R.F. Nariman, J.

1. The present appeals raise two important questions which arise under the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as the “Code”). The first question is Signature Not Verified whether, in relation to an operational debt, the provision Digitally signed by VISHAL ANAND Date: 2017.12.15 17:00:32 IST Reason: contained in Section 9(3)(c) of the Code is mandatory; and 1 secondly, whether a demand notice of an unpaid operational debt can be issued by a lawyer on behalf of the operational creditor.

2. The facts contained in the three appeals are similar. For the purpose of this judgment, the facts contained in Civil Appeal No.15481 of 2017 will now be set out. Hamera International Private Limited executed an agreement with the appellant, Macquarie Bank Limited, Singapore, on 27.7.2015, by which the appellant purchased the original supplier’s right, title and interest in a supply agreement in favour of the respondent. The respondent entered into an agreement dated 2.12.2015 for supply of goods worth US$6,321,337.11 in accordance with the terms and conditions contained in the said sales contract. The supplier issued two invoices dated 21.12.2015 and 31.12.2015. Payment terms under the said invoices were 150 days from the date of bill of ladings dated 17.12.2015/19.12.2015. Since amounts under the said bills of lading were due for payment, the appellant sent an email dated 3.5.2016 to the contesting 2 respondent for payment of the outstanding amounts. Several such emails by way of reminders were sent, and it is alleged that the contesting respondent stated that it will sort out pending matters. Ultimately, the appellant issued a statutory notice under Sections 433 and 434 of the Companies Act, 1956. A reply dated 5.10.2016 denied the fact that there was any outstanding amount.

3. After the enactment of the Code, the appellant issued a demand notice under Section 8 of the Code on 14.2.2017 at the registered office of the contesting respondent, calling upon it to pay the outstanding amount of US$6,321,337.11. By a reply dated 22.2.2017, the contesting respondent stated that nothing was owed by them to the appellant. They further went on to question the validity of the purchase agreement dated 27.7.2015 in favour of the appellant. On 7.3.2017, the appellant initiated the insolvency proceedings by filing a petition under Section 9 of the Code. On 1.6.2017, the NCLT rejected the petition holding that Section 9(3)(c) of the Code was not 3 complied with, inasmuch as no certificate, as required by the said provision, accompanied the application filed under Section

9. It, therefore, held that there being non-compliance of the mandatory provision of Section 9(3)(c) of the Code, the application would have to be dismissed at the threshold. However, the NCLT also went into the question as to whether a dispute has been raised in relation to the operational debt and found that such dispute was in fact raised by the reply to the statutory notice sent under Sections 433 and 434 of the Companies Act, 1956 and that, therefore, under Section 9(5)(ii)

(d), the application would have to be dismissed.

4. By the impugned judgment dated 17.7.2017, the NCLAT agreed with the NCLT holding that the application would have to be dismissed for non compliance of the mandatory provision contained in Section 9(3)(c) of the Code. It further went on to hold that an advocate/lawyer cannot issue a notice under Section 8 on behalf of the operational creditor in the following terms:

5. Shri Mukul Rohatgi, learned senior advocate appearing on behalf of the appellant, referred us 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”. He cited a number of judgments for the proposition that when serious general inconvenience is caused to innocent persons or the general public without really furthering the object of the particular Act, the said provision should not be read as mandatory, but as 5 directory only. 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) . This is further clear from the fact that under Section 9(5) , if there is no such certificate, the application does not need to be rejected. He 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. The word “confirming” in Section 9(3)(c) would also show that this is only one more document that can be relied upon by the operational creditor, apart from other documents, which may well prove the existence of the operational debt. According to learned senior counsel, on the second ground as well it is clear, on a perusal 6 of Form 5, that a “person authorised to act on behalf of the operational creditor” is a person who can sign Form 5 on behalf of the operational creditor. Also, the expression “position with or in relation to the operational creditor” shows that a lawyer, who is authorized by the operational creditor, is certainly within the said expression. He also referred us to Section 30 of the Advocates Act, 1961 and judgments on the effect of the expression “practise” when it applies to lawyers, vis-a-vis Tribunals such as the NCLT and NCLAT.

6. Shri Arvind Datar, learned senior advocate, supported the arguments of Shri Rohatgi and went on to add that the definition of “person” contained in Section 2(23) of the Code includes a person resident outside India, and when read with the definition of “operational creditor” in Section 5(20) of the Code would make it clear that persons, such as the appellant, are certainly operational creditors within the meaning of the Code. He stressed the fact that if a copy of the certificate under Section 9(3)(c) can only be from a “financial institution” as 7 defined under Section 3(14) of the Code, and if a non resident bank or financial institution, such as the appellant, may not be included either as a scheduled bank under Section 3(14)(a) or as such other institution as the Central Government may by notification specify as a financial institution under Section 3(14)

(d), it is clear that Section 9(3)(c) cannot operate to non suit the appellant, as it would be impossible to get a certificate from a financial institution as defined. This being the case, he argued that the Court should add words into the expression “financial institution”, as it would otherwise lead to absurdity and that if Section 9(3)(c) is held to be mandatory, then a certificate from a foreign bank, who is not a “financial institution” as defined under the Code, should be read into Section 9(3)(c) . Otherwise, the learned senior counsel supported Shri Rohatgi’s argument that Section 9(3)(c) is a directory provision which need not mandatorily be complied with. 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 8 categories mentioned in Section 3(14) when it comes to an operational creditor who is a resident outside India.

7. All these arguments were countered by Dr. A.M. Singhvi, learned senior counsel appearing on behalf of the respondent. First and foremost, according to learned senior counsel, 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. According to 9 learned senior counsel 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. According to him, the principle contained in Taylor v. Taylor (1875) 1 Ch. D. 426, has been followed by a number of judgments and is applicable inasmuch as when a statute requires a particular thing to be done in a particular manner, it must be done in that manner or not at all. He also referred us to various Sections of the Code, the Insolvency and the Adjudicating Authority Rules, Form 5 in particular, together with the Viswanathan Committee and report Joint Committee report of the Parliament. According to the learned senior counsel, it is clear from the definition of “financial institution” contained in Section 3(14) that certain foreign banks are 10 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 is only where operational creditors have dealings with banks which fall within Section 3(14) , that they can avail the opportunity of declaring a corporate debtor as insolvent under Sections 8 and 9 of the Code. Persons who may be residents outside India and who bank with entities that are not contained within the definition of Section 3 (14) would, therefore, be outside the Code.

8. According to the learned senior counsel, 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. Also, according to the learned senior counsel, the NCLAT was right in following the judgment contained in Smart Timing Steel Ltd. v. National Steel and Agro Industries Ltd decided on 19.5.2017, which, 11 according to the learned senior counsel, has merged in an order of this Court dismissing an appeal from the said judgment .

9. 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 . Dr. Singhvi 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 12 the operational creditor and not a lawyer. According to learned senior counsel, the provisions contained in certain statutes such as Section 434(2) of the Companies Act, 1956 and Rule 4 of the Debts Recovery Tribunal (Procedure) Rules, 1993 under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (“Debts Recovery Rules”) would also make it clear that where a lawyer can do things on behalf of a party, it is expressly so mentioned unlike the present case.

10. Having heard learned counsel for the parties, it is necessary to set out the relevant Sections of the Code and the Adjudicating Authority Rules.

“3. In this Code, unless the context otherwise requires,— (10) “creditor” means any person to whom a debt is owed and includes a financial creditor, an operational creditor, a secured creditor, an unsecured creditor and a decree-holder; (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 13

(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; (25) “person resident outside India” means a person other than a person resident in India;

xxx xxx xxx

5. In this Part, unless the context otherwise requires,— (20) “operational creditor” means a person to whom an operational debt is owed and includes any person to whom such debt has been legally assigned or transferred;

(21) “operational debt” means a claim in respect of the provision of goods or services including employment or a debt in respect of the repayment of dues arising under any law for the time being in force and payable to the Central Government, any State Government or any local authority; xxx xxx xxx

8. Insolvency resolution by operational creditor- (1) An operational creditor may, on the occurrence of a default, deliver a demand notice of unpaid 14 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, if any, and 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 repayment 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 repayment of the operational debt in respect of which the default has occurred. xxx xxx xxx

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 15 Authority for initiating a corporate insolvency resolution process.

(2) The application under sub-section (1) shall be filed in such form and manner and accompanied with such fee as may be prescribed.

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

(a) a copy of the invoice demanding payment or demand notice delivered by the operational creditor to the corporate debtor;

(b) an affidavit to the effect that there is no notice given by the corporate debtor relating to a dispute of the unpaid operational debt;

(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 (d) such other information as may be specified. (4) An operational creditor initiating a corporate insolvency resolution process under this section, may propose a resolution professional to act as an interim resolution professional.

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

(i) admit the application and communicate such decision to the operational creditor and the corporate debtor if,—

(a) the application made under sub-section (2) is complete;

(b) there is no repayment of the unpaid operational debt;

(c) the invoice or notice for payment to the corporate debtor has been delivered by the operational creditor;

(d) no notice of dispute has been received by the operational creditor or there is no record of dispute in the information utility; and

(e) there is no disciplinary proceeding pending against any resolution professional proposed under sub-section (4), if any.

(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:

xxx xxx xxx The Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016

5. Demand notice by operational creditor.— 17 (1) An operational creditor shall deliver to the corporate debtor, the following documents, namely.-

(a) a demand notice in Form 3; or

(b) a copy of an invoice attached with a notice in Form 4.

(2) The demand notice or the copy of the invoice demanding payment referred to in sub-section (2) of section 8 of the Code, may be delivered to the corporate debtor,

(a) at the registered office by hand, registered post or speed post with acknowledgement due; or

(b) by electronic mail service to a whole time director or designated partner or key managerial personnel, if any, of the corporate debtor. (3) A copy of demand notice or invoice demanding payment served under this rule by an operational creditor shall also be filed with an information utility, if any.

6. Application by operational creditor.— (1) An operational creditor, shall make an application for initiating the corporate insolvency resolution process against a corporate debtor under section 9 of the Code in Form 5, accompanied with documents and records required therein and as specified in the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016.

(2) The applicant under sub-rule (1) shall dispatch forthwith, a copy of the application filed with the Adjudicating Authority, by registered post or speed post to the registered office of the corporate debtor.

FORM 3 (See clause (a) of sub-rule (1) of rule 5) 18 FORM OF DEMAND NOTICE / INVOICE DEMANDING PAYMENT UNDER THE INSOLVENCY AND BANKRUPTCY CODE, 2016 (Under rule 5 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016) [Date] To, [Name and address of the registered office of the corporate debtor] From, [Name and address of the registered office of the operational creditor] Subject: Demand notice/invoice demanding payment in respect of unpaid operational debt due from [corporate debtor] under the Code. Madam/Sir,

1. This letter is a demand notice/invoice demanding payment of an unpaid operational debt due from [name of corporate debtor].

2. Please find particulars of the unpaid operational debt below:

3. If you dispute the existence or amount of unpaid operational debt (in default) please provide the undersigned, within ten days of the receipt of this letter, of the pendency of the suit or arbitration proceedings in relation to such dispute filed before the receipt of this letter/notice.

4. If you believe that the debt has been repaid before the receipt of this letter, please demonstrate such repayment by sending to us, within ten days of receipt of this letter, the following:

5. The undersigned, hereby, attaches a certificate from an information utility confirming that no record of a dispute raised in relation to the relevant operational debt has been filed by any person at any information utility. (if applicable)

6. The undersigned request you to unconditionally repay the unpaid operational debt (in default) in full within ten days from the receipt of this letter failing which we shall initiate a corporate insolvency resolution process in respect of [name of corporate debtor].

Yours sincerely, Signature of person authorised to act on behalf of the operational creditor Name in block letters Position with or in relation to the operational creditor Address of person signing Instructions

1. Please serve a copy of this form on the corporate debtor, ten days in advance of filing an application under section 9 of the Code.

2. Please append a copy of such served notice to the application made by the operational creditor to the Adjudicating Authority.

Form 5 21 (See sub-rule (1) of rule 6) APPLICATION BY OPERATIONAL CREDITOR TO INITIATE CORPORATE INSOLVENCY RESOLUTION PROCESS UNDER THE CODE.

(Under rule 6 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016) [Date] To, The National Company Law Tribunal [Address] From, [Name and address for correspondence of the operational creditor] In the matter of [name of the corporate debtor] Subject: Application to initiate corporate insolvency resolution process in respect of [name of the corporate debtor] under the Insolvency and Bankruptcy Code, 2016.

Madam/Sir, [Name of the operational creditor], hereby submits this application to initiate a corporate insolvency resolution process in the case of [name of corporate debtor]. The details for the purpose of this application are set out below:

ATTACH A COPY OF A CERTIFICATE OF REGISTRATION OF CHARGE ISSUED BY THE REGISTRAR OF COMPANIES (IF THE CORPORATE DEBTOR IS A COMPANY)

2. DETAILS OF RESERVATION / RETENTION OF TITLE ARRANGEMENTS (IF ANY) IN RESPECT OF GOODS TO WHICH THE OPERATIONAL DEBT REFERS

3. PARTICULARS OF AN ORDER OF A COURT, TRIBUNAL OR ARBITRAL PANEL ADJUDICATING ON 24 THE DEFAULT, IF ANY (ATTACH A COPY OF THE ORDER)

4. RECORD OF DEFAULT WITH THE INFORMATION UTILITY, IF ANY (ATTACH A COPY OF SUCH RECORD)

5. DETAILS OF SUCCESSION CERTIFICATE, OR PROBATE OF A WILL, OR LETTER OF ADMINISTRATION, OR COURT DECREE (AS MAY BE APPLICABLE), UNDER THE INDIAN SUCCESSION ACT, 1925 (10 OF 1925) (ATTACH A COPY)

6. PROVISION OF LAW, CONTRACT OR OTHER DOCUMENT UNDER WHICH OPERATIONAL DEBT HAS BECOME DUE

7. A STATEMENT OF BANK ACCOUNT WHERE DEPOSITS ARE MADE OR CREDITS RECEIVED NORMALLY BY THE OPERATIONAL CREDITOR IN RESPECT OF THE DEBT OF THE CORPORATE DEBTOR (ATTACH A COPY)

8. LIST OF OTHER DOCUMENTS ATTACHED TO THIS APPLICATION IN ORDER TO PROVE THE EXISTENCE OF OPERATIONAL DEBT AND THE AMOUNT IN DEFAULT I, [Name of the operational creditor / person authorised to act on behalf of the operational creditor] hereby certify that, to the best of my knowledge, [name of proposed insolvency professional], is fully qualified and permitted to act as an insolvency professional in accordance with the Code and the rules and regulations made thereunder. [WHERE APPLICABLE] [Name of the operational creditor] has paid the requisite fee for this application through [state means of payment] on [date].

Yours sincerely, Signature of person authorised to act on behalf of the operational creditor Name in block letters Position with or in relation to the operational creditor Address of person signing Instructions -

Please attach the following to this application:

We may only indicate that under Rules 5 and 6 of the Adjudicating Authority Rules, read with Forms 3 and 5, it is clear that, as Annexure I thereto, the application in any case must have a copy of the invoice/demand notice attached to the application. That this is a mandatory condition precedent to the filing of an application is clear from a conjoint reading of sections 8 and 9(1) of the Code.

13. When we come to Section 9(3)(b) , it is obvious that an affidavit to the effect that there is no notice given by the corporate debtor relating to a dispute of the unpaid operational debt can only be in a situation where the corporate debtor has not, within the period of 10 days, sent the requisite notice by way of reply to the operational creditor. In a case where such notice has, in fact, been sent in reply by the corporate debtor, obviously an affidavit to that effect cannot be given.

14. When we come to sub-clause (c) of Section 9(3) , it is equally clear that a copy of the certificate from the financial institution maintaining accounts of the operational creditor confirming that there is no payment of an unpaid operational debt by the corporate debtor is certainly not a condition precedent to triggering the insolvency process under the Code. The expression “confirming” makes it clear that this is only a piece of evidence, albeit a very important piece of evidence, which only “confirms” that there is no payment of an unpaid operational debt. This becomes clearer when we go to 29 sub-clause (d) of Section 9(3) which requires such other information as may be specified has also to be furnished along with the application.

15. When Form 5 under Rule 6 is perused, it becomes clear that Part V thereof speaks of particulars of the operational debt. There are 8 entries in Part V dealing with documents, records and evidence of default. Item 7 of Part V is only one of such documents and has to be read along with Item 8, which speaks of other documents in order to prove the existence of an operational debt and the amount in default. Further, annexure III in the Form also speaks of 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”. This would show that such accounts are not a pre-condition to trigger the Code, and that if such accounts are not available, a certificate based on such accounts cannot be given, if Section 9 is to be read the 30 Adjudicating Authority Rules and the Forms therein, all of which set out the statutory conditions necessary to invoke the Code.

16. In State of U.P. v. Babu Ram 1961 2 SCR 679 at 701-702, this Court dealt with the position of rules made under a statute as follows:

In Baleshwar Bagarti v. Bhagirathi Dass [ILR 35 Cal 701 at 713] the principle, which was reiterated in Mathura Mohan Saha v. Ram Kumar Saha [ILR 43 Cal 790 : AIR 1916 Cal 136] has been stated by Mukerjee, J., thus:

Commissioner of Customs (2006) 12 SCC 583 (para 21). The aforesaid judgments only have application when rules are ultra vires the parent statute. In the present case, the rules merely flesh out what is already contained in the statute and must, therefore, be construed along with the statute. Read with the Code, they form a self-contained code being contemporanea expositio by the Executive which is charged with carrying out the provisions of the Code. The true construction of Section 9(3)(c) is that it is a procedural 33 provision, which is directory in nature, as the Adjudicatory Authority Rules read with the Code clearly demonstrate.

17. There may be situations of operational creditors who may have dealings with a financial institution as defined in Section 3(14) of the Code. There may also be situations where an operational creditor may have as his banker a non-scheduled bank, for example, in which case, it would be impossible for him to fulfill the aforesaid condition. A foreign supplier or assignee of such supplier may have a foreign banker who is not within Section 3(14) of the Code. The fact that such foreign supplier is an operational creditor is established from a reading of the definition of “person” contained in section 3(23) , as including persons resident outside India, together with the definition of “operational creditor” contained in Section 5(20) , which in turn is defined as “a person to whom an operational debt is owed and includes any person to whom such debt has been legally assigned or transferred”. That such person may have a bank/financial institution with whom it deals and which is not contained within the definition of Section 3(14) of the Code 34 would show that Section 9(3)(c) in such a case would, if Dr. Singhvi is right about the sub-section being a condition precedent, amount to a threshold bar to proceeding further under the Code. 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. Equally, Dr. Singhvi’s other 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.

18. However, it was argued that there are various other categories of creditors who cannot file insolvency petitions, such as government authorities who have pending tax dues. Such authorities have ample powers under taxation statutes to coercively collect outstanding tax arrears. Besides they form a class, as a whole, who are kept out of the Code, unlike persons who are resident outside India who, though being operational creditors, are artificially divided, if we are to accept Dr. Singhvi’s argument, into two sub-classes, namely, those who bank with an institution that is recognized by Section 3(14) of the Code and those who do not. This argument also does not commend itself to us.

19. It is true that the expression “initiation” contained in the marginal note to Section 9 does indicate the drift of the provision, but from such drift, to build an argument that the expression “initiation” would lead to the conclusion that Section 9(3) contains mandatory conditions precedent before which the Code can be triggered is a long shot. Equally, the expression 36 “shall” in Section 9(3) does not take us much further when it is clear that Section 9(3)(c) becomes impossible of compliance in cases like the present. It would amount to a situation wherein serious general inconvenience would be caused to innocent persons, such as the appellant, without very much furthering the object of the Act, as has been held in the State of Haryana v. Raghubir Dayal (1995) 1 SCC 133 at paragraph 5 and obviously, therefore, Section 9(3)(c) would have to be construed as being directory in nature.

20. Even otherwise, the important condition precedent is an occurrence of a default, which can be proved, as has been stated hereinabove, by means of other documentary evidence. Take for example the case of an earlier letter written by the corporate debtor to the operational creditor confirming that a particular operational debt is due and payable. This piece of evidence would be sufficient to demonstrate that such debt is due and that default has taken place, as may have been admitted by the corporate debtor. If Dr. Singhvi’s submissions 37 were to be accepted, despite the availability of such documentary evidence contained in the Section 9 application as other information as may be specified, such application filed under Section 9 would yet have to be rejected because there is no copy of the requisite certificate under Section 9(3)(c). Obviously, such an absurd result militates against such a provision being construed as mandatory.

21. It is unnecessary to further refer to arguments made on the footing that Section 7 qua financial creditors has a process which is different from that of operational creditors under Sections 8 and 9 of the Code. The fact that there is no requirement of a bank certificate under Section 7 of the Code, as compared to Section 9, does not take us very much further. The difference between Sections 7 and 9 has already been noticed by this Court in Innoventive Industries Ltd. v. ICICI Bank & Anr., Civil Appeal Nos. 8337-8338 of 2017 decided on August 31, 2017, as follows:-

22. It was also submitted that Sections 65 and 76 of the Code provide for criminal prosecution against banks issuing false bank certificates and that a foreign bank issuing such a certificate may not be amenable to the jurisdiction of the Code. It is unnecessary to answer this submission in view of the fact that the necessity for such a certificate has itself been held by this judgment to be directory in nature.

23. Equally, Dr. Singhvi’s argument that the Code leads to very drastic action being taken once an application for insolvency is filed and admitted and that, therefore, all conditions precedent must be strictly construed is also not in sync with the recent trend of authorities as has been noticed by a concurring judgment in Ms. Eera through Dr. Manjula Krippendorf v. State (Govt. of NCT of Delhi) & Anr, Criminal Appeal Nos. 1217-1219 of 2017 decided on July 21, 2017. In this judgment, the correct interpretation of Section 2(1)(d) of the Protection of Children from Sexual Offences Act, 2012 arose. After referring to the celebrated Heydon’s case, 76 E.R. 637 40 [1584] and to the judgments in which the golden rule of interpretation of statutes was set out, the concurring judgment of R.F. Nariman, J., after an exhaustive survey of the relevant case law, came to the conclusion that the modern trend of case law is that creative interpretation is within the Lakshman Rekha of the Judiciary. Creative interpretation is when the Court looks at both the literal language as well as the purpose or object of the statute, in order to better determine what the words used by the draftsman of the legislation mean. The concurring judgment then concluded:

24. However, Dr. Singhvi cited Raghunath Rai Bareja v. Punjab National Bank , (2007) 2 SCC 230 and relied upon paragraphs 39 to 47 for the proposition that the literal construction of a statute is the only mode of interpretation when the statute is clear and unambiguous. Paragraph 43 of the said judgment was relied upon strongly by the learned counsel, which states:

25. Dr. Singhvi then argued that the application of the principle in Taylor (supra) should be followed when it comes to the correct interpretation of Section 9(3)(c) of the Code. The principle of Taylor (supra), namely that where a statute states that a particular act is to be done in a particular manner; it must be done in that manner or not at all, was followed by the Privy Council in Nazir Ahmad v. King Emperor , 63 IA 372 (1936). In that case, the Privy Council held that Sections 164 and 364 of 44 the Code of Criminal Procedure , 1898 prescribed the mode in which confessions are to be recorded by Magistrates, when made during investigation, and a confession before a Magistrate not recorded in the manner provided was inadmissible. In Ukha Kolhe v. State of Maharashtra (1964) 1 SCR 926 at 948-949, a Constitution Bench of this Court held that the principle contained in Taylor (supra) would not apply when proof of a specified fact could be obtained by means other than that statutorily specified. The argument in that case was that Sections 129A and 129B prescribed the mode of taking blood in the course of investigation of an offence under the Bombay Prohibition Act, 1949 , and that, therefore, production or examination of a person before a registered medical practitioner during the course of such investigation is the only method by which consumption of an intoxicant may be proved. After setting out Sections 129A and 129B and the judgment of the Privy Council in Nazir Ahmad (supra), this Court held:

This step may have been taken for deciding upon the line of treatment, but certainly not for collecting evidence to be used against the appellant in any possible trial for a charge of an offence of 46 consuming liquor contrary to the provisions of the Act. If unlawful consumption of an intoxicant by a person accused, may be proved otherwise than by a report obtained in the conditions mentioned in Section 129-A(1) and (2), there would be no reason to suppose that other evidence about excessive concentration of alcohol probative of consumption is inadmissible. Admissibility of evidence about concentration of alcohol in blood does not depend upon the exercise of any power of the Police or Prohibition Officer. Considerations which were present in Nazir Ahmad case [(1936) LR 63 IA 372] regarding the inappropriateness of Magistrates being placed in the same position as ordinary citizens and being required to transgress statutory provisions relating to the method of recording confessions also do not arise in the present case.”

26. This judgment applies on all fours to the facts of the present case inasmuch as, like Section 129A(8) of the aforesaid Act, proof of the existence of a debt and a default in relation to such debt can be proved by other documentary evidence, as is specifically contemplated by Section 9(3)(d) of the Code. Like Section 66(2) of the aforesaid Act in Ukha Kolhe (supra), Section 8 of the Code does not prescribe any particular method of proof of occurrence of default. Consequently, we are of the opinion that the principle contained in Taylor (supra) does not apply in the present situation. 47

27. Also, in Madan & Co. v. Wazir Jaivir Chand (1989) 1 SCC 264 at 268-270, the interpretation of Section 11 of the Jammu and Kashmir Houses and Shops Rent Control Act, 1966 was under consideration of this Court. As stated in paragraph 4 of the judgment, the controversy in that case turned on the question whether the notice sent by the Respondent by registered post can be said to have been served and the Petitioner can be said to have been in receipt of the said notice. In the words of the judgment:

Ltd.[(1965-66) 70 Cal WN 262] and Surajmull Ghanshyamdas v. Samadarshan Sur [AIR 1969 Cal 109 : ILR (1969) 1 Cal 379] to contend that such postal service can neither be presumed nor considered to be good service where the letter is returned to the sender due to the non-availability of the addressee. He urges that, in the absence of any enabling provision such as the one provided for in Section 106 of the Transfer of Property Act, service by some other mode, such as affixture, cannot be treated as sufficient compliance with the statute. In this context, he referred to the frequently applied rule in Taylor v. Taylor [(1875) 1 Ch D 426] that where a power is given to do a certain thing in a certain way, the thing must be done in that way or not at all and that other methods of performance are necessarily forbidden. He urged that even if service by affixture can be considered to be permissible, there are stringent prerequisites for service by affixture, such as those outlined in Order V Rules 17 to 19, of the Code of Civil Procedure ( CPC ) and that these prerequisites were not fulfilled in the present case. He pointed out that even under the CPC , service by such affixture can be recognised as valid only if sincere and vigilant attempts to serve the notice on the addressee personally are unsuccessful. In the present case, it is submitted, the evidence shows that the postman made no serious efforts to ascertain the whereabouts of the addressee even though the evidence showed that a servant of the petitioner firm was known to the postman and was present in the neighbourhood. He, therefore, submitted that the High Court should 49 have dismissed the suit for eviction filed by the landlord on the ground that the requirements of Sections 11 and 12 of the Act were not satisfied.” The Court turned down the contention based on Taylor (supra) in the following terms:

The position further becomes clear that both forms require such authorized agent to state his position with or in relation to the operational creditor. A position with the operational creditor would perhaps be a position in the company or firm of the operational creditor, but the expression “in relation to” is significant. It is a very wide expression, as has been held in Renusagar Power Co. Ltd. v. General Electric Co. , (1984) 4 SCC 679 at 704 and State of Karnataka v. Azad Coach Builders (P) Ltd. (2010) 9 SCC 524 at 535, which specifically includes a position which is outside or indirectly related to the operational creditor. It is clear, therefore, that both the expression “authorized to act” and “position in relation to the operational creditor” go to show that an authorized agent or a 59 lawyer acting on behalf of his client is included within the aforesaid expression.

34. Quite apart from the above, Section 30 of the Advocates Act states as follows:

35. The doctrine of harmonious construction of a statute extends also to a harmonious construction of all statutes made by Parliament. In Harshad S. Mehta v. State of Maharashtra (2001) 8 SCC 257 at 280-81, the Special Court (Trial of Offences Relating to Transactions in Securities) Act, 1992 was held, insofar as the criminal jurisdiction of the Special Court was concerned, to be harmoniously construed with the Code of Criminal Procedure ,1973 in the following terms:

This section rather provides that the provisions of the Code shall apply to the proceedings before the Special Court. The inconsistency seems to be only imaginary. There is nothing in the Act to show that Sections 306 to 308 were intended to be excluded from the purview of the Act.” Similarly, in CTO v. Binani Cements Ltd. (2014) 8 SCC 319 at 332, the rule of construction of two Parliamentary statutes being harmoniously construed was laid down as follows:

36. The non-obstante clause contained in Section 238 of the Code will not override the Advocates Act as there is no inconsistency between Section 9, read with the Adjudicating Authority Rules and Forms referred to hereinabove, and the Advocates Act . In Balchand Jain v. State of M.P. (1976) 4 SCC 572 at 585-86, the anticipatory bail provision contained in Section 438 of the Code of Criminal Procedure was held not to be wiped out by the non-obstante clause contained in Rule 184 of the Defence and Internal Security of India Rules, 1971. Fazal Ali, J. concurring with the main judgment, held:

37. However, Dr. Singhvi referred to Rule 4 of the Debts Recovery Rules and Section 434(2) of the Companies Act, 1956, which state as follows:

xxx xxx xxx

434. COMPANY WHEN DEEMED UNABLE TO PAY ITS DEBTS-

(2) The demand referred to in clause (a) of sub-section (1) shall be deemed to have been duly given under the hand of the creditor if it is signed by 70 any agent or legal adviser duly authorised on his behalf, or in the case of a firm, if it is signed by any such agent or legal adviser or by any member of the firm.” The argument then made was that when Parliament wishes to include a lawyer for the purposes of litigation or to a pre-litigation stage, it expressly so provides, and this not being so in the Code, it must be inferred that lawyers are excluded when it comes to issuing notices under Section 8 of the Code. We are afraid that this argument must be rejected, not only in view of what has been held by us on a reading of the Code and on the harmonious construction of Section 30 of the Advocates Act read with the Code, but also on the basis of a judgment of this Court in Byram Pestonji Gariwala v. Union Bank of India , (1992) 1 SCC 31 at 47-48. In this judgment, what fell for consideration was Order XXIII Rule 3 of the Code of Civil Procedure , 1908 after its amendment in 1976. It was argued in that case that a compromise in a suit had, under Order XXIII Rule 3, to be in writing and “signed by the parties”. It was, therefore, argued that a compromise effected by counsel on 71 behalf of his client would not be effective in law, unless the party himself signed the compromise. This was turned down stating that Courts in India have consistently recognized the traditional role of lawyers and the extent and nature of the implied authority to act on behalf of their clients, which included compromising matters on behalf of their clients. The Court held there is no reason to assume that the legislature intended to curtail such implied authority of counsel. It then went on to hold:

…………………………..J. (R.F. Nariman) …………………………..J. (Navin Sinha) New Delhi;

December 15, 2017.