An Insight on Demand Notice under IBC

Demand Notice: To initiate a Corporate Insolvency Resolution Process (hereinafter referred to as "CIRP") under the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as, the "IBC Code"), the creditor is required to deliver a demand notice to the Corporate Debtor demanding payment of the operational debt in respect of which the default has occurred.

Explanation to section 8 of IBC Code states that, a “demand notice” means a notice served by an operational creditor to the corporate debtor demanding payment of the operational debt in respect of which the default has occurred.

Details in the notice: The demand notice contains the following details:

• The total amount of debt,
• The details of transactions,
• Date from which the debt begin accruing,
• Amount claimed by the creditor,
• Particulars of securities held by the creditor (if any),
• Records of previous defaults (if any),
• Documents supporting the claim filed by the creditor, etc.

Form of Notice: A demand notice can be submitted in Form No.3 or a copy of an invoice attached with a notice in Form 4 as per Rule 5(1) of Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016.

Payment pursuant to notice: The payment of debt is required to be made within 10 days of demand notice. The corporate debtor within 10 days of the receipt of demand notice or copy of invoice may 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

 OR

b)      Make the payment of unpaid operational debt by

i)         sending an attested copy of electronic transfer record of 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 corporate debtor

Modes of Delivery of Notice: The demand notice can be delivered to the corporate debtor at the registered office with acknowledgement due in following modes by  

• hand OR
• registered post OR
• speed post OR
• Electronic mail (E-mail) service to a whole time director or designated partner or key managerial personnel, if any