The corporate petition was submitted by M/s Cloudwalker Streaming Technologies Pvt. Ltd. under Section 9 of the Insolvency & Bankruptcy Code, 2016 against the Corporate Debtor on the grounds that it had defaulted on a loan for the sum of Rs. 26,95,00,000. In order to import and provide LED TVs to the Corporate Debtor, the Operational Creditor got in touch with the Corporate Debtor. On December 29, 2016, both parties signed into a supply agreement. According to Clause 2(a) of the Supply Agreement, which specifies how orders should be placed, the Operational Creditor had been periodically importing and providing LED TVs to the Corporate Debtor via purchase orders.
Based on the import and the purchase order given by the Corporate Debtor, the Operational Creditor requested payment for the LED TVs that were purchased and imported for the Corporate Debtor between October 11, 2017, and December 1, 2017. More than 70% of the merchandise that was ordered by the Corporate Debtor had not been collected as of March 2018. According to Section 8 of the Insolvency and Bankruptcy Code, 2016, the Operational Creditor sent a demand notice in Form 3 on June 8, 2019, and the Corporate Debtor received it on June 13, 2019. But there hasn't been a response to that either. The amount owed to the operational creditor has never been the subject of any disagreement on the part of the corporate debtor.
In the instant case titled Neeraj Jain, Director of M/s Flipkart India Private Limited v. Cloudwalker Streaming Technologies Private Limited, the issue raised for clarification before the NCLAT was:
Whether the issuing of a notification in Form 3 or Form 4 under Section 8 (1) of the Insolvency and Bankruptcy Code 2016 depends on the operational creditor's discretion or the nature of the operational debt?
With regard to this issue, the application submitted under Section 9 by the Operational Creditor is rejected, and NCLAT has revoked the contested order from the Adjudicating Authority that was issued on October 24, 2019, according to the court. The Corporate Insolvency Resolution Process was terminated for the Corporate Debtor. The Promoter, who will oversee the Corporate Debtor, will receive the records and assets of the Corporate Debtor right away from the Interim Resolution Professional. With the aforementioned observations and instructions, the appeal was granted. The Adjudicating Authority must issue a ruling directing payment of the CIRP cost.
The NCLAT further ruled that the type of operational debt affects whether a demand notice is issued under Section 8(1) of the Insolvency and Bankruptcy Code 2016 in Form 3 or Form 4 under the Insolvency and Bankruptcy Code Application to Adjudicating Authority Rules 2016. The Operational Creditor is not given the option to issue the demand notice in Form 3 or Form 4 depending on its convenience under Section 8(1). Whether or not the invoices were generated during the course of the transaction determines whether Form 3 or Form 4 is applicable. It is also made clear that if the demand notice is filed in Form 3 of the Insolvency and Bankruptcy Code Application, the copy of the invoice is not necessary.
The NCLAT categorically stated that,
"On perusal of the above notice, it appears that in Form-III Operational Creditor has only mentioned the total amount of debt without giving any detail of the debt. The list of documents which are attached to the Form-III Demand Notice contains only Supply Agreement dated 29th December 2016, Purchase Order/Email and computation of amount in tabular form. As per Proforma of Form-III, the Operational Creditor had to attach the documents with the Notice to prove the existence of Operational Debt and the amount in default.”