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TMI Blog2025 (4) TMI 1194X X X X Extracts X X X X X X X X Extracts X X X X ..... 022 and IA- 319/2024 by which initiation of Personal Insolvency Resolution Process (PIRP) it has been ordered against the Appellant. Similar PIRP2 has been ordered by the AA in CP (IB) No. IB-656(ND)/2022 and IA-521/2024 against which appeal CA (AT) (Ins.) 2054/2024 has been filed and for PIRP ordered by the AA in CP (IB) No. IB-652(ND)/2022 and IA-335/2024 appeal in CA (AT) (Ins.) 2117/2024 has been filed. Brief facts relevant for the Appeal 2. Facts necessary to be noticed for deciding this appeal are: Sanction Letter- issued in favour of Andes Town Planners Pvt. Ltd ("Corporate Debtor") and Rohtas Projects Ltd ("Co- Borrower") for a project loan of Rs. 90 crores by Omkara Assets Reconstruction Private Limited "Financial Creditor" or "Respondent No.1" - earlier Dewan Housing Finance Corporation Ltd.-DHFL and subsequently Piramal Capital & Housing Finance Limited. The Loan was secured by way of irrevocable personal guarantees. Sept. 10, 2014 Following documents exchanged between the Corporate Debtor, the Co-borrower and the Financial Creditor: a. Hypothecation Deed- charge created on all receivables from sale of units in Rohtas Plumeria & Summit. b. Pledge Letter- for 99.9 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... going CIRP, wherein resolution plan is being considered by the members of the committee of creditors. Feb. 13, 2024 Adjudicating Authority passed the Impugned Order. Sept. 19, 2024 Submissions of the Appellant - Personal Guarantor: 3. DHFL issued a notice dated 02.01.2020 inter alia, to the Corporate Debtor, Co-Borrower and the Appellant to re-pay the alleged outstanding amount of Rs. 108,19,72,155/-, as on 30.12.2019, within 15 days. Pertinently, the said notice was not received by the Appellant. That the Loan Recall Notice, purportedly dated 02.01.2020, was never served upon the Appellant-PG. Respondent No. 1-FC has failed to provide any proof of service of this notice within the petition. The absence of a delivery receipt or any other credible evidence confirming its service indicates that the appellant was not notified of the Loan Recall Notice and, therefore, was deprived of the opportunity to respond or take any necessary action in relation to the same. 4. DHFL issued a purported notice dated 15.02.2021 for invocation of the Guarantee Deed, calling upon, the Appellant to re-pay the alleged outstanding amount of Rs. 133,14,26,737/-, as on 31.01.2021, within 15 days. Pert ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... service further compounds the appellant's inability to participate in the proceedings in a fair and informed manner, violating the principles of natural justice. 7. The Appellant filed its objections to the report filed by the Resolution Professional: (a) The Recall Notice, Invocation Notice and Demand Notice, was not delivered on the Appellant; (b) There were various discrepancies in the report filed by the RP u/s 99 of the Code.; (c) The Appellant had not acknowledged the liability to pay the debt; (d) Corporate Debtor is already undergoing CIRP, wherein resolution plan is being considered by the members of the committee of creditors. 8. It is contended that the Adjudicating Authority erroneously issued the Impugned Order on 19.09.2024 without considering settled legal principles and in contravention of the mandatory provisions of Section 957 of the Code. This includes improper service of the demand notice on the Appellant and an inaccurate report filed by the Resolution Professional (RP) under Section 99 of the Code, read with Rule 7 (1)5 of IRPPG Rules6. The Appellant contends that the Impugned Order was issued without due consideration of established legal principles an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 7 proceeding against the Corporate Guarantor automatically...". The Respondent has, therefore, failed in establishing compliance of subsection (4)(a) and (b) of section 95 I&B Code, 2016. As such the "debt" as claimed under the Guarantee Deed does not "exist" as on the date of filing of the Petition under Section 95 of IBC. 11. In light of the foregoing, it is evident that essential documents- including the alleged Loan Recall Notice, Invocation of Guarantee Notice, Demand Notice under Section 95(4)(b) of the IBC, 2016, and the petition itself-were either not served on the Appellant or their service has not been adequately proven. The lack of clear evidence of service for these crucial documents deprived the Appellant of a fair and reasonable opportunity to respond. This procedural lapse raises serious concerns regarding compliance with the mandatory requirements of the IBC, 2016, and undermines the Appellant's right to participate in the proceedings. 12. The presumption of service under Section 27 of the General Clauses Act applies only when the notice is dispatched via registered post. In the present case, since the alleged demand notice was not sent through registere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onal Guarantor's address was recorded as 803, Rohtas Road, Lucknow-the Given Address. 16. Thus, the issuance of the Recall Notice, Invocation Notice, and Demand Notice to the Given Address constitutes valid service in accordance with the Guarantee Deed. Consequently, the Appellant - Personal Guarantor's objections regarding non-service of the notices are baseless, contradict the terms of the Guarantee Deed, and should be rejected outright. 17. Respondent No. 1 - Omkara asserts that sending the Recall Notice, Invocation Notice, and Demand Notice to the last known address constitutes valid service. As previously stated, these notices were sent to the Given Address, as recorded in the Guarantee Deed. It is well settled in law that service of notice at a party's last known address is deemed valid. 18. Pursuant to the Adjudicating Authority's directions, a copy of the Petition was also sent to the Appellant - Personal Guarantor via email on 26.09.2022 and by speed post to the Given Address. The speed post was undelivered with the remark "addressee left without instructions," but the Petition was successfully served via email. Despite receiving the Petition, the Respondent has not mad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntor (of a corporate debtor) of her or his liabilities under the contract of guarantee. Further, the National Company Law Appellate Tribunal, New Delhi, in the matter of Mohan Kumar Garg vs. Omkara Assets Reconstruction Pvt. Ltd. & Anr. being Company Appeal (AT) (Insolvency) No.993 of 2023, had held that the simultaneous proceedings in respect of the guarantor as well as the borrower can be proceeded with. 24. Hence, it is a settled principle of law that simultaneous proceedings can be initiated against the borrower as well as the guarantor. Furthermore, it is submitted that the Respondent No 1- Omkara has not received the outstanding amount, either in part or in full. Hence, the contention of the that since borrower is already undergoing CIRP, wherein resolution plan is being considered by the members of the COC, the Petition ought not be proceeded with, is contrary to the settled principles of law. Submissions of Respondent No. 2-Resolution Professional (R2-RP) 25. With respect to the objections raised by the Appellant - PG on non- service of statutory demand notice, the Respondent No. 2-RP has examined the demand notice dated May 10, 2022, attached to the Company Petition, wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e submitted via email on January 3, 2024. Despite multiple attempts to engage the Appellant, they remained unresponsive and only raised objections later, causing unnecessary delays. The Appellant has not disputed the debt, the guarantee, or the last known address but only alleged non-delivery of the demand notice, which is unfounded. 31. Respondent No. 2- RP ensured to serve the copy of the order requesting the Appellant to put forward his case, objection and contentions to substantiate their case. However, there was no response. The contents of the objections filed by the Appellant has not denied the due debt amount. Therefore, the statement that the acknowledgement has not been given is untenable in the eyes of the law. The averment made by the Appellant regarding the same is unacceptable. 32. Respondent No. 2- RP has verified the documents pertaining to the NESL report wherein the default has been recorded in respect of the Corporate Debtor, co-borrower(s) and other co-guarantors. It is pertinent to mention that the law in case of personal guarantor is clear that there is no pre-requisite of filing of record of default in respect of the personal guarantor with the information ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tly Piramal Capital & Housing Finance Limited]. Further to the sanction letter dated September 10, 2014 a loan of Rs. 90 crores which was approved and sanctioned to the Corporate Debtor. The Loan was secured by way of irrevocable personal guarantees. A deed of guarantee dated 29/09/2014 ("Deed of Guarantee") was issued by Mr. Paresh Rastogi, Mr. Piyush Rastogi, Mr. Pankaj Rastogi, Mr. Deepak Rastogi in favour of DHFL, giving an unconditional and irrevocable guarantee to jointly and severally repay on demand, all amounts that are due and payable under the facility, including interest, default/penal interest and all other charges, expenses and monies payable under the Loan Agreement. 37. Prayers sought in CA (AT) (Insol) 2053/2024 are: "a) Allow the present appeal; b) Set aside the Impugned Order dated 19.09.2024 passed by the Ld. Adjudicating Authority initiating Personal Insolvency Process against the Appellant. c) Pass such other or further order(s)/ direction (s) as the Hon'ble Appellate Authority deems fit in the facts and circumstances of the case." Since the facts and issues are similar in CA (AT) (Ins.) 2053/2024, CA (AT) (Ins.) 2054/2024 and CA (AT) (Ins.) 2117/2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Appellants non-maintainable. 41. We first delve into the issue of Validity of Service of Notices. From the materials on record we find that the Respondents had sent the Loan Recall Notice, Invocation Notice, and Demand Notice to the Given Address recorded in the Guarantee Deed. Appellant contends that the notices were either not served or not adequately proven to be served. Clause 22 of the Guarantee Deed explicitly states that all communications, including a Notice of Demand, sent to the address provided in the Guarantee Deed or the last known address shall be considered sufficient service. The relevant clause is reiterated below: "22. The Guarantors agree that all the communications including a Notice of Demand posted under the Certificate of Posting at the above stated or last known address of the Guarantors shall be sufficient service of such communication on or Notice of Demand on him and DHFL shall be entitled to proceed on the basis that the said communication or Notice of Demand Posted under the Certificate of Posting has been duly received by the Guarantor at the end of the normal period after which such communication or Notice of Demand be ordinarily delivered by Pos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dress by registered post. This Court held as under: (SCC p. 564, para 14) "14. Section 27 gives rise to a presumption that service of notice has been effected when it is sent to the correct address by registered post. ... Unless and until the contrary is proved by the addressee, service of notice is deemed to have been effected at the time at which the letter would have been delivered in the ordinary course of business." b. This Court has reiterated a similar view in Gujarat Electricity Board v. Atmaram Sungomal Poshani [(1989) 2 SCC 602 : 1989 SCC (L&S) 393 : (1989) 10 ATC 396 : AIR 1989 SC 1433], CIT v. V.K. Gururaj [(1996) 7 SCC 275: 1996 SCC (L&S) 579: (1996) 33 ATC 269], Poonam Verma v. DDA [(2007) 13 SCC 154], Sarav Investment & Financial Consultancy (P) Ltd. v. Llyods Register of Shipping Indian Office Staff Provident Fund [(2007) 14 SCC 753: (2009) 1 SCC (Cri) 935], Union of India v. S.P. Singh [(2008) 5 SCC 438 : (2008) 2 SCC (L&S) 1], Municipal Corpn., Ludhiana v. Inderjit Singh [(2008) 13 SCC 506] and V.N. Bharat v. DDA [(2008) 17 SCC 321: AIR 2009 SC 1233] ...." [Emphasis Supplied] 47. Such like situations have been noted in the legal precedents-including St. Alfr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he suit premises. The notice sent by courier was received back with the remarks "shifted", whereas the notice sent by registered post at the suit premises was received back with the remarks "on repeated visits premises found locked". As noted earlier, the notice sent at the registered office of defendant-company was also sent with the remarks 'left without instructions". 15. The contention of the learned counsel for the plaintiff is that the plaintiffs did whatever they could possibly have done to serve the notice upon the defendants and if the defendants chose to lock the suit premises and either shift its registered office or altogether stop its functioning and close down its operations and its registered office, without any intimation to the plaintiffs, that would amount to deliberate avoidance to receive the notice and consequently constitute a valid service. 19. In the case before this Court also, it was for the defendant- company, if it decided to lock the suit premises which it had been taken on rent from the plaintiffs, to make necessary arrangements for service of the letters, etc that could be sent to it, either by instructing the postal authorities to re-direct t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act that notice by fax was not valid. Rejecting the aforesaid contention, the hon'ble Supreme Court has held as under: 'Francis Bennion in Statutory Interpretation has stressed the need to interpret a statute by giving "allowances for any relevant changes that occurred, since the Act's passing, in law, social conditions, technology, the meaning of words, and other matters". For the need to update legislations, the courts have the duty to use interpretative process to the fullest extent permissible by the enactment. The following passage at page 167 of the above book has been quoted with approval by a three-judge Bench of this court in State v. S. J. Choudhary (1996) 2 SCC 428: It is presumed that Parliament intends the court to apply to on ongoing Act a construction that continuously updates its wording to allow for changes since the Act was initially framed (an updating construction). While it remains law, it is to be treated as always speaking. This means that in its application on any date, the language of the Act, though necessarily embedded in its own time, is nevertheless to be construed in accordance with the need to treat it as current law." So, if the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Guarantors to Corporate Debtors) Rules, 2019, which is provided at Rule 3(g): "... 3(g). "serve" means sending any communication by any means, including registered post, speed post, courier or electronic form, which is capable of producing or generating an acknowledgement of receipt of such communication: Provided that 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;" 53. Further the Respondent No.1- Omkara had sent the Recall Notice, Invocation Notice and Demand Notice to the Appellant on the address provided in the Guarantee Deed, being the last known address provided by the Appellant in terms of Clause 22 of the Guarantee Deed. The Appellant has not claimed that the address on which the Recall Notice, the Invocation Notice and the Demand Notice were sent was incorrect or does not belong to the Appellant. Also, the Appellant has not claimed that any fresh address was provided to the Respondent No.1 (or Piramal or DHFL), hence the address mentioned in the Guarantee Deed remained the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nts: 1. Demand Notice - dated May 10, 2022, issued by Respondent No.1 2. Loan Agreement- dated September 29, 2014. 3. Deed of Guarantee- signed by the Appellant. Section 95(4)(b) of the Code: Details and documents relating to the failure by the debtor to pay the debt within a period of fourteen days of the service of the notice of demand Respondent No.1 served the Demand Notice in Form B, upon the Appellant in terms of Rule 3(g) proviso of the Personal Insolvency Rules which was duly received by the Appellant. Neither any reply was received by Respondent No.1 to the said Demand Notice within 14 days as per the Regulations mentioned in the Code nor any repayment was made by the Appellant. Section 95(4)(c) of the Code: Details and documents relating to relevant evidence of such default or non-repayment of debt 1. Demand Notice - dated May 10, 2022, issued by Respondent No.1. 2. Loan recall notice- dated January 02, 2020, issued by the Respondent No. 1 to the Corporate Debtor and Appellant. 3. Loan Agreement- dated September 29, 2014 4. Loan Agreement- dated September 29, 2014. 5. Deed of Guarantee- signed by the Appellant. Section 95(5) of the Code: The creditor s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... all documents, including those submitted via email on January 3, 2024. 58. We also note that the Respondent No.1 - Omkara had sent the Recall Notice, Invocation Notice, and Demand Notice to the Given Address, which remained the last known address of the Appellant-PG as per the Guarantee Deed. It is to be noted that the same address was used by the Appellant-PG for transactions with other banking and financial institutions as well. Even in the Objections, the Appellant-PG had not claimed that the same address does not belong to them or that any updated address was provided to the Respondent No.1-FC (or Piramal or DHFL). Furthermore, the address mentioned in the affidavit supporting the Objections is not that of the Appellant-PG but rather of the Borrower, who is undergoing CIRP under the IBC. Furthermore, a first information report (FIR No. RC0062022A0014) dated 11.04.2022 was registered by police station ACB, Lucknow, based on a complaint filed by Canara Bank, Lucknow, wherein the Appellant-PG's address was recorded as 803, Rohtas Road, Lucknow-the Given Address. Thus, the issuance of the Recall Notice, Invocation Notice, and Demand Notice to the Given Address constitutes valid se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ail transmissions, supports the contention that the statutory process was duly followed. The Appellant's argument that the non-receipt of the notices undermines the proceedings is not borne out by the documentary record. 62. In the above background, the contentions of the Appellant-PG for non- compliance of statutory requirements are devoid of merits and are rejected. 63. Now we delve into the issue of Invocation of the Guarantee and Liability of the Appellant. It is claimed by the Appellant that the guarantee was not properly invoked. The Guarantee Deed provides that liability arises upon the occurrence of default by the borrower, and the subsequent actions taken by the financial institution were in line with the contractual obligations. It is claimed that the guarantee becomes a debt once the said guarantee is invoked, wherein after the guarantor becomes liable. The Appellant has placed reliance upon Edelweiss Asset Reconstruction Company v Orissa Manganese and Minerals Limited and others (supra) wherein it has been held that: "A contract of guarantee matures in to a binding obligation only upon its invocation. Contract of Guarantee is an autonomous contract and the admission ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t Hydrocarbons and Power SEZ Ltd. & Anr., Company Appeal (AT) (Ins.) No. 1096 of 2020" taking the view that simultaneous proceedings against the Principal Borrower and the Corporate Guarantor can be Initiated. 9. We are of the view that law is well settled that proceeding under Section 7 can be initiated against both the Principal Borrower and Corporate Guarantor and there is no inhibition in proceeding against the Corporate Guarantor although proceeding against Principal Borrower under Section 7 was admitted. We are of the view that no error has been committed by the Adjudicating Authority in admitting Section 7 application against the Corporate Guarantor. There is no merit in the Appeal. Appeal is dismissed." (emphasis supplied) 65. Therefore, it is a settled position of law that simultaneous proceedings can be initiated against the borrower as well as the guarantor. As the Respondent No1- Omkara has not received the outstanding amount, either in part or in full, hence, the contention of that since borrower is already undergoing CIRP, wherein resolution plan is being considered by the members of the COC, the Petition ought not be proceeded with, is bereft of any justification ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctions'. 21. Be that as it may the Personal Guarantor has not denied that pursuant to the Sanction of the credit facilities by the Applicant/Financial Creditor in favour of the Corporate Debtor, the Personal Guarantor executed the various documents which were duly accepted by the Corporate Debtor and the Personal Guarantor. 22. We have also noticed that the Personal Guarantor has not raised any objection with regard to non-compliance of Principles of Natural Justice by the Resolution Professional while submitting the report in terms of Section 99 of the Code, 2016. 23. We are therefore of the considered view that the non-service of demand notice as alleged by the Personal Guarantor will not absolve the Personal Guarantor from discharging its liability under the Deed of Guarantee. 24. We are therefore not inclined to accept the submissions made by Ld. Counsel appearing for the Personal Guarantor that non- service of demand notice would result in the dismissal of the application filed under Section 95 of the Code, 2016. 25. We find that the Notices were issued to the Personal Guarantor as well as the Financial Creditor and the report was served by the Resolution Profess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 68. In view of the above, it we conclude that: * The notices in question were sent to the last known address as stipulated in the Guarantee Deed, and such service is deemed valid under established legal principles. * The Resolution Professional has satisfactorily demonstrated compliance with the requirements of Sections 95 and 99 of the IBC. * The Appellant's contentions regarding non-service and the alleged deficiencies in the report are without merit, as the burden of updating one's address lies with the Appellant. * The simultaneous CIRP against the Corporate Debtor does not interfere with the obligations of the Personal Guarantor under the Guarantee Deed. Orders 69. For the reasons stated above, we don't find any infirmity in the orders of the Adjudicating Authority and the Appeals CA (AT) (Ins.) No. 2053/2024, CA (AT) (Ins.) No. 2054/2024 and CA (AT) (Ins.) No. 2117/2024 are dismissed. The impugned Order dated 19th September 2024 is hereby upheld, and the Insolvency Resolution Process against the Appellant shall proceed accordingly. No orders as to costs. Footnotes 3 Section 95-Application by creditor to initiate insolvency resolution process. "...... (4) An ..... X X X X Extracts X X X X X X X X Extracts X X X X
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