In a significant ruling clarifying the procedural requirements under the Insolvency and Bankruptcy Code, 2016 (IBC), the Supreme Court on April 29, 2025, held that service of a demand notice under Section 8 of the IBC on the Key Managerial Personnel (KMP) of a corporate debtor at its registered office constitutes valid service. The Court set aside the concurrent decisions of the National Company Law Tribunal (NCLT), Cuttack Bench, and the National Company Law Appellate Tribunal (NCLAT), which had rejected a Section 9 petition for initiation of Corporate Insolvency Resolution Process (CIRP) on the ground of invalid service.
Background
The appeal before the Supreme Court arose from the dismissal of a Section 9 application filed by Visa Coke Limited (Operational Creditor) against Mesco Kalinga Steel Limited (Corporate Debtor). The appellant had sought initiation of CIRP due to non-payment of dues amounting to ₹4.19 crores for the supply of Low Ash Metallurgical Coke (LAM Coke), based on a contract executed in October 2019. Despite an admitted default by the respondent through an email dated 25.11.2019, payment was not made.
On 31.03.2021, the appellant issued a demand notice under Section 8 of the IBC to the respondent at its registered office, addressing it to the company’s Director, Chief Financial Officer, and Commercial Manager in their official capacities.
The NCLT, however, dismissed the Section 9 petition on 24.01.2023, holding that no notice was addressed directly to the corporate debtor. This view was upheld by the NCLAT on 03.10.2024, leading to the appeal before the Supreme Court.
Legal Issues
The primary question before the Court was whether a demand notice under Section 8, served upon the KMP of a corporate debtor at its registered office, fulfills the statutory requirements so as to maintain a petition under Section 9 of the IBC.
Observations of the Supreme Court
A bench comprising Justice J.B. Pardiwala and Justice R. Mahadevan held that the requirement under Section 8 of the IBC is to deliver the notice at the registered office of the corporate debtor, and such delivery may be made through its KMP, as permitted under Rule 5(2)(b) of the Adjudicating Authority Rules, 2016.
The Court noted that the demand notice issued in Form 3 had been addressed and delivered to the KMP at the registered office, and the language of the notice made it clear that the corporate debtor was being called upon to discharge its liabilities. The Court found the rejection of the Section 9 application on this technical ground to be unsustainable.
The bench observed:
“The notice dated 31.03.2021 issued by the appellant to the KMP of the Corporate Debtor and delivered at the registered office of the Corporate Debtor, can be construed as a deemed service of demand notice as required under section 8 of the IBC.”
The Court further referred to precedents including Rajneesh Aggarwal v. Amit J. Bhalla [(2001) 1 SCC 631] and NCLAT rulings in K.B. Polychem (India) Ltd. v. Kaygee Shoetech Pvt. Ltd. and Shubham Jain v. Gagan Ferrotech Ltd., where service on a director or deemed service at the registered office was held to be valid.
Additionally, the Court reiterated that “laws of procedure are meant to regulate effectively, assist and aid the object of doing substantial and real justice and not to foreclose even an adjudication on merits of substantial rights,” referring to the five-judge bench decision in Sardar Amarjit Singh Kalra v. Pramod Gupta [(2003) 3 SCC 272].
On the Issue of Default and Novation
While the respondent had argued that the original contract dated 11.10.2019 was subsequently amended and possibly novated due to email correspondences and delayed payments, the Court held that this issue involved mixed questions of fact and law. It observed that such matters ought to be decided by the NCLT after a full hearing on merits.
Decision
Allowing the appeal, the Court set aside the orders of the NCLT and NCLAT and remanded the matter back to the NCLT for fresh adjudication:
“This appeal stands allowed by setting aside the orders impugned herein and the matter is remanded to the NCLT, which shall entertain the section 9 petition and decide the same afresh, on merits, after providing reasonable opportunity to the parties.”
The Court also directed the NCLT to decide the matter uninfluenced by any observations made in its earlier order.
