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Macquarie Bank Limited v. Shilpi Cable Technologies Ltd

Civil Appeal · 2017 INSC 1241Decided 15 Dec 2017
Civil Appeal No. 15135 of 2017
Justice Rohinton Fali Nariman · Justice Navin Sinha

Background

Macquarie Bank, an overseas creditor, was owed over US$6.3 million by Shilpi Cable Technologies for goods supplied under a trade finance arrangement. After the debt went unpaid, Macquarie's lawyer sent a statutory demand notice under Section 8 of the newly-enacted Insolvency and Bankruptcy Code, 2016, and then filed an insolvency application under Section 9. Both the National Company Law Tribunal (NCLT) and the National Company Law Appellate Tribunal (NCLAT) rejected the application on two technical grounds: that the application lacked a certificate required under Section 9(3)(c) of the Code (confirming no payment had been received), and that a lawyer, rather than the creditor itself, cannot validly send the Section 8 demand notice.

Decision Breakdown

The Supreme Court decided both legal questions in Macquarie's favour. First, it held that the certificate requirement under Section 9(3)(c) is procedural/directory, not mandatory, since a foreign bank's accounts may not be maintained in the specific Indian format the provision envisages, an application cannot be thrown out at the threshold merely for lacking this certificate when other evidence establishes non-payment. Second, relying on Section 30 of the Advocates Act (which entitles advocates to "practice" on behalf of clients) and on the Court's own precedent in Byram Pestonji Gariwala, the Court held that a lawyer is fully competent to issue a Section 8 demand notice on behalf of an operational creditor, just as lawyers can act on behalf of clients in other legal proceedings. Having removed both threshold bars, the Court set aside the NCLAT's judgment and remanded the matter to the NCLAT to proceed with the insolvency application on its merits.

Lesson Learnt

Technical defects, like a missing certificate format or a notice being sent through a lawyer rather than personally, should not be used to throw out a legitimate insolvency claim at the very first step; the law favours deciding such disputes on their substance, and lawyers are legally entitled to issue formal demand notices on behalf of their clients.

Official source (sci.gov.in)View Judgment (PDF)

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