Chapter II Corporate Insolvency Resolution Process
Section 8. Insolvency resolution by operational creditor.
(1) An operational creditor may, on the occurrence of a default, deliver a demand notice of unpaid operational debtor copy of an invoice demanding payment of the amount involved in the default to the corporate debtor in such form and manner as may be prescribed.
(2) The corporate debtor shall, within a period of ten days of the receipt of the demand notice or copy of the invoice mentioned in sub-section (1) bring to the notice of the operational creditor –
- (a) existence of a dispute, 1[if any, or] record of the pendency of the suit or arbitration proceedings filed before the receipt of such notice or invoice in relation to such dispute;
- (b) the 2[payment] of unpaid operational debt-
- (i) by sending an attested copy of the record of electronic transfer of the unpaid amount from the bank account of the corporate debtor; or
- (ii) by sending an attested copy of record that the operational creditor has encashed a cheque issued by the corporate debtor.
Explanation. – For the purposes of this section, a “demand notice” means a notice served by an operational creditor to the corporate debtor demanding 3[payment] of the operational debt in respect of which the default has occurred.
1. Subs. by Act No. 26 of 2018, sec.5 (a) (i) for the words “if any, and” (w.e.f. 6-6-2018).
2. Subs by Act No. 26 of 2018, sec.5 (a) (ii) for the word “repayment” (w.e.f. 6-6-2018).
3. Subs. by Act No. 26 of 2018, sec.5 (b) for the word “repayment” (w.e.f. 6-6-2018).
CASE LAWS
1. Dispute to be raised at the time of statutory notice, not at the time when the application is made u/s 9 of the code.
2. A dispute must truly exist in facts & should not be spurious, hypothetical & illusory.
3. Expression existence of a dispute, if any, is broad & not limited to instances specified in the definition u/s 5(6), it has far arms.
4. Prior notice u/s 8 is mandatory before making an application u/s 9 of the code.
5. OC cannot use the code prematurely or for extraneous considerations or as a substitute for debt enforcement mechanisms.
6. Legislative intent of issuance of notice u/s 8 is not a mere formality but mandatory.
7. Dispute u/s 18 of the MSME Act takes color from section 17 thereof and is different from the dispute u/s 5(6) of the code read with section 8 of the Code.
8. Corporate Debtor can show and satisfy the AA that default has not occurred in the sense that the debt, which may also include a disputed claim, is not due or payable in law or fact.
9. Pendency of proceeding u/s 138/141 of the Negotiable Instrument Act, 1881 cannot be held to be a dispute pending before a court, such pendency actually amounts to an admission of debt and not the existence of a dispute.
10. Pendency of appeal u/s 37 of the Arbitration & Conciliation Act, 1996 falls within the definition of existence of the dispute.