Ramkhumar Narasimhan vs Bank Of Baroda

Oral Judgment: Justice Sharad Kumar Sharma, Member (Judicial):

The Appellant is a Personal Guarantor of the Corporate Debtor (CD), M/s. Infinitas Energy Solutions Pvt. Ltd. The Appellant contends that he was a Director of the aforesaid entity, which was initially known as M/s. Trishe Renewable Energy Solutions Private Limited. The corporate debtor, for which the Appellant admittedly stood as a Personal Guarantor, had availed financial assistance extended by the Financial Creditor, the Respondent, Bank of Baroda to the tune of Rs. 35 Crores. It is an admitted case, and apparent from the records, that for the purpose of advancement of financial assistance by Bank of Baroda to the Corporate Debtor, the said assistance was secured by execution of a Letter of Guarantee dated 01.02.2013 by the appellant. It is an admitted position that the said loan was recalled by a recall letter dated 19.07.2014 issued by the Respondent Bank, calling upon the Appellant to repay the entire outstanding dues towards the loan liability. Simultaneously, a notice under Section 13(2) of the SARFAESI Act was also issued by the Respondent on 26.08.2014. Owing to the acknowledgment of debt by the Company, as reflected in its audited balance sheets for the financial years 2014–2015 and 2015–2016, the Corporate Debtor was directed to be admitted into CIRP by an order dated 18.09.2017.

In the absence of receipt of any Resolution Plan, the Corporate Debtor was ordered to be liquidated by an order passed in MA/341/2018 in CP/588/IB/CB/2017 on 06.02.2019. Consequentially, a demand notice in Form B under Rule 7(1) of the Insolvency and Bankruptcy (Application to Adjudicating Authority for Insolvency Resolution Process of Personal Guarantors to the Corporate Debtor) Rules, 2019 was issued by the financial creditor, bank of Baroda, against the present Appellant on 07.08.2020 as he stood as personal director to the financial assistance extended to the CD.

Thereafter, the financial creditor filed an application in form C under Section 95 of the I&B Code, before Ld. Adjudicating Authority, seeking initiation of personal insolvency resolution process against the personal guarantor, the appellant here in. The Ld. Adjudicating authority, after hearing the parties and considering the documents presented, including the report of the resolution professional, passed order under section 100 of the code on 09.12.2024, admitting the said application. The said order is the subject matter of challenge in the present Company Appeal.

The Appellant argues that the entire proceedings are vitiated because of non—service of the demand notice in form -B on him. He has stated that the demand notice was sent on following two addresses given as given below:-

Upon considering the particulars of the addresses supplied by the Appellant and placed on record in the present Company Appeal, it is evident that after execution of the Guarantee Agreement on 01.02.2013, the Appellant has repeatedly changed his addresses. This conduct is now being used as a pretext by the Appellant to deny the proceedings by contending that demand notice was sent on the wrong address, that it was not served on him, and hence the said proceedings are vitiated. This contention cannot be accepted because the said notice was served on the address provided by him in the guarantee deed and further, by his own admission, he received the copy of section 95 application in form C which contained certain details and documents, including the copy of the demand notice as an attachment. Hence, the appellant cannot deny that he is not aware of the demand notice.

The very purpose of a “notice” under law is to impart knowledge of proceedings. Having got the knowledge as above, the attempt of the appellant to challenge the proceedings under the plea of non-service of the demand notice cannot be considered to be a fair conduct on the part of the Appellant. When the proceedings were taken up before the Learned Tribunal, the Appellant had entered appearance and contested the proceedings under Section 95 of the I&B Code by filing a counter. The primary contention raised therein was that since the Letter of Guarantee was executed on 01.02.2013 and the loan was recalled vide the recall letter dated 19.07.2014, the consequential initiation of the CIRP of the Corporate Debtor on 18.09.2017, being more than 3 years from the above dates, were barred by limitation. In fact, limitation was one of the principal grounds pleaded in the counter filed by the Appellant before the Learned Tribunal and not the alleged non—service of the demand notice.

The Appellant had also contended before Ld. NCLT that the demand notice dated 07.08.2020 has not been served on him, the said notice having been sent at addresses where he was no longer residing. On this basis, he contended that he was not aware of the proceedings till he was served the copy of section 95 application in form-C at his Mylapore address. He had also contended that this Mylapore address was known to the Bank as the notice under section 13(2) of SARFAESI Act had been served on him by the same Bank, as back as on 26.08.2014 in both Mylapore and Ashok Nagar addresses. The financial creditor counter the same by stating that the demand notice was sent at the address available on record with the bank and that the copy of the demand notice was also enclosed as annexure IA16 with the copy of section 95 application, which as per the Appellant’s own admission, has been served on him and therefore, the contention that demand notice in Form B issued under Rule 7 has not been served on the Appellant and it ought to vitiate the proceedings under Section 95 of the I&B Code, cannot be accepted. The contention regarding non-service of notice at the Mylapore address cannot be accepted for the reason that the notice was issued to the Appellant at the address mentioned in the Guarantee Agreement, as well as at his place of current residence as per the record available in the Bank, which was reflected as West Mambalam, Chennai. Thus, the contention raised by the Appellant before the Learned NCLT that the proceedings would be vitiated due to lack of sufficient service of notice in Form B is not acceptable.

The Appellant has contended that the order of Learned NCLT that the proceedings stood vitiated on the ground that no finding was recorded regarding insufficient service of notice which he raised before Ld. NCLT. Such contention cannot be sustained because there is no denial of the fact that all addresses detailed in Form B and the recall letter were those of the Appellant. It is also not the case of the Appellant that notices were not sent to all such addresses. Furthermore, once the copy of the section 95 application was admittedly received by him at the Mylapore address, it must be deemed that Form B demand notice was also served upon him at the said address and at the other addresses mentioned therein, thereby giving him due knowledge of the proceedings.

Further, there are several reasons for which the said argument advanced by the Learned Counsel for the Appellant cannot be accepted, namely:

The Appellant has attempted to challenge the proceedings on the plea of non-service of notice because it was served on the Ashok Nagar address, where he was no longer residing. However, we cannot be oblivious to the fact that when the Appellant executed the Guarantee Agreement, he himself had furnished his address as Ashok Nagar and it was his responsibility to intimate the bank of the change of address, if any correspondence thereafter. It has never been the case of the Appellant that he had intimated the Financial Creditor of such change to demonstrate his bonafides. Consequently, the Appellant cannot take advantage of his own wrong by not intimating the changes of address and thereafter, when proceedings under Section 95 of the I&B Code are initiated, raise a defence that he was not served with notices due to change of residence. Further, as per the provisions of the Code, the demand notice has to be served prior to filing of the application under section 95 of the code and the application has to contain the copy of such notice of demand. The intention of the legislature is that the personal guarantor is made aware of the proceedings to be initiated by the financial creditor prior to the actual filing of the application and that 14 days’ time is given to the personal guarantor to take appropriate steps that is, either to make arrangements to pay the demanded amount or to deny the same by arranging documents to prove that he is not obliged to make the payment. In the instant case, the Form- B demand notice was first served on the Appellant and thereafter, the copy of application filed under section 95 was also served on him which contained copy of such demand notice. The appellant has denied receipt of the demand notice, but he has not denied the receipt of the copy of the application, which means that he has received the copy of demand notice contained therein. This fact has also been stressed by the Respondent herein who made the same statement before Ld. NCLT.

Hence, the plea of non-service of notice cannot be accepted. As a consequence, the impugned order passed by the Learned Tribunal under Section 95 of the I&B Code, admitting the application and resulting in initiation of the personal insolvency process, is held to be not vitiated. There are some more points regarding the conduct of the Appellant which needs to be highlighted. The instant Company Appeal was preferred by the Appellant against the impugned order by filing the same on 11.01.2025. Despite intimation of defects by the Registry of the Tribunal as early as 29.01.2025, the defects were not rectified. Consequently, the Company Appeal was taken up by this Tribunal, and the Tribunal was constrained to pass an order on 03.09.2025 granting seven days’ time to the Appellant to rectify the defects. It was only thereafter, upon rectification by the Appellant, that the Company Appeal was listed afresh on 23.10.2025. The Appellant cannot derive any advantage from his own dereliction in instituting the Company Appeal by e-filing it on 11.01.2025 and thereafter allowing it to remain pending for an indefinite period almost nine months without rectifying the defects pointed out by the Registry. The defects were rectified only pursuant to the order passed by this Tribunal on 03.09.2025. This Tribunal could not have ignored the said modus operandi, which was apparently adopted by the Appellant for the purpose of delaying rectification of defects.

Learned Counsel for the Respondent placed before this Appellate Tribunal further developments in the said company petition CP/IB/238/CHE/2021 and an order passed by the Learned Tribunal in IA/IBC/904/CHE/2025 dated 12.06.2025. The application had been preferred by the Resolution Professional seeking to bring on record the fact of non-submission of the repayment plan by the Personal Guarantor despite due intimation, and the consequential impact on other connected reliefs.

Ld. Tribunal disposed of the said application by the order dated 12.06.2025 with following observations:

In view of the above, it is quite apparent that the Appellant did participate in the Personal Insolvency proceedings, but choose not to disclose the same in the instant appeal papers filed by them.

The date 12.06.2025, on which the said order was passed, assumes significance. It must be borne in mind that the Company Appeal was filed on 11.01.2025, and the Appellant consciously allowed the Appeal to remain defective for nine months until the order dated 03.09.2025 was passed by this Tribunal. This was done despite the Appellant being fully aware that the Resolution Professional’s application in IA/IBC/904/CHE/2025 was under consideration in the Company Petition, wherein the Appellant was required to submit a revised repayment plan—an obligation admittedly not discharged. Only after the opportunity to submit the repayment plan was closed by the order dated 12.06.2025 did the Appellant proceed to rectify the defects, and that too only after the order of this Tribunal dated 03.09.2025.

This conduct adopted by the Appellant (i) filing the Appeal on 11.01.2025; (ii) non-submission of the revised repayment plan; (iii) closure of the opportunity to submit the revised repayment plan by order dated 12.06.2025; and (iv) rectification of defects only after the order dated 03.09.2025, clearly demonstrates mala fides on the part of the Appellant. The Appellant evidently sought to gain time and delay the proceedings under Section 95 of the I&B Code. What is even more concerning is that despite being fully conscious of the proceedings in IA/IBC/904/CHE/2025 and the order passed therein on 12.06.2025—wherein it was recorded that the Appellant was required to submit a revised repayment plan, which he chose not to submit, resulting in closure of the personal insolvency process and initiation of bankruptcy proceedings the Appellant failed to disclose these facts. The pendency of IA/IBC/904/CHE/2025 and the passing of the order dated 12.06.2025, which occurred after filing of the Company Appeal but before the order dated 03.09.2025 and prior to arguments in the Appeal, were neither pleaded nor disclosed, even when the Appellant was permitted to rectify defects by the order dated 03.09.2025.

The Appellant had sufficient opportunity from 12.06.2025 to 03.09.2025 to place these facts on record. However, these material facts were concealed, neither pleaded nor argued, until they were pointed out by Learned Counsel for the Respondent. This conduct, by itself, warrants imposition of costs.

Since, the Appellant has not approached this Tribunal with clean hands, and has attempted to mislead the Tribunal by concealment of vital facts, such as closure of his opportunity to submit the repayment plan and liberty granted to the financial creditor to initiate the bankruptcy proceeding against him. Considering the fact that the order dated 12.06.2025 has not been put to challenge, challenge to Section 95 of I&B Code vide the instant Appeal, at this stage, would be an act in futility. Thus, the Company Appeal is dismissed with a cost of Rs. 5 Lakhs, to be deposited by the Appellant in the Prime Minister's Relief Fund, within a period of 1 week from the date of uploading of the order. All Interlocutory Applications would stand closed.