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TMI Blog2021 (6) TMI 533X X X X Extracts X X X X X X X X Extracts X X X X ..... isposing of any of the assets or his legal right or beneficial interest therein - thus, it it is clear that initiation of the interim-moratorium under Section 96 causes no prejudice to the Personal Guarantor. As it is evident from the provisions in Section 94 to 97 of IBC, 2016, the intention of legislature is not to make this Adjudicating Authority-a trial court at the time of appointing RP under Section 97. Rather, it is the RP, who once appointed, has been vested with the power to examine the documents provided by the Creditor or debtor, as the case may be, on merits - the provisions under Section 99 of IBC, 2016, are intended to protect the interest of Personal Guarantor by affording him an opportunity. By virtue of Section 99(2) of IBC, 2016, the Personal Guarantor is given an opportunity to prove before RP if the debt has already been discharged and the Personal Guarantor can furnish proof(s) or evidence to the RP regarding such payment of debt. Further, by virtue of the provision under Section 99(3), the Personal Guarantor is entitled to dispute the validity of such a debt except when the debt is registered with the information utility. Non-issuance of notice at the t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red to as RP/Respondent No. 2 ). The RP was directed to examine the application and make recommendation along with the reasons in writing for acceptance or rejection of the Application filed under Section 95 of IBC, 2016 within the time as stipulated under Section 99 of IBC, 2016. The matter was further posted to 22.04.2021. 4. It is the contention of the Applicant that the order dated 22.03.2021 of this Adjudicating Authority was passed ex parte and without issuing notice to the Applicant. 5. That the Applicant has further averred the following: 9. Thereafter, the Respondent allegedly issued Demand Notice dated 22.10.2020 in Form B under Rule 7(1) of Insolvency Bankruptcy (Application to Adjudicating Authority for Insolvency Resolution Process of Personal Guarantors to Corporate Debtor) Rules, 2019. It is submitted that the alleged Demand Notice was never served upon the Applicant on its address i.e. X-12, Block X Hauz Khas, New Delhi-110016. It is case of Respondent that Demand Notice was served on 18/7/2, Laxmi Garden, Najafgarh, Pole No. 926, New Delhi-110043. It is submitted that the said address does not belong to Applicant and said address was never used as mod ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ell, the proof of which has been annexed on Page 85-86 of IB/116/ND/2021. The same is reproduced overleaf: 8. In response to the specific queries, raised by this Bench during hearing of the matter, pertaining to (a) receipt of the copy of the Petition in terms of Section 95(5) of IBC 2016 read with Rule 7(3) of Insolvency Bankruptcy (Application to Adjudicating Authority for Insolvency Resolution Process of Personal Guarantors to Corporate Debtor) Rules, 2019, and (b) receipt of the Demand notice, Ld. Counsel for the Applicant admitted and confirmed to have received both the petition as well as the Demand Notice through the email. 9. In the light of the admission made by the Ld. Counsel of the Applicant and on perusal of the email communication annexed on Page 85-86 and the Tracking Report Annexed on Page 81 depicting the status of delivery as item delivered , we do not find any force in the contention of the Applicant that the Demand Notice was not served on him and therefore, we hold that the order dated 26.04.2021 does not suffer from any mistake apparent on the face of record as regards to the service of demand notice to the Personal Guarantor. Therefore, the pray ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the principles of natural justice, and, subject to the other provisions of this Act 1[ or of the Insolvency and Bankruptcy Code, 2016] and of any rules made thereunder, the Tribunal and the Appellate Tribunal shall have power to regulate their own procedure. 13. To support his contention regarding the necessity of issuance of notice to the Personal Guarantor, the Ld Counsel of the Applicant placed reliance on Rule 34(1) and Rule 51 of NCLT Rules 2016, which are reproduced overleaf: 34. General Procedure.-(1) In a situation not provided for in these rules, the Tribunal may, for reasons to be recorded in writing, determine the procedure in a particular case in accordance with the principles of natural justice. 51. Power to regulate the procedure.-The Tribunal may regulate its own procedure in accordance with the rules of natural justice and equity, for the purpose of discharging its functions under the Act. 14. By placing emphasis on the abovementioned provisions, the Ld. Counsel for the Applicant submitted that the order dated 22.03.2021 has been passed without giving the Applicant an opportunity of being heard and it is, therefore, in violation of the Prin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th the sides are, therefore, entitled to a reasonable opportunity of hearing. 16. That the Applicant has also relied upon the order dated 03.11.2020 passed by the Principal Bench in C.P. (IB) No. 947(PB) of 2020 titled as State Bank of India Vs. Shagufa Khan, wherein an opportunity was given to the Personal Guarantor before appointing an RP in that matter. 17. Per contra, the Respondents argued that the Application under Section 95 has not been admitted by this Adjudicating Authority yet and therefore, no Insolvency Resolution Process has begun against the Personal Guarantor yet. 18. It was further submitted by the Ld. Counsel for the Respondent No. 1 that since all the legal requirements of Section 95 of IBC 2016 were met, after considering their application, Adjudicating Authority appointed the RP in the matter to examine the Application and submit a report. 19. We have perused the averments made by the Applicant in its Application and heard the Ld. Counsels of both the parties at length on 26.04.2021. After considering all the contentions, we observe that the only issue that remain for adjudication is: Whether this Adjudicating Authority is bound to issue noti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... interest therein. 24. Thus, it is clear and therefore, we are of the considered view that initiation of the interim-moratorium under Section 96 causes no prejudice to the Personal Guarantor. 25. That when an Application comes for the first time before this Adjudicating Authority, it is only required prima facie to satisfy itself that there is sufficient material on record to depict that the Personal Guarantor has given Personal Guarantee in respect of the debt of the Corporate Debtor. Further, it needs to examine compliance of the limited aspects as stipulated under Rule 7 of Insolvency and Bankruptcy (Application to Adjudicating Authority for Insolvency Resolution Process for Personal Guarantors to Corporate Debtors) Rules, 2019. For the sake of convenience, the contents of Rule 7 are reproduced below: 7. Application by creditor- (1) A demand notice under clause (b) of sub-section (4) of section 95 shall be served on the guarantor demanding payment of the amount of default, in Form B. (2) The application under sub-section (1) of section 95 shall be submitted in Form C, along with a fee of two thousand rupees. (3) The creditor shall serve forthwith a copy ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no notice is required to be issued to the Personal Guarantor at the initial stage when the RP is appointed. 29. That this Adjudicating Authority is empowered under Rule 51 of NCLT Rules, 2016 to regulate its own procedure and further decide what shall be the appropriate stage of issuing notice. 30. Further, in our view the non-issuance of notice at the time of appointment of RP cannot be held to be a violation of the Principles of Natural Justice, since these cannot be rigid and their applicability depends on the demand of the law and situation. Further, there is no straight jacket formula applicable to the principles of natural justice, which can be followed in each and every case. Here, it is worthwhile to refer to the Judgment of Hon'ble Supreme Court passed in the matter of Ajit Kumar Nag Vs. G.M. (P.J.) India Oil Corporation Ltd., Civil (Appeal) No. 4544 of 2005 dated 19.09.2005. The relevant extracts of the Judgment are reproduced overleaf: ....But we are also aware that principles of natural justice are not rigid or immutable and hence they cannot be imprisoned in a straight-jacket. They must yield to and change with exigencies of situations. They must be con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al may require the debtor to prove repayment of debt, so the debtor will have full opportunity of defending him/herself. 4. Therefore, before appointing Resolution Professional and seeking REPORT from the Resolution Professional under Section 99 of IBC, 2016, there does not appear any procedure to deal with the issues raised by the Personnel Guarantor/Debtor or even sending notice to the Personnel Guarantor/Debtor. The Guarantor/Debtor can be given notice once the Resolution Professional recommends the acceptance of the application, filed under Section 95 of IBC, 2016. Thereafter, full opportunity of being heard could be provided to the debtor. 33. We, therefore, conclude that in the light of the material available on record and the admission made by the Ld. Counsel during hearing regarding receipt of the Demand Notice by E-mail, there is no mistake apparent on the face of record in the order dated 22.03.2021 passed by this Adjudicating Authority. We further hold that the Scheme of Insolvency Resolution Process in Chapter III of the IBC, 2016 does not warrant and provide issuance of notice at the stage of appointing RP under Section 97 of IBC, 2016 for the purpose of exam ..... X X X X Extracts X X X X X X X X Extracts X X X X
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