2025 (7) TMI 83 - AT - IBC

Initiation of Section 95 application - initiation of Personal Insolvency Resolution Process (PIRP) - notice invoking the guarantee dated 10.10.2017 was never served on the Appellant - violation of principles of natural justice - HELD THAT - The fact remains that materials brough on the record by replies of the SBI as well as the RP bringing on the record materials to prove service of notice invoking bank guarantee on the Appellant remain un-rebutted. From the materials on record in the replies and additional affidavit it is satisfied that Appellant was duly served with the notice invoking the bank guarantee as well as legal Demand Notice dated 10.10.2017 which were sent by the Speed Posts. The fact that before the Adjudicating Authority the Appellant despite repeated opportunities did not file any reply speaks for itself. In the oral submissions advanced on behalf of the Personal Guarantor which has been noticed in detail by the Adjudicating Authority as extracted above the submission that notice invoking the guarantee has not been served was not even raised. Thus notice invoking the bank guarantee was duly served - there are no merits in the submissions made by the Appellant that he was not served with notice invoking bank guarantee. There is no merit in the Appeal. The Appeal is dismissed.

Summary

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered by the Tribunal in this appeal are:

(a) Whether the application under Section 95 of the Insolvency and Bankruptcy Code, 2016 (IBC) for initiation of Personal Insolvency Resolution Process (PIRP) against the Personal Guarantor is barred by limitation;

(b) Whether the notice invoking the personal guarantee was validly issued and duly served on the Personal Guarantor as required under the Deed of Personal Guarantee and the statutory provisions;

(c) Whether the notice of demand was required to be issued by the Security Trustee as per the terms of the Deed of Personal Guarantee, and if so, whether issuance of the notice by the State Bank of India (SBI) instead of the Security Trustee affects the maintainability of the application;

(d) Whether the Personal Guarantor was afforded adequate opportunity to file a reply or raise objections before the Adjudicating Authority;

(e) Whether the Adjudicating Authority properly considered the submissions and evidence regarding service of notices and limitation before admitting the Section 95 application.

2. ISSUE-WISE DETAILED ANALYSIS

(a) Limitation of the Section 95 Application

The Appellant contended that the application filed by SBI under Section 95 IBC for initiation of PIRP was barred by limitation. The Adjudicating Authority and subsequently the Tribunal noted that this issue was raised before the Adjudicating Authority and was duly considered. The Tribunal did not find any merit in the limitation plea, as the application was filed within the prescribed period after issuance of notices and default. The limitation period under IBC provisions and relevant rules was complied with, and no delay was demonstrated by the Appellant that would warrant rejection on limitation grounds.

(b) Validity and Service of Notice Invoking Personal Guarantee

The primary issue raised in the Appeal was non-service of the notice invoking the personal guarantee dated 10.10.2017. The Appellant argued that no proof of service of this notice was annexed with the Section 95 application, and no postal receipt or service report was produced. The Appellant further submitted that the Adjudicating Authority failed to consider this material irregularity.

In response, the SBI and Resolution Professional (RP) produced extensive documentary evidence including postal receipts, speed post tracking reports, and copies of the notices dated 01.09.2017 and 10.10.2017, demonstrating that the notices were sent to and delivered at the Appellant's addresses in Gurgaon and Aligarh. The postal receipts and tracking reports showed delivery dates of 08.09.2017 and 11.09.2017 respectively. The RP also filed an additional affidavit bringing these documents on record.

The Tribunal observed that the Appellant was given multiple opportunities before the Adjudicating Authority to file a reply or raise objections, but failed to do so. The right to file a reply was ultimately struck off due to non-compliance despite repeated chances and imposition of costs. The Tribunal noted that the Appellant did not raise the issue of non-service of notice invoking the guarantee before the Adjudicating Authority, but only raised it for the first time in the Appeal, which was considered an afterthought aimed at delaying proceedings.

Given the un-rebutted documentary evidence on record, the Tribunal held that the notice invoking the personal guarantee was duly served on the Appellant in accordance with the requirements of the IBC and the Deed of Guarantee.

(c) Issuance of Notice by SBI Instead of Security Trustee

The Appellant contended that as per the Deed of Personal Guarantee, the Security Trustee (SBICAP Trustee Co. Ltd.) was required to issue the notice of demand upon the Personal Guarantor. However, the notice was issued by SBI, the lead lender, and not the Security Trustee. This was argued as a procedural irregularity affecting the maintainability of the application.

The Tribunal noted that this contention was raised before the Adjudicating Authority and considered. The SBI and RP submitted that the Security Trustee was acting as an agent for the lenders and that the lenders had full authority to issue notices and invoke guarantees. The issuance of notice by SBI was therefore valid and did not vitiate the proceedings. The Tribunal accepted this interpretation, holding that the lenders' authority to issue notices was not curtailed by the Security Trustee Agreement and that the procedural formality of issuance by the Security Trustee was not a condition precedent to maintainability.

(d) Opportunity to File Reply and Raise Objections

The Tribunal extensively reviewed the procedural history of the matter before the Adjudicating Authority. The Personal Guarantor was repeatedly granted opportunities to file replies and raise objections, including on limitation and issuance of notice. The Adjudicating Authority's orders dated 21.12.2023, 16.01.2024, 01.03.2024, and 17.04.2024 were examined, showing repeated indulgences granted to the Personal Guarantor, including extension of time and imposition of costs for filing replies, all of which were not complied with.

The Tribunal emphasized that the Appellant failed to avail the opportunity to submit any reply or rebut the documentary evidence on service of notices. The right to reply was ultimately struck off, and the Adjudicating Authority proceeded to hear oral submissions and pass the impugned order. The Tribunal found that the procedural fairness and principles of natural justice were duly complied with.

(e) Consideration of Evidence and Submissions by the Adjudicating Authority

The Tribunal noted that the Adjudicating Authority considered the submissions of the parties on limitation and issuance of notice but did not entertain the issue of non-service of notice invoking guarantee as it was not raised before it. The Tribunal found that the Adjudicating Authority's approach was justified in light of the procedural history and the fact that the Appellant did not file any reply contesting service of notices.

The Tribunal further held that the evidence produced by SBI and RP in the form of postal receipts, speed post tracking reports, and notices was sufficient to establish valid service of notices invoking guarantee and demand notices. The Tribunal found no infirmity in the Adjudicating Authority's conclusion admitting the Section 95 application.

3. SIGNIFICANT HOLDINGS

The Tribunal's key legal findings and principles established are as follows:

"The materials brought on record by replies of the SBI as well as the RP bringing on the record materials to prove service of notice invoking bank guarantee on the Appellant, remain un-rebutted. From the materials on record in the replies and additional affidavit, we are satisfied that Appellant was duly served with the notice invoking the bank guarantee as well as legal Demand Notice dated 10.10.2017, which were sent by the Speed Posts."

"The fact that before the Adjudicating Authority, the Appellant, despite repeated opportunities did not file any reply, speaks for itself."

"The issue having been raised by the Appellant for the first time in the Appeal, it is relevant to notice the orders passed by Adjudicating Authority in Section 95 application... The right to file reply was struck off due to non-compliance despite repeated opportunities."

"The issuance of notice by the State Bank of India instead of the Security Trustee does not vitiate the proceedings as the lenders had full authority and jurisdiction to invoke guarantee and initiate proceedings."

"The Appellant failed to rebut the proof of service of notices and failed to avail the opportunities granted to file reply or raise objections before the Adjudicating Authority."

"There is no merit in the submissions made by the Appellant that he was not served with notice invoking bank guarantee. The Appeal is dismissed."

The Tribunal's final determination was to dismiss the Appeal and uphold the order admitting the Section 95 application initiating PIRP against the Personal Guarantor. The interim relief granted earlier was vacated, and no costs were imposed on the parties.