Supreme Court Clarifies Validity of Demand Notice in Corporate Insolvency Case

The Supreme Court of India recently delivered a landmark judgment in the case of Visa Coke Limited vs. M/s Mesco Kalinga Steel Limited, addressing critical issues related to the validity of demand notices under the Insolvency and Bankruptcy Code (IBC), 2016. The judgment, dated April 29, 2025, was authored by Justices J.B. Pardiwala and R. Mahadevan, and it overturned the decisions of the National Company Law Tribunal (NCLT) and the National Company Law Appellate Tribunal (NCLAT), which had dismissed the appellant’s petition on technical grounds.

The dispute arose from a contractual agreement between Visa Coke Limited (Operational Creditor) and Mesco Kalinga Steel Limited (Corporate Debtor) for the supply of Low Ash Metallurgical Coke (LAM Coke). The appellant claimed that the respondent failed to pay for the supplied goods, leading to a default. The appellant issued a demand notice under Section 8 of the IBC, addressed to the Key Managerial Personnel (KMP) of the respondent at their registered office. However, the NCLT and NCLAT dismissed the petition, stating that the notice was not addressed to the Corporate Debtor directly, rendering it invalid.

The Supreme Court, in its judgment, emphasized the importance of substance over form. The Court noted that the demand notice, though addressed to the KMP, was delivered to the registered office of the Corporate Debtor and clearly pertained to the unpaid operational debt. The Court observed:

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“When there has been an admission on the part of the defendants/respondents herein that the suit schedule property consisted of a room, a water tank, a service station, and a jet pump installed with electricity connection which was being used for the purpose of washing of vehicles, then it cannot be said that the suit schedule property was an open land as such.”

The Court further highlighted that the purpose of the demand notice is to inform the Corporate Debtor of the unpaid debt and provide an opportunity to settle it. The notice in question fulfilled this purpose, as it was received by the KMP in their official capacity and pertained to the Corporate Debtor’s liability. The Court cited precedents, including Rajneesh Aggarwal v. Amit J. Bhalla, to reinforce that notices addressed to directors or KMPs are valid if they serve the intended purpose.

The Supreme Court also addressed the issue of default, noting that the NCLT and NCLAT had not examined this aspect in detail. The Court remanded the matter to the NCLT for a fresh decision on the merits, emphasizing that procedural technicalities should not override substantive justice.

This judgment is significant as it clarifies the interpretation of Section 8 of the IBC and ensures that operational creditors are not denied their rights due to procedural oversights. It reinforces the principle that the IBC is a tool for resolving insolvency efficiently, and its provisions should be interpreted to achieve this objective.

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Petitioner Name: Visa Coke Limited.
Respondent Name: M/s Mesco Kalinga Steel Limited.
Judgment By: Justice J.B. Pardiwala, Justice R. Mahadevan.
Place Of Incident: Kalinganagar Industrial Complex, Jaipur Road, Odisha.
Judgment Date: 29-04-2025.
Result: allowed.

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