2022 (3) TMI 796 - Tri - Insolvency and Bankruptcy

Maintainability of application - initiation of CIRP - failure on the part of Personal Guarantors to Corporate Debtors - service of demand notice or not - it is alleged that the petitioner failed to serve the demand notice under Form B on the Respondent - HELD THAT - Order 5 CPC provides for issuance and service of summons and Rule 24 specifically prescribes a procedure for service of summons to the defendant who is in jail. Therefore, we ought to distinguish between issuance of demand notice and service of summons on the defendants who is in jail. This Bench is of the prima facie opinion that intention of legislature for issuance/ service of Form B notice has to be read and it is seen that the Petitioner in strict compliance of Rule 7 r/w Rule 3 (h) has served Form B notice upon the Respondent at his address and the same was received by his son Mr. Kathik Wadhawan. This is a good service in terms of Rule 3 (h) of Personal Guarantor Rules, which requires that Form B notice shall be served upon the guarantor by Post/ Speed Post/ Courier or electronic form and where it cannot be served by any other mode it shall be affixed to outer door or some other conspicuous part of the house in which the addressee ordinary resides or carry out business. Section 95(5) requires the Creditor to provide copy of the application under sub-section (1) to the Debtor. This section needs to be read with Rule 3(1)(g) reproduced above. It is evident from reading the Section alongwith the Rule that what Creditor has to serve is copy of the application made under sub-section (1) to the Debtor. Reading Rule 7(2) with Rule 3 shows that the application filed under sub-section (1) of Section 95 shall be submitted in Form C and that the Creditor will serve forthwith a copy of the application to the Guarantor and the Corporate Debtor for whom the Guarantor is a Personal Guarantor. Thus, what has to be served is the copy of application which has been submitted - The procedure thus prescribed will give the Personal Guarantor notice of the application already filed before the Adjudicating Authority. Section 95(5) requires Creditor to provided copy of the application made under sub-section (1) to the Debtor. Thus, serving advance copy is not contemplated. This Bench concludes that the Code does not prescribe personal service but in fact contemplates that when there is inability to serve of any notice, it can be overcome by affixing notice on the outer door. In strict interpretation of the Statute, this Bench concludes that the Form B notice served upon the address of the Respondent is a valid service of a demand notice which is a prerequisite for filing a Petition u/s. 95. The Petition u/s 95 was served upon the Respondent in jail. Hence, the objection raised by the Respondent is untenable and set aside. Application allowed.

Summary

Issues Involved:
1. Validity of service of Form B demand notice.
2. Compliance with statutory requirements for serving notice.
3. Objection by the Respondent regarding non-receipt of demand notice.
4. Commencement of Interim Moratorium.
5. Appointment and role of Resolution Professional.

Detailed Analysis:

1. Validity of Service of Form B Demand Notice:
The primary issue was whether the Form B demand notice was duly served upon the respondent as per the provisions of the Insolvency & Bankruptcy Code (IBC). The Petitioner claimed to have served the notice at the respondent's residential address, and it was received by the respondent's son. The Tribunal held that this constituted valid service under Rule 3(h) of the Personal Guarantor Rules, which allows for service by post, speed post, courier, or electronic form, and if these methods fail, by affixing the notice to the outer door of the residence.

2. Compliance with Statutory Requirements for Serving Notice:
The Respondent argued that since he was in judicial custody, the notice should have been served as per Order 5 Rule 24 of the Civil Procedure Code (CPC), which requires delivery to the officer in charge of the prison. The Tribunal distinguished between the issuance of a demand notice and the service of summons, concluding that the service of Form B notice was in compliance with Rule 7 and Rule 3(h) of the Personal Guarantor Rules.

3. Objection by the Respondent Regarding Non-Receipt of Demand Notice:
The Respondent contended that the demand notice was not served as mandated by the Code, and thus the petition should be dismissed. The Tribunal referred to precedent cases, including the Supreme Court's judgment in Pepsu Road Transport Corporation vs. Amandeep Singh, which held that personal service is not necessary unless explicitly required by regulation. The Tribunal found that the service of the notice at the respondent's residential address was sufficient and dismissed the respondent's objections.

4. Commencement of Interim Moratorium:
The Tribunal noted that from the date of filing the application, an interim moratorium commenced as per Section 96(1) of the IBC. This interim moratorium stays any pending legal actions or proceedings regarding debts and prevents creditors from initiating new legal actions.

5. Appointment and Role of Resolution Professional:
The Tribunal confirmed the appointment of Mr. Santanu T. Ray as the Resolution Professional, emphasizing the importance of safeguarding the assets of the Personal Guarantor. The Resolution Professional is tasked with making recommendations for the acceptance or rejection of the application within the stipulated time under Section 99 of the IBC. The Tribunal directed the Resolution Professional to provide a copy of the report to the creditor once filed.

Conclusion:
The Tribunal allowed the application filed by the Union Bank of India under Section 95 of the IBC against the Personal Guarantor, confirming the validity of the service of Form B demand notice and initiating the interim moratorium. The appointment of the Resolution Professional was also confirmed, with directions to proceed as per the provisions of the IBC. The matter was listed for further hearing on 01.03.2022.