Objection To Demand Notice Served Via FedEx Cannot Defeat Insolvency Plea If Notice Received: NCLAT

The National Company Law Appellate Tribunal (NCLAT) at Delhi on Thursday ruled that an objection to service of a demand notice via FedEx cannot defeat insolvency proceedings when the corporate debtor has received the notice and had knowledge of the claim.

The bench comprising Judicial Member Justice Sharad Kumar Sharma, Technical Member Arun Baroka and Technical Member Indevar Pandey observed, “Hyper-technical objections cannot be permitted to defeat a proceeding when from the circumstantial evidence it is inferred that the Corporate Debtor has, in substance, received the Demand Notice and had knowledge of the claim.”

The ruling came in an appeal filed by Identity Science Co. Ltd., a Japanese company, against the Mumbai bench of the National Company Law Tribunal's dismissal of its insolvency petition against Sonal Plasrub Industries Private Limited.

Identity Science had entered into contracts with Sonal Plasrub in 2018 and 2019 for supply of 1-Bromo Butane and Hydro Bromic Acid. It paid advances for consignments that were never supplied. Sonal Plasrub later agreed to repay the advances but did not make the payment.

The company issued a demand notice on February 21, 2020, claiming ₹1.12 crore. The notice was delivered through FedEx on February 27, 2020. Identity Science subsequently filed a petition under Section 9 of the Insolvency and Bankruptcy Code (IBC), which allows an operational creditor to seek initiation of the Corporate Insolvency Resolution Process (CIRP) when an operational debt remains unpaid, subject to statutory requirements.

Sonal Plasrub argued that the notice was invalid because FedEx was not among the modes specified under Rule 5 of the IBC Rules. It also contended that the operational debt was below the ₹1 crore threshold and that there was a pre-existing dispute over USD 16,766 claimed as damages for a damaged consignment.

The NCLAT rejected the service objection, noting that there was proof of dispatch, delivery and a tracking number. The notice had been sent to the registered office and was delivered there.

The bench held that the use of a private courier by a Japanese company could not defeat the proceedings when effective delivery was established.

The bench further held that the operational debt crossed ₹1 crore even after excluding the disputed USD 16,766 damages claim. It found that the exchange rate on the date of the demand notice was relevant for converting the foreign-currency claim.

On the alleged pre-existing dispute, the NCLAT held that the correspondence over the damages claim did not amount to a genuine dispute concerning the admitted advance amounts. Sonal Plasrub had agreed to repay those advances but failed to do so.

The bench also observed that Sonal Plasrub's claim of being solvent and profit-making could not, by itself, justify rejecting the Section 9 petition when the statutory requirements were satisfied.

The NCLAT set aside the NCLT's order and directed it to pass the necessary order for initiating CIRP within 15 days. Sonal Plasrub was given liberty to pay the amount due before the Section 9 order is issued