Macquarie Bank Ltd. v. Shilpi Cable Technologies: Supreme Court clearing the air on procedural aspects of Insolvency and Bankruptcy Code, 2016

Facts of the Case

One Company named Uttam Galva Metallics (Corporate Debtor) (Respondent in the current case) did not make the payment to one bank named Macquarie Bank (Operational Creditor) (Appellant in the current case). The amount which was demanded by the bank amounted to 6,321,337 US dollars which is equal to Rs 4,11,15,190. The bank sent emails repeatedly to the respondent demanding the payment of the amount. The Respondent did not make payment even after receiving multiple emails. The bank then sent a statutory notice to the respondent under Section 433 and 434 of the Companies Act, these Sections stipulate for circumstances in which company may be wound up by Court and conditions for when a company is deemed to be unable to pay its debt, respectively. The Appellant made use of Insolvency and Bankruptcy Code (IBC) and gave a ‘Demand Notice’ to the Respondent under Section 8 of the IBC. The respondent in its reply denied the existence of debt and also questioned the Purchase Agreement. Hence, the appellants approached National Company Law Tribunal (NCLT) and started the Corporate Insolvency Resolution Process.

NCLT Ruling

The NCLT rejected the application of Corporate Insolvency Resolution Process on the ground that the application was devoid of the compulsory requirements under Section 9(3)(c) of the IBC. This Section required that 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 be attached with Insolvency Resolution Process Moreover, the bank being foreign it was held that it is not a ‘Financial Institution’ as per Section 3(14) of the IBC and thus it was held that it is not a certificate from a Financial Institution.

The second reason for rejecting the application was that there was already an existence of dispute before the Demand Notice was sent u/S 8(2)(a) of the IBC which was also raised at the time when a reply was made to the Statutory Notice which was furnished under  Section  433 and 434 of the Companies Act.

National Company Law Appellate Tribunal (NCLAT) Ruling

NCLAT upheld the NCLT’s order reason being that an application has to complete the statutory requirements u/S 9(3)(c) of the IBC and that the bank not being a Financial Institution u/S 3(14) of the IBC cannot issue a valid certificate signifying the payment/non-payment of a debt. The certificate being a compulsory requirement and it not being made by a financial institution the application remains incomplete.

Moreover, the tribunal paid heed to the Demand Notice and held that it should be made in compliance with Form 3 under Rule 5 of IBC Rules, 2016. Such Demand Notice was to be sent by the Operational Creditor himself or by a person authorized by him and a lawyer sending such Demand Notice would not suffice the Notice to be a Demand Notice u/S8 of the IBC. The appeal was rejected on these grounds.

Issues Before the Hon’ble Supreme Court

Issue 1: Whether a demand notice of an unpaid operational debt can be issued by a lawyer on behalf of the operational creditor?

Issue 2: Whether, in relation to an operational debt, the provision contained in Section 9(3)(c) of the IBC stipulating for the requirement of a Financial Institution’s certificate with respect to payment of the Debt is mandatory?

Contentions raised

Appellant’s Side:

Learned senior advocate appearing on behalf of the appellant, referred to various provisions of the Code. According to learned senior counsel, on a conjoint reading of Section 9(3)(c), Rule 6 and Form 5 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 (“Adjudicating Authority Rules”), it is clear that Section 9(3)(c) is not mandatory, but only directory and that, in the said section, “shall” should be read as “may”.

Further, according to learned senior counsel, Section 9(3)(c) is a procedural section, which is not a condition precedent to the allowing of an application filed under Section 9(1)

It was also stressed the fact that at the end of Form 5, what has to be attached to the application, by way of Annexure III, is a copy of the relevant accounts from banks/financial institutions maintaining accounts of the operational creditor confirming that there is no payment of the operational debt only “if available”. Also, according to learned counsel, this is only an additional document, which along with other documents that are mentioned in Item 8 of Part V, would go to prove the existence of the operational debt.

A further argument was made that the definition in Section 3(14), though exhaustive, is subject to context to the contrary and that, therefore, it is clear that a financial institution would include a bank outside the categories mentioned in Section 3(14) when it comes to an operational creditor who is a resident outside India.

Respondent’s Side:

According to learned senior counsel from the side of the Respondent, the object of the Code is not that persons may use the Code as a means of recovering debts. The Code is an extremely draconian piece of legislation and must, therefore, be construed strictly. If this is kept in mind, it is clear that Section 9(3)(c) is mandatory and requires to be complied with strictly or else the application should be dismissed at the threshold.

He stated that in the context of it being recognized by our judgments that a financial creditor and operational creditor are completely, differently and separately dealt with in the Code, and that so far as an operational creditor is concerned, it is important to bear in mind that a very low threshold is required in order that an operational creditor’s application be rejected, namely, there being a pre-existing dispute between the parties.

He contended that Section 9(3)(c) is a jurisdictional condition precedent, which is clear from the expression “initiation” and the expression “shall”, both showing that the Section is a mandatory condition precedent which has to be satisfied before the adjudicating authority can proceed further. According to learned senior counsel, a copy of the certificate from a financial institution is a very important document which makes it clear, almost conclusively, that there is an unpaid operational debt.

It was contended by the it is clear from the definition of “financial institution” contained in Section 3(14) that certain foreign banks are included within the expression “scheduled banks” under Section 3(14)(a) and that, under Section 3(14)(d), the Central Government may, by notification, specify other foreign banks as financial institutions.

It was argued that the consequence of not furnishing a copy of the certificate under Section 9(3)(c) is that, under Section 9(5)(ii)(a) the application that is made would be incomplete and, subject to the proviso, would have to be dismissed on that score.

According to the learned senior counsel, a lawyer’s notice cannot be given under Section 8, read with the Adjudicating Authority Rules and Form 5 therein. Either the operational creditor himself must send the requisite notice, or a duly authorized agent on his behalf should do so, and such authorized agent can only be an “insider”, namely, a person who is authorized by the operational creditor, being an employee, director or other person from within who alone can send the notice under Section 8 and sign the application under Section 9. It was also stated that it is clear, from Forms 3 and 5, that only a person authorized to act on behalf of the operational creditor can send the notice and/or sign the application. He stressed the word “position” with or in relation to the operational creditor and stated that this would also indicate that it is only an insider who can be so authorized by the operational creditor and not a lawyer.

Hon’ble Supreme Court’s Judgement

The Supreme Court held that Section 9(3)(c) of the IBC should be interpreted creatively and not in a restrictive way. As interpreting it in a restrictive sense would cause grave inconvenience to the appellants and other foreign banks which might land in a similar situation as that of present case.

It was observed that the certificate under Section 9(3)(c) of the IBC is a supportive document which proves the existence or non-existence of debt, which could be proved by other documents as well. Serious inconvenience will be caused if documents which are impossible to furnish are demanded from the appellants. If such documents are demanded by the way of strictly interpreting the provisions, it would impair the aims and objectives that the Code aspires to achieve.

While dealing with a second issue of whether a lawyer a can send a Demand Notice u/S 8 of the IBC. It relied on the case of Byram Pestonji Gariwala v. Union Bank of India[1], in this case a signature made by a lawyer on behalf of his client on a compromise document was held to effective in law.


The Hon’ble Supreme Court made great observations and saved the IBC to be wrecked as a piece of law riddled with procedural technicalities. The language was paid heed to and interpreted along with the aims and object that the IBC aims to achieve. Furthermore, by liberally interpreting the procedural aspects the creditors would be at ease putting in motion the proceedings under IBC against a debtor. It would also avoid the debtors from escaping their liability by pulling out the procedural loopholes in law while causing an inconvenience and injustice to an innocent creditor.

[1]  1992 (1) SCC 31


Jai Bajpai


Jai Bajpai is a student in the third year of the five-year B.B.A. L.L.B (hons.) Course at University of Petroleum and Energy Studies, Dehradun.

5 Interesting Law Case Studies: A takeaway of knowledge for students

For Indians, it is a common phenomenon to undermine the judicial system and mock the professionals by saying they don’t do any work. But is it really true?

In the year 2014, the Delhi high court granted a divorce to an 85-year old man after a waiting period of 32 years. This, in turn, shattered all hopes of resuming his married life.  There are almost 27 million cases that are pending in the Indian courts while they remain short of around 5000 judges.

The story that I mentioned in the beginning is something that the High Court and Supreme Court judges are facing every day. It’s almost like a bubble breaker for a common man. As a child, there have been innumerable instances where I overheard ‘men in my family’ talk about the legal scenarios and judiciary system of India. Most of the times, it started and ended with the same thing ‘the judges in our country don’t do any work’. It’s easy to say so, but how would we know the reality behind the harsh truth?

Judges, lawyers and the entire judiciary system is working extremely hard to ensure they clear the backlog. They are unable to do so, not because they don’t want to, but because there is a shortage of resources.

In fact, there are a number of law case studies which are extremely long and have a lot of knowledge about law. For example, the Nirbhaya judgement sheet is around 429 pages long which explains the reason it takes a particular case so long.

Here are 5 Interesting Law Case Studies which is a great knowledge takeaway for the students of today:

  1. Tarakeswar Case (1874)

The popularity of the case is understandable from the fact that authorities had to sell tickets at the entry. The case revolves around Nobin Chandra and his wife Elokeshi. Nobin slit his wife’s throat for allegedly having an affair with the chief priest of Tarakeshwar Temple. Nobin confessed his crime to the police, but the locals were mostly on his side. Due to this, Nobin was released after two years while serving life imprisonment. However, the priest was put behind the bars for three years. In fact, there were rumours doing rounds that the priest had raped Elokeshi by promising to help her with “fertility issues”. This case was even more important due to the ‘British Raj’ prevalent during that time.

  1. Bhawal Case (1921-1946)

One of the most peculiar identity cases of that time, it revolves around a possible pretender who affirmed to be the prince of Bhawal Estate, largest zamindari estate of Bengal.

Ramendra, a kumar of Bhawal estate died in early 1900, but there was tittle-tattle among people that he was not really dead. In 1921, a religious man who looked like Ramendra was spotted in Dhaka. The former tenants and farmers of Ramendra supported his claim to the title. The entire village trusted him except Ramendra’s widow, Bibhabati. After a long legal procedure of 25 years, the court ruled in his favor after which he passed away due to a stroke.

The interesting thing is that during the case, the look-alike (or whatever) also moved to Calcutta and even collected 1/3rd of the estate revenue.

  1. Kiranjit Ahluwalia’s Case

Kiranjit Ahluwalia’s case came a year after marital rape was declared as ‘rape’ in 1991. She was convicted of murder by burning her husband alive during his sleep. The lady in question had been a victim of domestic violence for over a decade and had been in severe depression when she took the step. The case set a benchmark for improving public awareness on domestic abuse. As a final verdict, she was convicted to life imprisonment. However, she was later freed as her conviction of murder was reduced to manslaughter.

  1. Roe V Wade

If you want to understand the implications of judicial decisions on the political and the social environment, no case is as good as this one. The decision in 1973 supported a woman’s right to abortion and is celebrated by women each year today. The popularity of this decision is such that thousands of people march in the support every year.

  1. Mathura Rape Case (1972)

One of the most prominent cases in the history of India, mainly due to the protests following the final verdict which saw a major overhaul in the rape laws of the country. In the city of Mathura, a tribal woman was raped by two constables within the premises of a police station. During the trial, the judge found the accused not guilty. Can you guess the reason given behind this unfair judgement? As per the judge, a sexual act within the premises of a police station was permitted and consensual. However, this law had to be amended due to the massive protests all over the country, with everyone saying- Submission does not mean consent.

These were some of the cases which are extremely interesting if you go through the entire judgement. Some cases would have surely made you go “Like what! Are you serious this ever happened?” This proves one thing- The lives of lawyers and judges aren’t as easy as it seems and you must be prepared before taking up the L.L.B. course. They may seem right to some and wrong to others. However, as history has it, wherever they have been wrong, they have acknowledged their mistakes, and the judgement has been changed as well. So, let them do their work while we do ours.


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Ms Sanya Sajjanhar is the academic writer at Sharda University. She has keen interest in writing articles pertaining to Law Courses.