The Supreme court upheld the operational debtor's rights by applying a literal interpretation to section 9 of the Code's provision. In order to prevent depriving the Advocates of their right to practise their profession, the Court ruled that doing so would constitute a violation of Article 19 of the Indian Constitution.
The delivery of demand notice by the operational creditor to the corporate debtor for payment of the amount owing to him is covered in Section 8 of the Insolvency and Bankruptcy Code, 2016. Additionally, Section 9 of the Code deals with the request for the start of an insolvency proceeding against a corporate debtor made by an operational creditor in accordance with Act regulations. The idea of the Code's predominance over other laws is also covered in Section 238. In this decision, the court interpreted a number of Act-related provisions. The Hon'ble Court in this matter, along with the Section, has also interpreted the norms established for the explanation of provisions incorporated under the Code.
In the instant case titled Macquarie Bank Limited v. Shilpi Cable Technologies Limited the issues raised for clarification before the Supreme Court were:
Whether the clause found in Section 9(3)(c) of the Insolvency and Bankruptcy Code, 2016 is required in relation to an operational debt?
What legal authority does the attorney have to send a demand letter for an overdue operational debt on behalf of an operational creditor?
With regard to the first issue, in this case, the court concluded that in interpreting Section 9 of the Code, the judge should consider what is best for the case and not strictly adhere to the rules set forth in the provision. The court went on to say that an operating creditor with a residence outside of India is included in the definition of "person." The same, nonetheless, will not be qualified to apply for the Indian financial institution. This section will be interpreted as a directory. As a result, the court determined that section 9(3) would not be interpreted as a prerequisite and is not mandatory in nature. Section 9 of the code was interpreted by the court.
With regard to the second issue, Regarding this matter, the court determined that while section 8 of the statute refers to "delivering of the demand notice," it does not refer to the operational creditor issuing the demand notice. In other words, section 8 of the Code specifies that the operational creditor shall deliver the demand notice; it does not provide that the operational creditor shall issue the demand notice. Therefore, it is not stated anywhere in the code that attorneys may not serve notice under the Code on behalf of an operating creditor. In addition, the court ruled that preventing attorneys from working in the tribunal would violate Article 19 of the constitution, which guarantees freedom of employment.
The Court categorically stated that,
"It is true that the expression “initiation” contained in the marginal note to Section 9 does indicate the drift of the provision, but from such drift, to build an argument that the expression “initiation” would lead to the conclusion that Section 9(3) contains mandatory conditions precedent before which the Code can be triggered is a long shot. Equally, the expression “shall” in Section 9(3) does not take us much further when it is clear that Section 9(3)(c) becomes impossible to comply with in cases like the present. It would amount to a situation wherein serious general inconvenience would be caused to innocent persons, such as the appellant, without very much furthering the object of the Act."
The rights of the operating creditors, in this case, were properly protected by the court. The judges in such cases must apply the modern approach to the strict provisions of the code in such a way that the innocent person will not suffer and that justice will be served for those operational creditors who are residents outside of India who are defrauded or affected by the actions of the corporate debtor to whom the provisions of IBC 2016 would apply. As in the current instance, the court upheld the operational debtor's rights by applying a literal interpretation to section 9 of the Code's provision. In order to prevent depriving the Advocates of their right to practise their profession, the Court ruled that doing so would constitute a violation of Article 19 of the Indian Constitution.