Sunday, February 11, 2018

CERTIFICATE FROM A SCHEDULED BANK LOCATED IN INDIA NO MORE MANDATORY BEFORE COMMENCING THE INSOLVENCY RESOLUTION PROCESS


By Anoop Prakash Awasthi, Advocate on Record, 9891491829, anoopclc@gmail.com, http://www.aoranoop.com/

Section 9(3)(c) of the Insolvency & Bankruptcy Code 2016 reads as follows: “The operational creditor shall…….along with the application furnish a copy of the certificate from the financial institutions maintaining accounts of the operational creditor confirming that there is no payment of an unpaid operational debt by the corporate debtor”.  The ‘shall’ appearing in the section has throughout been treated sacrosanct by the company tribunals but in a paradigm shift from the earlier approach,the Hon’ble Supreme Court of India, in MACQUARIE BANK LIMITED VERSUS SHILPI CABLE TECHNOLOGIES LTD. CIVIL APPEAL NO.15135 OF 2017, on 15.12.2017, has held that that Section 9(3)(c) of the Insolvency & Bankruptcy Code 2016 is not mandatory, but only directory and in the said section, “shall” should be read as “may”. Hon’ble Apex Court conjointly read Section 9(3)(c), Rule 6 and Form 5 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 and held that the true construction of Section 9(3)(c) makes it a procedural provision, which is directory in nature.