VISA COKE LTD VS M/S MESCO KALINGA STEEL LIMITED : CASE SUMMARY

The Supreme Court held in Visa Coke Ltd. Vs. M/s Mesco Kalinga Steel Ltd  Civil Appeal 357/2025 held that demand notice under Section 8 sent to key managerial personnel  at the registered office address in the capacity of their official position can be considered service to the Corporate Debtor.

BRIEF FACTS

Visa Coke Ltd. (Operational Creditor) was engaged in business of manufacture and sale of lowend Low Ash Metallurgical Coke. The Operational Creditor supplied LAM Coke to the Respondent. The Corporate Debtor failed to pay the outstanding amount as such the Operational Creditor sent legal notice demanding the outstanding payment for supply of 1700 MT of LAM Coke amounting to INR 3,34,16,661.60 along with penal interest at 15% per annum. As amount was not paid the Operational Creditor sent demand notice under Form 3 on 31.03.2021 in compliance with section 8 of the IBC, to the Corporate Debtor at its registered address through its Key Managerial Personnel i.e Director, Chief Financial Officer and Manager, Commercial. As outstanding amount was not paid, Section 9 IBC petition was filed  before NCLT for initiation of CIRP process. NCLT dismissed the Petition on the ground that service has not been made on the Corporate Debtor but only on key managerial personnel. An appeal was filed before NCLAT, which was also dismissed.

FINDINGS OF THE SUPREME COURT

The Supreme Court observed that section 9 petition can be filed only against the corporate debtor after giving prior notice under section 8 of the IBC to the corporate debtor and the key requirements for filing the same are –  (i) demand notice under section 8 must be served on the corporate debtor; (ii) after 10 days, if the payment is not made or if there is no valid dispute, the application can be filed; (iii) application must be filed in Form 5 as prescribed by the Adjudicating Authority Rules, 2016; and (iv) supporting evidence such as invoices, bank statements, or written contracts must be attached. Further, a conjoint reading of section 8 of the IBC r/w Rule 5(2)(a) and (b) of the Adjudicating Authority Rules, 2016 would reveal that a demand notice under section 8 can be addressed and delivered to the corporate debtor through its KMP.

The Supreme Court observed that on a perusal of Form 3 notice dated 31.03.2021 issued by the appellant, it is revealed that the same was addressed to the names of the KMP and delivered to the registered office of the respondent – Corporate Debtor viz., MESCO Kalinga Steel Limited. Even the ‘subject’ and paragraph 1 of the notice clearly demonstrate that as per the IBC, demand notice / invoice demanding payment in respect of unpaid operational debt due from the corporate debtor was issued and thereby, the appellant called upon the Corporate Debtor to pay the operational debt within a period of ten days from the date of receipt of the notice, failing which, CIRP be initiated in respect of the Corporate Debtor. Notably, the said notice dated 31.03.2021 was served on the KMP in their official capacities at the registered office address of the corporate debtor. The contents of the notice clearly establish that the same was issued to the Corporate Debtor in respect of the operational debt due and payable by them. As such, it cannot be said that the appellant did not comply with the statutory requirement of sending demand notice in Form 3 to the respondent – Corporate Debtor as provided under section 8 of the IBC, before filing the section 9 petition seeking initiation of CIRP against the respondent in respect of the unpaid operational debt.

The Supreme Court observed that the purpose of sending a demand notice is to give the corporate debtor an opportunity to either repay the outstanding debt, or dispute the debt if there are genuine reasons. In the present case, the notice dated 31.03.2021 sent by the appellant to the KMP of the corporate debtor at the registered office address in the capacity of their official position, explicitly demonstrates that the same was issued to the corporate debtor demanding the operational debt due and payable by them. However, it is not the case of the respondent that no notice was sent by the appellant calling upon the respondent – Corporate Debtor to pay the operational debt. Further, it is pertinent to point out that during the pendency of the section 9 petition, the Corporate Debtor approached the Operational Creditor for settlement, which was not fructified.

The Supreme Court concluded that the approach of the NCLT and the NCLAT rejecting the section 9 petition on the technical ground that no notice was sent to the corporate debtor and the notice sent by the appellant to the KMP of the corporate debtor cannot be taken to be a notice issued under section 8 of the IBC, is incorrect and is unsustainable in law.

The Supreme Court allowed the appeal and remanded the matter back to NCLT for determination on merits.

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