal has noted that issuing a notice under Section 271 of the Companies Act 2013 cannot be treated as an appropriate notice to be served in the required manner in compliance with Section 8(1) of the I&B Code 2016. It was observed that no notice was given by the Operating Creditor stipulated in Form 3 pursuant to Rule 5. Thus, there was no question of choosing an application under Section 9 of the  I&B Code 2016 in the absence of any expiry period of tenure of 10 days. Furthermore, the Hon'ble NCLAT held that the Adjudicating Authority has refused to notice the above-mentioned facts and the necessary provisions of law as discussed above. Since the request was not complete and there was no other way to remedy the defect, the order under appeal cannot be upheld.


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