Demand Notice Valid Despite Missing Default Date in Invoice-Based Claims: NCLAT Chennai

Metals And Metal Electric Private Limited Vs Prince Foundations Limited (NCLAT Chennai)

The appeal was decided by the National Company Law Appellate Tribunal, Chennai Bench against an order dated 21.02.2023 passed by the NCLT, Chennai, dismissing an application filed under Section 9 of the Insolvency and Bankruptcy Code, 2016 (IBC). The appellant, acting as an operational creditor, had initiated insolvency proceedings by filing an application in Form-5, stating the date of default as 22.02.2022.

The NCLT dismissed the Section 9 application on multiple grounds. It held that the date of default mentioned in the application was later than the date of the demand notice dated 18.02.2022, that the demand notice did not mention any date of default, that most invoices were barred by limitation, and that the affidavit under Section 9(3)(b) had not been attached.

Before the Appellate Tribunal, the appellant contended that the demand notice issued on 18.02.2022 contained full details of unpaid invoices and liabilities. It was argued that the notice was invoice-based and issued in accordance with Rule 5(1)(b) of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016, i.e., in Form-4. According to the appellant, neither Section 8 of the IBC nor Form-4 mandates specific mention of a “date of default,” as default is ascertainable from the invoices themselves. Therefore, non-mention of the date of default could not render the demand notice invalid.