Second Demand Notice Mandatory: NCLT New Delhi’s Ruling on Section 9 Petition

Second Demand Notice Mandatory: NCLT New Delhi’s Ruling on Section 9 Petition

Introduction

The National Company Law Tribunal (NCLT), New Delhi Bench, has held that if a demand notice issued under Section 8 of the Insolvency and Bankruptcy Code, 2016 (IBC) is returned unserved with the endorsement “addressee has left without instructions” — and the Operational Creditor fails to attempt delivery again through any alternate mode — the Section 9 petition for initiating Corporate Insolvency Resolution Process (CIRP) is not maintainable.

Factual Background

In this case, the Operational Creditor filed an application under Section 9 of the IBC seeking to initiate CIRP against the Corporate Debtor. The statutory demand notice under Section 8 was initially sent to the Corporate Debtor but was returned with the remark “addressee has left without instruction.” An attempt to serve the notice by email also failed, as the email bounced back.

Contentions of the Parties

Operational Creditor’s Contentions:

• The Operational Creditor argued that it had complied with the statutory mandate under Section 8 by sending the demand notice to the last known address of the Corporate Debtor.

Corporate Debtor’s Contentions:

• The Corporate Debtor contended that the notice was never validly served because it was returned unserved and no further effort was made to deliver it by other modes such as alternative postal addresses or other electronic means.

Reasoning and Analysis

The Bench, comprising Shri Manni Sankariah Shanmuga Sundaram (Judicial Member) and Shri Atul Chaturvedi (Technical Member), relied on the National Company Law Appellate Tribunal (NCLAT) decision in Shubham Jain v. Gagan Ferrotech Ltd. In that case, the Appellate Tribunal held that when a demand notice is returned with the endorsement “addressee has left without instruction,” the Operational Creditor must make genuine attempts to effect service by other available modes — failing which the statutory requirement of valid service under Section 8 is not fulfilled.

The Tribunal reiterated that actual or constructive service of the demand notice is a mandatory condition precedent for maintaining a Section 9 petition. Failure to ensure valid service renders the insolvency application not maintainable.

Implications

This ruling reinforces the principle that strict compliance with Section 8 is necessary before invoking the CIRP mechanism under Section 9. Operational Creditors must ensure that if an initial notice is returned unserved, alternative means of delivery must be exhausted — otherwise, the application risks dismissal at the threshold.

Outcome

Finding that the Operational Creditor failed to validly serve the demand notice, the Tribunal dismissed the application as not maintainable.

In this case, the appellant was represented by Mr. Rahul and Mr. Vardaan Jain, Advocates. The respondent’s counsel included Ms. Charu Ambwan, Ms. Shreya Garg (for R-1), Mr. Subhojit Dutta (for R-5), and Mr. Videh Vaish with Mr. Lalit Mohan (for R-4).