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Lawyers can send demand notice on behalf of operational creditors, says Supreme Court

Team SoOLEGAL 21 Dec 2017 4:49pm

Lawyers can send demand notice on behalf of operational creditors, says Supreme Court

In a recent ruling, the Supreme Court has done away with the mandatory requirement for operational creditors to provide their bank’s certificate in order to file an application at the National Company Law Tribunal (NCLT) against corporate debtors.

In the same judgment, the apex court has also allowed lawyers to send a demand notice to a debtor company on behalf of the operational creditors.

According to law experts, the two precedents in one judgment would further strengthen the jurisprudence surrounding the Insolvency and Bankruptcy Code (IBC).

The Insolvency and Bankruptcy Code 2016 differentiates between financial creditors and operational creditors. Financial creditors are those whose relationship with the entity is a pure financial contract, such as a loan or a debt security.

For operational creditors, liability from the entity comes from a transaction on operations, say provided goods and services to the company.

Three civil appeals from National Company Law Tribunal judgments were clubbed and two important questions, which arose before a bench of justice RF Nariman and Navin Sinha, were: 1) Whether a certificate under Section 9(3) (c) of the Code is mandatory or directory in nature; and 2) Whether a demand notice of an unpaid operational debt can be issued by a lawyer on behalf of the operational creditor.

[Source: Financial Chronicle]



Tagged: Supreme Court   National Company Law Tribunal   Lawyers  
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