By Vishal Hablani (


The Supreme Court with its decision on December 15, 2017, in the case Macquarie Bank Limited v. Shilpi Cable Technologies Ltd.[1], cleared the ambiguities w.r.t. interpretation of Section 8 and 9(3)(c) of the Insolvency and Bankruptcy Code, 2016 ( ‘the Code’). The decision overturned the concurring rulings laid down by the NCLAT in three cases, viz. Uttam Galve Steels Limited v. DF Deutsche Forfait AG & Anr.[2], Senthil Kumar Karmegam v. Dolphin Offshore Enterprises & Anr.[3], and Goa Antibiotics & Pharmaceuticals Ltd. v. Lark Chemicals Pvt. Ltd.[4]

The judgements laid down by the National Company Law Appellate Tribunal (‘NCLAT’) in the abovementioned cases settled the law, that a lawyer, law firm, C.A., or a C.S. cannot send demand notices to the Corporate Debtor on behalf of an operational creditor, unless they are authorized by the Board. Also, if authorised, they are required to clearly state their position in relation to the operational creditor, in the concerned demand notice.

Importantly, the Hon’ble Supreme Court (‘SC’) in this judgement, also dealt with the issue of requirement of a certificate from the financial institutions maintaining accounts of the operational creditor under Section 9(3)(c) of the Code.

Brief Facts of the Case:

The Appellant had challenged the order passed by the NCLAT before SC. The petitioner demanded the payment for supply of goods to the respondent. When the demand was not met, the Appellant issued a demand notice under Section 8 of the Code for payment of the outstanding debt. Later, the Appellant initiated insolvency proceedings under Section 9 of the Code. The NCLAT, in its impugned judgement (dated 17/7/2017), agreed with the stand of National Company Law Tribunal (‘NCLT’), and dismissed the appeal for non-compliance with the mandatory provision contained in Section 9(3)(c) of the Code. Moreover, it took an obstinate view that an advocate/lawyer cannot issue a demand notice on behalf of an operational creditor under Section 8 of the Code.

The SC, allowing the appeal of the operational creditor, set aside the NCLAT judgment on both the counts. In order to come up with the judgment, reliance was placed on Article 14 of the Constitution of India and Doctrine of Harmonious Construction for the interpretation of Advocates Act, 1961 (‘Advocates Act’) with the Code.

Relevant Provisions of the Law:

Insolvency and Bankruptcy Code, 2016:


Section 3: “Definitions –


(14) “financial institution” means—

(a) a scheduled bank;

(b) financial institution as defined in section 45-I of the Reserve Bank of India Act, 1934;

(c) public financial institution as defined in clause (72) of section 2 of the Companies Act, 2013; and

(d) such other institution as the Central Government may by notification specify as a financial institution;


(23) “person” includes—

(a) an individual;

(b) a Hindu Undivided Family;

(c) a company;

(d) a trust;

(e) a partnership;

(f) a limited liability partnership; and

(g) any other entity established under a statute, and includes a person resident outside  India;


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.


Explanation.— For the purposes of this section, a “demand notice” means a notice served by an operational creditor to the corporate debtor demanding repayment of the operational debt in respect of which the default has occurred.


Section 9: “Application for initiation of corporate insolvency resolution process by operational creditor – (1) After the expiry of the period of ten days from the date of delivery of the notice or invoice demanding payment under sub-section (1) of section 8, if the operational creditor does not receive payment from the corporate debtor or notice of the dispute under sub-section (2) of section 8, the operational creditor may file an application before the Adjudicating Authority for initiating a corporate insolvency resolution process.


(3) The operational creditor shall, along with the application furnish—


(c) 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; and

(5) The Adjudicating Authority shall, within fourteen days of the receipt of the application under sub-section (2), by an order—


(ii) reject the application and communicate such decision to the operational creditor and the corporate debtor, if— (a) the application made under sub-section (2) is incomplete; (b) there has been repayment of the unpaid operational debt; (c) the creditor has not delivered the invoice or notice for payment to the corporate debtor; (d) notice of dispute has been received by the operational creditor or there is a record of dispute in the information utility; or (e) any disciplinary proceeding is pending against any proposed resolution professional: Provided that Adjudicating Authority, shall before rejecting an application under subclause (a) of clause (ii) give a notice to the applicant to rectify the defect in his application within seven days of the date of receipt of such notice from the adjudicating Authority.


Advocates Act, 1961:


Section 30: Right of advocates to practise. — Subject to provisions of this Act, every advocate whose name is entered in the 1[State roll] shall be entitled as of right to practise throughout the territories to which this Act extends,—

(i) in all courts including the Supreme Court;

(ii) before any tribunal or person legally authorised to take evidence; and

(iii) before any other authority or person before whom such advocate is by or under any law for the time being in force entitled to practise.


Constitution of India:


Article 14: Equality before law – The State shall not deny to any person equality before the law or the equal protection of the laws within the territory of India.


Article 19: Protection of certain rights regarding freedom of speech, etc. –

(1) All citizens shall have the right—

          (g) to practise any profession, or to carry on any occupation, trade or business.


Contentions Presented by the Appellant:

The Appellant argued that on a conjoint reading of Section 9(3)(c) of the Code with Rule 6 and Form 5 of the Insolvency and Bankruptcy (Application to Adjudicating AuthorityRules2016 (‘Adjudicating Authority Rules’), it can be found that Section 9(3)(c) is not mandatory, but only directory in nature. Further, it was argued that Section 9(3)(c) is only a procedural provision, and is not a pre-requisite for admission of an application under Section 9(1) of the Code. It was further supported by the fact that, if certificate is not furnished by the financial institution, the application should not be rejected under Section 9(5)(ii). Such certificate under Section 9(3)(c) is just an additional requirement, and is to be provided only “if available”. Moreover, it was argued that there might be situations where it is possible that an operational creditor might have a non-scheduled bank as his banker, or a foreign supplier who is an operational creditor, defined as “person” under Section 3(23) may deal with some other foreign banker who is not covered under Section 3(14) of the Code. It would then become impossible for the petitioner to obtain the requisite certificate and satisfy the condition laid down under Section 9(3)(c). This loophole in the provision(s) cannot operate in a manner to nonsuit the petitioner.

The Appellant went ahead to further submit two important points:

Firstly, that the expression “position with or in relation to the operational creditor” demonstrates that a lawyer, authorized by the operational creditor, would come under the ambit of the said provision.

Secondly, it was emphasised that under Section 30 of the Advocates Act, 1961 the effect of the expression “practise” applies to lawyers, vis-a-vis Tribunals such as the NCLT and NCLAT.

Findings of the Court:

Findings of the court can be summarised by taking into consideration the two prime issues addressed by the Court. They are:

  1. Is the provision contained in Section 9(3)(c) mandatory?

The Court took into consideration the expression “confirming” under Section 9(3)(c) and took the view that a certificate is a mere piece of evidence which only “confirms” that the debt has not been paid. It cannot be construed as a condition precedent for triggering the insolvency process under the Code. Moreover, the certificate is to be provided only “if available”. This can be construed by reading Item 7 of Part V contained in Form 5 under Rule 6, along with Item 8, which talks about other documents in order to prove the existence of an operational debt and the amount in default. Further, Annexure III in the Form speaks about copies of relevant accounts kept by banks/financial institutions maintaining accounts of the operational creditor, confirming that there is no payment of the unpaid operational debt, only “if available”.

Taking into consideration the possibilities presented by the Appellant (as mentioned above), when it becomes impossible for an operational creditor to comply with the provision laid down in Section 9(3)(c), the Court took the view:

The Code cannot be construed in a discriminatory fashion so as to include only those operational creditors who are residents outside India who happen to bank with financial institutions which may be included under Section 3(14) of the Code. It is no answer to state that such person can approach the Central Government to include its foreign banker under Section 3(14) of the Code, for the Central Government may never do so. …….argument that such persons ought to be left out of the triggering of the Code against their corporate debtor, despite being operational creditors as defined, would not sound well with Article 14 of the Constitution, which applies to all persons including foreigners. Therefore, as the facts of these cases show, a so called condition precedent impossible of compliance cannot be put as a threshold bar to the processing of an application under Section 9 of the Code.

The Court further interpreted expression “shall” under Section 9(3) in a liberal manner, taking into consideration the possibility of non compliance with the provision laid down in Section 9(3)(c). It took the view that strict interpretation would cause inconvenience to innocent persons, and would defy the objective of the Act.

  1. Can a lawyer issue a demand notice on behalf of the operational creditor?

The Court took into consideration the expression “delivered”, as stated in Section 8, and took the view that an operational creditor is only required to deliver the demand notice. The notice can be issued by an authorized agent, who can be a lawyer as well. As per Forms 3 and 5 signature of the person “authorized to act” on behalf of the operational creditor is required to be appended to both the demand notice as well as the application under Section 9 of the Code. This authorized agent has to state his position with or in relation to the operational creditor. The expression “in relation to” was interpreted in the widest possible manner, as the Court took the view that, it includes a position which is outside or indirectly related to the operational creditor. It was concluded that both the expressions “authorized to act” and “position in relation to the operational creditor” demonstrate that a lawyer acting on behalf of the creditor is included in the aforesaid expression.

Also, the expression “practise” stated under Section 30 of the Advocates Act was also elaborated at lengths, and the Court took the view that it would include all preparatory steps leading to the filing of an application before a Tribunal. The Court relied on Harish Uppal (Ex-Capt.) v. Union of India, (2003) 2 SCC 45 at 72, which states:

“The right of the advocate to practise envelopes a lot of acts to be performed by him in discharge of his professional duties. Apart from appearing in the courts he can be consulted by his clients, he can give his legal opinion whenever sought for, he can draft instruments, pleadings, affidavits or any other, he can participate in any conference involving legal discussions, he can work in any office or firm as a legal officer, he can appear for clients before an arbitrator or arbitrators etc.”

The Court applied the Doctrine of Harmonious Construction and read both the statutes together. Moreover, it was emphasised that Section 30 of the Advocates Act deals with the fundamental right under Article 19(1)(g) of the Constitution to practice one’s profession. Therefore, a conjoint reading of Section 30 of the Advocates Act and Section 8 and 9 of the Code together with the Adjudicatory Authority Rules and Forms thereunder would yield the result that a notice sent on behalf of the operational creditor by a lawyer would be in order.


Intervention by the Supreme Court to clear the ambiguities w.r.t. interpretation of certain contentious provisions of the Code is commendable. In order to attain the objectives of the Code, the Court has interpreted certain expressions within the provisions liberally, as well as strictly, whenever required. From the above analysis it is evident that this ruling will have a long run impact on the suits filed by operational creditors on the account of two major relaxations provided therein.






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