2022 (3) TMI 699 - AT - Insolvency and Bankruptcy

Seeking direction to Resolution Professional (RP) to submit report under Section 99 of the Code for acceptance for rejection of the Application - HELD THAT - In the present case, Demand Notice as contemplated under Rule 7 sub-rule (1) of the 2019 Rules was sent by India Post on the address of the Appellant as mentioned in the Deed of Guarantee. The Demand Notice dated 07.10.2020 was duly delivered on the said address on 13.10.2020 and accepted by Mr. Karthik Wadhawan, an adult member of the Appellant s family. Fourteen days after service of Demand Notice, Application under Section 95 was filed on 01.12.2021. Rule 3(g) of the 2019 Rules provides mode and manner of sending any communication. As per Rule 3(g) serve means sending any communication by any means, including registered post, speed post, courier or electronic form. The proviso of 3(g) contemplate the situation where a document cannot be served in any of the modes, it shall be affixed at the outer door or some other conspicuous part of the house or building in which the addressee ordinarily resides or carries on business or personally works for gain. The statute provides a particular manner of service of notice. Demand Notice is to be served at house or building in which the addressee ordinarily resides. In the present case, proviso to Rule 3(g) was not resorted to since the Notice dated 07.10.2020 was sent and received on 13.10.2020. The Adjudicating Authority in impugned judgment after considering the submissions has come to the conclusion that notice served in Form B at the address of the Appellant is valid service. The Adjudicating Authority also came to the conclusion that service of Demand Notice is not requirement of personal service. Order 5 Rule 24 of the Civil Procedure Code is provision for issuance and service of summons. Said provision is not relevant in so far as service of Demand Notice is contemplated as per 2019 Rule 3(g) read with Rule 7 - Demand Notice which was dated 07.10.2020 was duly served on the Appellant as per Rule 3(g) read with Rule 7 of 2019 Rules. Service of Notice of Demand has been effected in accordance of procedure prescribed in 2019 Rules. There are no infirmity in the order of the Adjudicating Authority by which the Adjudicating Authority has held that the Demand Notice has been duly served and report under Section 99 of the Code by the Resolution Professional has been called for. The Application filed under Section 95(1) is yet to be admitted or rejected under Section 100 of the Code. After receipt of the report by the Resolution Professional as contemplated under Section 99, it is open for the Appellant to raise all his pleas and objections at the time of admission or rejection of Application under Section 95. The Appeal is dismissed.

Summary

Issues:
1. Validity of service of Demand Notice under Section 95 of the Insolvency and Bankruptcy Code, 2016.
2. Interpretation of the Insolvency and Bankruptcy (Application to Adjudicating Authority for Insolvency Resolution Process for Personal Guarantors to Corporate Debtors) Rules, 2019.
3. Compliance with the procedural requirements for serving a Demand Notice on a guarantor.
4. Applicability of Order 5 Rule 24 of the Civil Procedure Code to the service of Demand Notice.

Issue 1: Validity of service of Demand Notice under Section 95:
The Appellant challenged the order of the Adjudicating Authority, arguing that the Demand Notice was not validly served on him as required by law. The Respondent Bank contended that the notice was served as per the provisions of the 2019 Rules, and personal service was not mandatory. The Adjudicating Authority held that the Demand Notice was properly served on the Appellant, and the Resolution Professional was directed to submit a report under Section 99 of the Code. The Appellant's plea regarding the service of the notice was dismissed, and the Adjudicating Authority's decision was upheld by the Appellate Tribunal.

Issue 2: Interpretation of the 2019 Rules:
The Tribunal analyzed Rule 3(g) of the 2019 Rules, which defines the term "serve" and provides various modes of communication for serving notices. Rule 7 of the 2019 Rules outlines the procedure for serving a Demand Notice on a guarantor. The Tribunal emphasized that the Demand Notice in this case was sent in accordance with Rule 7, and the service was deemed valid under the prescribed rules.

Issue 3: Compliance with procedural requirements for serving a Demand Notice:
The Tribunal examined the specifics of how the Demand Notice was served on the Appellant, noting that it was sent by India Post to the address mentioned in the Deed of Guarantee. The notice was received by an adult family member of the Appellant, as confirmed by an Affidavit of Service filed by the Bank. The Tribunal concluded that the service of the Demand Notice adhered to the procedural requirements set out in the 2019 Rules.

Issue 4: Applicability of Order 5 Rule 24 of the Civil Procedure Code:
The Appellant relied on Order 5 Rule 24 of the Civil Procedure Code to argue that personal service was required, especially since he was in judicial custody at the time. However, the Tribunal clarified that Rule 24 of the Civil Procedure Code pertains to the service of summons and is not directly relevant to the service of a Demand Notice under the 2019 Rules. The Tribunal emphasized that the specific rules governing service of notices must be followed, as was done in this case.

In conclusion, the Appellate Tribunal dismissed the Appeal, upholding the decision of the Adjudicating Authority regarding the validity of the service of the Demand Notice. The Tribunal found no grounds for interference in the order and emphasized that the Appellant could raise objections during the admission or rejection of the Application under Section 95 after receiving the report from the Resolution Professional as per Section 99 of the Code.