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TMI Blog2025 (2) TMI 688X X X X Extracts X X X X X X X X Extracts X X X X ..... chronology relevant for appreciation of the issues involved in the case is a follows : 1. 2007-2012 NaftoGaz India Pvt Ltd took various credit facilities from SBI and SBBJ in which the Appellant was the Personal Guarantor. 2. 28.01.2012 Loan account of NaftoGaz India Pvt Ltd was classified as NPA by SBBJ 3. 13.06.2012 Loan account of NaftoGaz India Pvt Ltd was classified as NPA by the SBI 4. 08.10.2012 NaftoGaz India Pvt Ltd went into liquidation vide Order passed by the High Court of Delhi. 5. 26.12.2013 SBI sent Demand Notice dated 26.12.2013 under Section 13(2) of SARFAESI Act, 2002, calling upon to repay the amount of Rs 64.48 crs (approx.). 6. 2014 SBI filed OA No. 133 of 2014 before the Debt Recovery Tribunal, New Delhi, and the same is pending adjudication till date. 7. 28.06.2021 Respondent No. 1/SBI sent a Demand Notice under Rule 7(1) of the Insolvency and Bankruptcy (Application to Adjudicating Authority for Insolvency Resolution Process of Personal Guarantors to Corporate Debtors) Rule, 2019, demanding payment of Rs 264.61 crs - as on 31.05.2021. 8. 03.12.2022 Respondent No. 1 filed the Application under Section 95(1) of IBC seeking initiation of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y SBI later on 13.06.2012. SBI sent a Demand Notice dated 26.12.2013 under Section 13(2) of SARFAESI Act, 20023 calling upon the Company and the Appellant to repay the amount of about Rs 64.48 crores. Later on, in the year 2014, SBI also filed OA No. 133 of 2014 before the Debt Recovery Tribunal (DRT), New Delhi, and the same is still pending. No decree has been passed in the same. After about 7 years, in 2021, Respondent No.1-SBI sent a Demand Notice dated 28.06.2021 under Rule 7(1)1 demanding payment of about Rs 264 cores. This Demand Notice refers to four loan accounts, two from SBI (i.e. CC(SBI)-30451182299 and BG(SBI)-30449964100) and two from SBBJ (CC)SBBJ)-61253087296 and BG(SBBJ)-61074975160). No explanation was provided as to how the figure of Rs 264.61 crores was arrived at, or against which loan account how much amount was sought for. It is also claimed that the Application under Section 95(1) of IBC mentions only one loan account of SBI out of the four loan accounts. Respondent No. 1 - SBI filed Application under Section 95(1) of IBC seeking initiation of PIRP against the Appellant in the capacity as PG. In the proceedings before the NCLT, New Delhi, the arguments were ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dent No.1 chose not to serve the Demand Notice to the Appellant on the correct address and email ID, instead chose to send the Demand Notice on the address of E-14/13, Ground Floor, Vasant Vihar, New Delhi-110070. This, the letter was the address of the company which has gone into liquidation vide order dated 08.10.2012 by Hon'ble High Court of Delhi in the matter titled as Royal Marine vs Naftogaz India Private Limited being Company Petition No. 128 of 2011. The aforesaid company/residence of the Appellant and other assets of the Company including books of accounts were taken over by the Official Liquidator attached to the Hon'ble High Court of Delhi. 7. It is the contention of the Appellant that where a statute requires a particular act to be done in a particular manner, the act has to be done in that manner alone and, therefore, the service of Demand Notice under Rule 7(1) cannot be substituted with the service of notice under Section 13(2) of SARFAESI Act, 2002. The service of Demand Notice under Rule 7(1) is a mandatory provision and cannot be overridden by any other Demand Notice under any other act/statute. 8. It is claimed that the amount sought in the Demand Notice and A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Y Order Reserved." 12. With respect to the issue of Demand Notice under Rule 7 (1) of the IBC Rules of 2019, NCLT, in its Impugned Order dated 13.06.2024, and also by the Respondent No. 2-RP in its Report, has categorically stated that the Demand Notice dated 28.06.2021 under Rule 7 (1) of the 1BC Rules, 2019, was served to the Appellant on the address mentioned in his passport and bank records. Thus, the Appellant cannot argue that he should not have been served at the address mentioned in his passport since the passport is a valid ID and address proof. 13. Even otherwise, the copy of the Demand Notice under Rule 7 (1) as also the copy of the Section 95 IBC Petition was sent to the Appellant by the Respondents. Thus, no prejudice has been caused to the Appellant as the dues and factum of guarantee are an admitted position and the Appellant failed to provide the details of repayment of debt. 14. It is to be noted that the PG has not denied that, pursuant to the sanction of credit facilities by the bank in favour of the CD, the PG executed various documents that were duly accepted by the CD and PG. The PG has not denied the execution of the personal guarantee. The PG has not deni ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T, New Delhi Bench, after relying upon the observations of the Hon'ble NCLAT passed in judgment dated 10.01.2022 in Company Appeal (AT) (Ins.) No. 936/2021: M/S Essjay Ericsson Pvt Ltd vs M/S Frontline (NCR) Business Solutions Pvt Ltd. 17. Thus, once the Section 95 IBC Petition is within the limitation, the objection/contention of the Appellant has to be rejected. 18. The Appellant is trying to build its case that the Impugned Order dated 13.06.2024 does not deal with the objections as regards the issue of 'limitation'. However, the issue of 'limitation' was already argued during the hearing dated 29.05.2024 in which even the Counsel for the Appellant stated no objection to the filing of the Order dated 17.03.2018 passed in O.A. No. 213/2013, which actually put the issue of 'limitation' to rest and nothing more was needed to be done. 19. With respect to this issue of Demand Notice under Rule 7(1) sent to the wrong address by the Financial Creditor, it has been recorded in the Impugned Order dated 13.06.2024, and also by the Respondent No. 2-RP in its Report that the Demand Notice dated 28.06.2021 under Rule 7 (1) of the IBC Rules, 2019, was served to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Section 95 of IBC Petition are vague, it is contended that the Respondent No. 1-SBI had duly provided the amount of debt in default as also the copy of statement of accounts to the PG. Thus, the objection/contention of the Appellant that the amount mentioned is vague is without legs. Moreover, the amount of debt in default was stated to be more than Rs 264 crores, which the Respondent No. 2-RP would always analyse while collating the claims. In any case, the Hon'ble NCLAT in 'Company Appeal (AT) (Ins) No. 662-663 of 2022: Suzlon Synthetics Ltd vs Stressed Asset Stabilisation Fund (2022) 145 taxmann.com 594 (NCLAT-New Delhi)' has held that the Adjudicating Authority does not have to calculate and fix the amount in default but only has to see that the amount in default is more than the threshold. In view of this, since the amount of debt in default is more than Rs 264 crores, it would be more than Rs 1 crores by any calculation. Hence, the Hon'ble NCLT was correct in admitting the Section 95 IBC Petition of the Respondent No. 1-SBI. 23. The contention/objection of the Appellant that the Demand Notice under Rule 7 (1) and the Section 95 IBC Petition have no foundation of loan am ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... about the liability and default of the Appellant being the PG for credit facilities advanced to the CD. Thus, this objection of the Appellant also deserves rejection. 26. All the challenges, allegations of the Appellant are only technical in nature to divert the attention which have no bearing on the Section 95 IBC Application. Thus, they cannot be entertained and are denied strongly. The Appeal is without merit. Therefore, in view of the above, the Impugned Order dated 13.06.2024 as passed by the Hon'ble Adjudicating Authority is perfectly legal and justified. Thus, no interference in the said Impugned Order is called for in this Appeal. Appraisal 27. Heard Counsels from both sides and also perused materials on record and noted the directions of the Hon'ble Supreme Court in Civil Appeal No. 8622 of 2024 in its Order dated 20.08.2024 of which the relevant extract is as follows: "1. The Appeal arises from an interlocutory order dated 16 July 2024 of the National Company Law Appellate Tribunal. 2. The proceedings have been posted for hearing before the NCLAT on 2 September-2024. Hence, we are not exercising jurisdiction at this stage. 3. All the questions of law which have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e issues are intricately related with each other, wherever possible they are being dealt in separately. 31. Firstly, we look into the issue relating to the non-service of the Rule 7(1) Demand Notice in IBC proceedings of Section 95. It is contended by the Appellant that the Demand Notice under Rule 7 was sent at E-14/13, Ground Floor, Vasant Vihar, New Delhi-110070, which was the address of the Company in liquidation (as on 08.10.2012) and where the Appellant was residing in 2012 till possession was taken over by OL. It is the contention of the Appellant that Respondent-Bank was aware of 64 Poorvi Marg since 2014 as the summons in O.A. No. 133 of 2014 were sent to Poorvi Marg address of the Appellant. Also, in RC No. 416 of 2018 the Income Affidavit dated 10.11.2020 was filed by the Appellant with advance copy to SBI Counsel, wherein correct email ID, address of Poorvi Marg and mobile number were duly provided. Further, Section 13(2) Notice dated 26.12.2013 by SBI to the Appellant was also addressed at 64, Poorvi Marg. O.A. No. 213/2014 of the SBBJ would also show that Poorvi Marg address of Appellant was known to SBI on 03.07.2014 also. Argument of the Respondent-Bank that Notice ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iew of the fact that the Personal Guarantor has not denied the execution of the Personal Guarantee and service of the notice under 13 (2) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002." 33. It is vehemently contended by the Appellant that the above observation in the Impugned Order that the non-service of Demand Notice to the Appellant will not absolve him from discharging his liability as the Appellant has not denied the service of Notice under Section 13(2) of SARFAESI Act is totally illegal. It is claimed that Rule 7 Notice cannot be substituted with Section 13(2) SARFAESI Notice. The nature of both the Notices are entirely different and one cannot substitute the other. The Appellant has given an example of a cheque bouncing notice under Section 138 of NI Act which cannot substitute a winding up Notice under Section 433 of the Companies Act. Similarly, a winding up notice under Section 433 cannot substitute a Section 13 (2) SARFAESI Notice. We find merit in the arguments of the Appellant but in the facts of the case sufficient time was available to the Appellant to provide repayment plan. 34. Even though there have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ice claimed a demand of Rs 264.61 crores (approximately), with a date of default of 25.01.2014, which includes not only the credit facilities provided by SBI, but also by SBBJ (pg 542 of APB) - as by that time the two banks - namely SBI and SBBJ had merged into SBI as on 31.03.2017 and the Notice combined demands of both banks without specifying details of individual accounts. Perusal of the Sl. No. 3 and 4 in the particulars of debt (at pg 541 of the APB) show that due date was 26.12.2013 and the default had occurred on 25.01.2014. The relevant extract is reproduced as follows: "FORM B [SEE RULE 7(1)] FORM OF DEMAND NOTICE Under Rule 7(1) of Insolvency and Bankruptcy (Application to Adjudicating Authority for Insolvency Resolution Process Guarantors to Corporate Debtors) Rules 2019 1. Total outstanding debt (Including any Interest or penalties) Rs.264,61,85,998.00 (Rs. Two hundred sixty four crore sixty one lacs eighty five thousand nine hundred ninety eight) as on 31.05.2021. 2. Amount of debt in default Rs.264,61,85,998.00 (As on 31.05.2021) 3. Date when the debt was due 26.12.2013 (Notice u/s 13(2) of SARFAESI Act) 4. Date when the default occurred 25.01.201 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... SARFAESI Act Demand Notice shows that: Accounts of the Company had become NPA on 13.06.2012 (SBI)/ 28.01.2012 (SBBJ); both SBI and SBBJ had not merged at that point of time. Section 13(2) Notice dated 26.12.2013 under SARFAESI Act was issued by SBI to the Company with a demand of about Rs 64.48 crores. Rule 7(1) Notice dated 28.06.2021 under IBC proceedings shows demand of about Rs 264.61 crores as on 31.05.2021. These were for four account numbers -two relating to SBI and two to SBBJ but without details of individual account numbers. Section 95 r/w Rule 7(2) Application dated 03.12.2022 under IBC shows total debt of about Rs 315 crores at Sl No. 1 in Part III as on 20.06.2022. Only statement of loan account of SBI was filed with Section 95 Application. There are no details of other individual account numbers. 39. Now when we closely look into the debt and default as claimed by the Respondent-Bank under Section 95 of the Code, we find that the Demand Notice under Section 13(2) of SARFAESI Act was with respect to default of the loan of SBI. Later on, in the Demand Notice under Rule 7(1) and also under Rule 7(2) under the IBC, for the first time, the Respondent Bank included ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the Rule 7(1) Notice has been issued much beyond three years. This argument, therefore, doesn't come to help of the Respondent-Bank. We therefore, find that the notices for debt and default under Rule 7(1) and Rule 7(2) are issued much beyond three years from the date of default and are therefore barred to be proceeded under the Limitation Act. 42. It is claimed by the Respondent-Bank that during the hearing before the Adjudicating Authority on 29.05.2024, the issue of limitation was argued, and as the Counsel for the Appellant had no objection to the filing of the Order dated 17.03.2018 passed in O.A. No.213/2013, therefore it puts the issue of limitation to rest and nothing more was needed to be done. The Orders which capture this are extracted as below: "IA-1592/2024 Pursuant to the order dated 28.05.2024, Mr. Harshit Khare, Ld. Counsel has appeared on behalf of State Bank of India and responded to the objections raised by the Ld. Counsel for the Personal Guarantor. Mr. Harshit Khare, Ld. Counsel handed-over a copy of the order of the Order passed by the DRT in OA No. 213/2013 and a copy of the pass-port of Mr. Mahdoom Bava, the Personal Guarantor during the course of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was issued on 17.03.2018 while the Section 95 IBC Petition has been filed by the Respondent No. 1-SBI on 03.12.2022, which is much later in time. Even then these RC proceedings, if they were of any help, do not find mention in the Section 95 proceedings, when they were filed. 45. To know the veracity of the claims of the Respondent-Bank, we test the Section 95 Application against the provisions of the Code and we find some crucial omissions and deficiencies in this application. For appreciating them, the relevant Sub-Section 4 of Section 95 is extracted herein: "95(4) An application under sub-section (1) shall be accompanied with details and documents relating to- (a) the debts owed by the debtor to the creditor or creditors submitting the application for insolvency resolution process as on the date of application; (b) the failure by the debtor to pay the debt within a period of fourteen days of the service of the notice of demand; and (c) relevant evidence of such default or non-repayment of debt." As per the legal provisions in the Section 95 of Code, the Application has to provide "details and documents" relating to the debts owed by the debtor to the creditor or cred ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2024 and also Section 95 application. 46. In conclusion, we find that the Applications under Rule 7(1) or Rule 7(2) / Section 95 have been deficient in providing details of individual accounts with respect to amounts, date of defaults, statement of accounts and dates of Notices and linking each individual account with the total amount claimed in the Section 95 Application. By providing a broad figure of Rs 315 crores, the demand becomes vague. Further directly linking of Application under Rule 7(2) / Section 95 with DRT Orders/decree is also not fully established. It is to be noted that DRT proceedings under SBBJ account were notified on 17.03.2018 for Rs 17.63 crores and at the time of filing of the Section 95 proceedings on 03.12.2022, the Respondent Bank was aware of the DRT proceedings. Even then it had not used them as an argument in the Section 95 Application at the time of filing this Application and later on in the hearing on 29.05.2024 it filed the order which was of an earlier date of 17.03.2018. 47. In this background, we find that the Adjudicating Authority had allowed the Counsel for the Respondent No.1-SBI to hand over a copy of the Order of DRT during the course of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... part amount and accordingly determine the issue of personal insolvency against the Appellant. Both parties are at liberty to raise all contentions before the Adjudicating Authority with respect to the issue in hand for determining whether the debt is time barred or not and whether for full or part amount and whether Section 95 proceedings are maintainable or not. The order impugned dated 13.06.2024 is set aside. We make it clear that we are not expressing any concluded opinion on the issues raised and it is for the Adjudicating Authority to consider the submissions and materials on the record and take a decision. FOOTNOTE 1 Rule 7 of Insolvency and Bankruptcy (Application to Adjudicating Authority for Insolvency Resolution Process Guarantors to Corporate Debtors) Rules 2019 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 Section 95 of the Insolvency and Bankruptcy Code 2016 Section 95. Application by creditor to initiate insolvency resolution process. (1) A creditor may apply either by himself, or jointly with other creditors, o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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