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Macquarie Bank Limited vs. Shilpi Cable Technologies Ltd-Corporate Newsletter

January 23, 2018
VOL III
ISSUE No. 04
january 23, 2018


Macquarie Bank Limited vs. Shilpi Cable Technologies Ltd.

NCALT

Source: www.nclat.nic.in

FACTS

Hamera International Private Limited executed an agreement with, Macquarie Bank
Limited, Singapore (hereinafter called ‘appellant’), where the appellant purchased the original supplier’s right, title and interest in a supply agreement in favour of Shilpi Cable Technologies (hereinafter referred to as the “respondent”).

Appellant had issued two invoices against the respondent for payment of the amount due, wherein term of payment was stated as 150 days from the date of bill of ladings. Upon the amounts becoming due for payment the appellant sent an email demanding payment of such amounts. On receiving a denial from any such default in payment the Appellant issued a statutory notice under Section 433 and Section 434of the Companies Act 1956 (as applicable that time) to the respondent to retrieve the outstanding amount.

Further the appellant also issued a demand notice under the Insolvency and Bankruptcy Code 2016 (hereinafter called ‘the Code’) under Section 8 of the Code at the registered office of the Respondent, calling upon it to pay the outstanding amount. Through reply, the contesting Respondent stated that nothing was owed by them to the Appellant and further went on to question the validity of the purchase agreement in favour of the appellant. Thus the Appellant initiated insolvency proceedings by filing a petition Under Section 9 of the Code.

Judgement appealed

The National Company Law Tribunal (hereinafter called ‘NCLT’) rejected the petition holding that Section 9(3) (c) of the Code was not complied with as the certificate required to accompany application under Section 9 was omitted. It therefore dismissed the application for non-compliance of mandatory provision as laid under Section 9 (3) (c) of the Code. The NCLT also acknowledged the dispute raised by the reply to the statutory notice sent under Sections 433 and 434 of the Companies Act, 1956 and therefore, under Section 9(5) (ii) (d), the application would have to be dismissed. The National Company Law Appellate Tribunal (hereinafter referred as ‘NCLAT’) reaffirmed and upheld the grounds of dismissal as held by NCLT. NCLAT further held that an advocate/lawyer cannot issue a notice under Section 8 on behalf of the operational creditor

Ratio Decidendi

  1. Section 9 (3) (c) mandatory or directory

    Supreme Court has relied on the recent judgement of Mobilox Innovations
    Private Limited v. Kirusa Software Private Limited[1] Civil Appeal No. 9405 of 2017, to answer the first question raised in this case that whether Section 9(1) contains the conditions precedent for initiating the Code insofar as an operational creditor is concerned. The components required to invoke the Code are:

    • Existence of default in payment;
    • Delivery of a demand notice for an unpaid operational debt or invoice demanding payment of the amount of payment; and
    • The fact that the operational creditor has not received payment from the
      corporate debtor within a period of 10 days of receipt of the demand notice or copy of invoice demanding payment, or received a reply from the corporate debtor which does not indicate the existence of a pre-existing dispute or repayment of the unpaid operational debt.
    • A copy of the invoice demanding payment or demand notice delivered by the
      operational creditor to the corporate debtor has to be mandatory furnished by joint reading of Sections 8 and 9(1) of the Code.
    • Further the court held that sub-clause (c) of Section 9(3), reads that the requirement
      for a copy of operational creditors financial account is certainly not a conditionprecedent for bringing the insolvency machinery in motion under this Code. Further the honorable court held that Section 9(3) (c) would have to be construed as being directory in nature as otherwise it would amount to a situation wherein serious general inconvenience would be caused to innocent persons, such as caused to the Appellant here
      in, without very much furthering the object of the Act, as has been held in the case State of Haryana v. Raghubir Dayal 1995 SCC (1) 133, 1994 SCALE (4)1084.

    • Authorized Agent

      As the second point is concerned, Section 8 of the Code speaks of an operational creditor delivering a demand notice. In Forms 3 and 5 the signature of the person “authorized to act” on behalf of the operational creditor must be added to both the demand notice as well as the application under Section 9 of the Code. Further both forms require authorized agent to state his position with or in relation to the operational creditor. A position with the operational creditor would perhaps be a position in the company or firm of the operational creditor, but the expression “in relation to” is significant. It is a very wide expression, as has been held in RRenusagar Power Co. Ltd. v. General Electric Co., and State of Karnataka v. Azad Coach Builders (P) Ltd, (1984) 4 SCC 679 at 704 which specifically includes a position which is outside or indirectly related to the operational creditor. It is clear, therefore, that both the expression “authorized to act” and “position in relation to the operational creditor” go to show that an authorized agent or a lawyer acting on behalf of his client is included within the aforesaid expression.

    • Harmonious construction between Advocates Act,1961 and the code

      The overriding clause contained in Section 238 of the Code will not override the Advocates Act, 1961 (hereinafter referred to as ‘the Advocates Act’) as there is no inconsistency between Section 9, read with the Adjudicating Authority Rules and Forms. The court relied onBalchand Jain v. State of M.P. (1976) 4 SCC 572to answer upon the overriding effect of the non obstante clause.

      The court held that, “there should be a clear inconsistency between the two enactments
      before giving an overriding effect to the non-obstante Clause but when the scope of the provisions of an earlier enactment is clear the same cannot be cut down by recourse to non-obstante clause. Harmonious interpretation, it is clear that both the statutes must be read together. Section 30 of the Advocates Act deals with the right of advocates to practice which is in consonance with Article 19(1) (g) of the Constitution. Therefore, a conjoint reading of Section 30 of the Advocates Act and Sections 8 and 9 of the Code together with the Adjudicatory Authority Rules and Forms thereunder would yield the result that a notice sent on behalf of an operational creditor by a lawyer would not be out of order”.

    Conclusion:

    Since the Code is in its natal stage, this particular judgment has become a landmark event as it has provided clarity as to the directory nature rather than mandatory nature of Section (9) (c) as well as to what is inclusive under the head of authorized person for serving a demand notice.

    ________________________________

    [1] https://ssrana.in/Admin/UploadDocument/IP%20Updates/India-NCLAT-
    Interprets-disputed-debts-under-the-Insolvency-Bankruptcy-Code-2016.htm

 



India: Financial health of Telecom sector

Technology

Health of Telecom Sector:

The telecom sector has made some noteworthy progress in the past few years and this progress can be attributed to the policy decisions by the Department of Telecommunications. It has undertaken some notable reforms and initiatives that have helped the telecom industry to grow and develop. As per the recent press release[1] regarding ‘Year End Review-2017’ by the Ministry of Communications, the total telecom connections in the country grew 33.07% by reaching the figure 1194.99 million in 2016-17 from 898.02 million in 2012-13.

As a part of the Digital India Campaign, key initiatives were undertaken by the Government for the growth of internet and broadband in the country. As per a recent press release[2] , the number of Internet subscribers (both broadband and narrowband put together) was 422.18 million at the end of March 2017 and increased to 431.21 million by the end of June 2017. Further, as per the press release, the FDI equity inflow in the telecom sector was USD 6.08 billion in the first half of the financial year which was in excess of four times that the sector had observed during the financial year 2015-16 and relatively a 10 percent increase was witnessed than that during 2016-17.

However, as per reports[3] , the financial health of the Indian telecom sector has been stressed to cope with a cumulative debt estimated, at INR 4.6 lakh crores, against revenues which have been dropped to less than INR 2 lakh crores. Further, an inter-ministerial group was constituted in 2017 to provide recommendations regarding the same.

Telecom Commission’s meeting on January 9 and COAI response:

The Telecom Commission met on January 9 to discuss and deliberate over the recommendations provided by the inter-ministerial group in August, 2017 and discuss a relief package that can be made for the sector.

Further, it has been reported in the media [4] that the Cellular Operators Association of India has welcomed the decision to allow 100 percent Foreign Direct Investment through the automatic route. The association also welcomed the Telecom Commission to approve the Inter-Ministerial Committee’s recommendations regarding the financial health of the telecom sector.

However, Rajan S. Mathews, the Director General of the Cellular Operators Association of India, was of the opinion that “since only the spectrum payment tenure is being extended, no real tangible financial benefit will accrue to the industry.” [5] Thus, concerns still ponder over the financial health of telecom sector in India.

[1] Refer: http://pib.nic.in/PressReleseDetail.aspx?PRID=1514451.

[2] Refer: http://pib.nic.in/PressReleseDetail.aspx?PRID=1514451.

[3] Refer: https://www.outlookindia.com/newsscroll/coai-welcomes-relief-
provided-by-telecom-commission/1227718.

[4] Refer: http://www.business-standard.com/article/news-ani/coai-welcomes-
relief-provided-by-telecom-commission-118011100723_1.html.

[5] Refer: https://economictimes.indiatimes.com/news/company/corporate-
trends/coai-sees-no-tangible-benefit-from-spectrum-payment-
leeway/articleshow/62458653.cms

 



India: Consumer Protection Bill 2018 – Salient Features in Brief

consumer

The Consumer Protection Bill, 2017 which was approved by the Union Cabinet last year (as already discussed in our previous titled “India: The Union Cabinet Approves The Consumer Protection Bill, 2017”[1] , dated January 15, 2018) is reportedly[2] scheduled to be taken up during this Budget session, which is to commence tentatively from January 29, 2018, as there is a need to update the Consumer Protection Act, 1986 (hereinafter referred to as the ‘Act’). The Consumer Protection Bill, 2018 (hereinafter referred to as the ‘Bill’) is slated to be the next big thing for the consumers. The said Bill was originally drafted in 2015 and placed before the Lok Sabha (Lower House) in 2016 and subsequently sent to the Standing Committee on Food and Consumer Affairs. The Bill is important because the new Bill is expected to completely overhaul the current laws stipulated under the Consumer Protection Act, 1986.

The Consumer Protection Bill, 2018 proposes the following new amendments:

  • The Pecuniary Jurisdiction of the Consumer Disputes Redressal Agencies have been revised. As per the rules, the jurisdiction of the District Forums has now been extended to INR 10 Million from the earlier limit of INR 2 Millions. Similarly, the State Forums can now entertain complaints where the value of dispute exceeds INR 10 Million, but does not exceed INR 100 Million. Finally, the National Forums can now entertain complaints where the value of the disputes exceeds INR 100 Million. The three-tier structure for adjudicating consumer disputes still remains in the form of district forums, state and national commissions but with enhanced values at each level, considering the current market realities.

  • Any manufacturer or service provider who causes a
    false or misleading advertisement to be made which is prejudicial to the interest of consumers shall be punished with imprisonment for a term which may extend to two years and with fine which may extend to INR 1 Million, for the first offence; and for every subsequent offence, be punished with imprisonment for a term which may extend to five years and with fine which may extend to INR 5 Million. It also provides for prosecution of celebrities endorsing products with misleading claims, including fines.

  • Establishment of a
    Central Consumer Protection Authority, whose task is to promote, protect and enforce the rights of consumers; make interventions when necessary to prevent consumer detriment arising from unfair trade practices and to initiate class action including enforcing recall, refund and return of products, etc. This fills an institutional void in the regulatory regime extant.

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