M/S Shilpi Cable Technologies Ltd. vs. Macquarie Bank Ltd. (Supreme court) Civil Appeal No. [15135 of 2017]
M/S Shilpi Cable Technologies Ltd. vs. Macquarie Bank Ltd.
Civil Appeal No. 15135 of 2017
Decided by: Supreme Court of India
Date of Judgment: December 15, 2017
🧾 Background:
This case dealt with the Insolvency and Bankruptcy Code, 2016 (IBC), particularly the interpretation of Section 9, which governs the initiation of corporate insolvency resolution process (CIRP) by operational creditors.
The dispute arose regarding compliance requirements under Section 9(3)(c) of the IBC, and whether a foreign operational creditor is obligated to submit a certificate from a financial institution maintaining the debtor’s accounts in India.
📌 Facts of the Case:
Macquarie Bank Ltd., a foreign bank, filed a petition under Section 9 of the IBC as an operational creditor, against M/S Shilpi Cable Technologies Ltd., a corporate debtor.
The operational creditor served a demand notice to the debtor, which was not replied to within the prescribed time.
When Macquarie Bank approached the National Company Law Tribunal (NCLT) for initiating CIRP, the application was dismissed by NCLT.
Reason for Dismissal: The operational creditor failed to provide a certificate from a financial institution as required under Section 9(3)(c) of the IBC.
The bank appealed the dismissal before the National Company Law Appellate Tribunal (NCLAT), which reversed the NCLT’s order.
The matter was then taken to the Supreme Court by the debtor company.
⚖️ Legal Issues:
Whether furnishing a certificate from a financial institution under Section 9(3)(c) of the IBC is mandatory or directory?
Whether an advocate/lawyer can issue a demand notice under Section 8(1) of the IBC on behalf of the operational creditor?
🧑⚖️ Judgment:
The Supreme Court upheld the NCLAT decision and dismissed the appeal filed by Shilpi Cable Technologies Ltd. The Court made two key rulings:
1. Section 9(3)(c) is Directory, Not Mandatory
Section 9(3)(c) requires the operational creditor to file a certificate from the financial institution maintaining the accounts of the corporate debtor, confirming that there is no payment.
The Court held that this requirement is not mandatory and non-filing of the certificate does not invalidate the application.
Reasoning:
The provision is directory in nature and cannot be made mandatory for foreign creditors who do not deal with Indian financial institutions.
Making it mandatory would make it impossible for foreign operational creditors to seek insolvency resolution under the IBC, thus defeating the purpose of the Code.
2. Advocates Can Issue Demand Notice on Behalf of Creditors
Under Section 8(1) of the IBC, an operational creditor must deliver a demand notice to the debtor before initiating CIRP.
The issue was whether this notice can be sent by a lawyer on behalf of the creditor.
The Court held that:
An authorized representative, including a lawyer, can issue a demand notice under Section 8(1).
There is nothing in the IBC that bars a lawyer from sending such a notice.
📚 Key Legal Principles Laid Down:
Substantial compliance with procedural requirements under IBC is sufficient—technical lapses should not defeat substantive rights.
The IBC must be interpreted liberally and pragmatically, keeping in view its objective of timely resolution of insolvency.
The rights of foreign operational creditors must be protected by allowing flexibility in procedural compliance.
The role of advocates as representatives is recognized and affirmed under the Code.
✅ Impact of the Judgment:
Facilitated access to IBC for foreign operational creditors, by relaxing rigid procedural conditions.
Clarified the non-mandatory nature of Section 9(3)(c), ensuring practical application of IBC.
Ensured that legal representatives (advocates) can act on behalf of clients in pre-insolvency stages.
Strengthened jurisprudence on the liberal interpretation of procedural law under the IBC.
🔍 Related Case Law:
Mobilox Innovations Pvt. Ltd. v. Kirusa Software Pvt. Ltd. (2017) – Clarified scope of disputes under Section 9.
Swiss Ribbons v. Union of India (2019) – Emphasized IBC’s objective as resolution over liquidation.
Innoventive Industries Ltd. v. ICICI Bank (2017) – Established IBC as a complete code in itself.
📝 Conclusion:
In M/S Shilpi Cable Technologies Ltd. v. Macquarie Bank Ltd., the Supreme Court took a progressive and pragmatic approach. It ensured that technical procedural requirements do not obstruct the objectives of the IBC—namely, insolvency resolution in a timely, efficient, and inclusive manner.
This judgment is a landmark in reinforcing ease of doing business, protecting the rights of foreign creditors, and affirming the judiciary's commitment to the principles of justice over technicality.
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