Macquarie Bank Vs. Shilip Cable: An Interpretation Of The Position Of Foreign Creditors Under IBC

Macquarie Bank Vs. Shilip Cable: An Interpretation Of The Position Of Foreign Creditors Under IBC Law

Siddhi Sahoo, B.B.A. LL.B. (Hons.), SVKM’S NMIMS School of Law

Introduction

“The essence of law lies in the spirit, not its letter, for the letter is significant only as being the external manifestation of the intention that underlies it.” - Salmond

The most common rule of interpretation is that the entire statute must be read and interpreted as a whole in order for it to make sense. “Verbis Legis Non Est Recedendum states” that when interpreting a statute, the words of the statute cannot be changed. The goal of statutory interpretation is to ascertain the legislative intent as expressed or suggested by the terminology utilized.

Brief Facts

The payment of USD 6,321,337, or Rs. 43,11,15,190, made by the Corporate Debtor/Respondent (Uttam Galva Metallics) to the Operational Creditor/Appellant (Macquarie Bank), was late. A Statutory Notice was issued by the Appellant in accordance with Sections 433 and 434 of the Companies Act after several emails were sent to the Debtor reminding them to settle the debt; however, these communications were unable to persuade the Debtor to fulfill the obligation. In response to the notice, the Respondent denied having any unpaid debt of this nature. Following the 2016 enactment of the Insolvency and Bankruptcy Code, the Appellant sent a Demand Notice to the Corporate Debtor in accordance with Section 8 of the Code. In response to the notice, the Respondent said that there was no active default on its part while also contesting the legality of the Purchase Agreement. The Appellants applied to start the Corporate Insolvency Resolution Process by approaching the National Company Law Tribunal.

Issues of the Case

1. Under the Insolvency Bankruptcy Code (IBC), Section 9 (3) (c) especially with reference to ‘Operational Creditors’ whether the Section is mandatory or directory in nature.

2. Can a ‘lawyer’ on behalf of the operational creditor file a demand notice for unpaid operational debt under Section 8 (1) under the IBC?

NCLT & NCLAT Ruling

The NCLT determined that the application should be denied for two reasons: found as follows, Section 9(3)(c) of the Code had not been followed because Macquarie Bank had neglected to submit a certificate from a financial institution as required by the provision; and second, Shilpi Cable had disputed the debt's existence in its response to a prior statutory notice that Macquarie Bank had sent in accordance with Sections 433 and 434 of the Companies Act of 1956, attempting to make the application subject to rejection under Said Section.

Further, on approaching the NCLAT, they upheld the order given by the NCLT and went on to say:

It was ruled that S. 9 (3) (c) of the Code is mandatory and not merely advisory in its earlier decision in Smart Timing Steel Ltd v. National Steel and Agro Industries Ltd2. This ruling must be complied with; Macquarie Bank's attorneys, not the bank itself, issued the notice required by S (8)(1). Only "operational creditor himself, or through a person authorized to act on the operational creditor's behalf" may send such a notice in order for it to be legal under this clause. As a result, an attorney or lawyer cannot issue a notice under Section 8 in the absence of any authority since in such case, it would be regarded as a notice from a lawyer or a legal representative.