Shri Chand Narain Kuchroo vs State Bank Of India & Anr.

Ashok Bhushan, J.

This Appeal by a Personal Guarantor of the Corporate Debtor (“CD”) – M/s K K Milk Fresh India Ltd. has been filed challenging the order dated 04.06.2024 passed by National Company Law Tribunal (“NCLT”), Allahabad Bench, Prayagraj admitting Section 95 application filed by the State Bank of India (“SBI”). Aggrieved by the order initiating Personal Insolvency Resolution Process (“PIRP”) against the Appellant, this Appeal has been filed.

Brief facts of the case necessary to be noticed for deciding the Appeal are:

The Adjudicating Authority delivered the order on 04.062024 admitting Section 95 application. Aggrieved by which order, this Appeal has been filed

Notice was issued in this Appeal on 29.10.2024. Learned Counsel for the SBI as well as learned Counsel for the RP, have filed their replies. The RP has also filed an additional affidavit dated 23.09.2024 to bring on record additional documents. Reply has been filed by the RP dated 31.01.2025. Learned Counsel for the Appellant took time to file rejoinder affidavit, however, no rejoinder was filed and on 08.04.2025, the Appellant made a statement that he does not purpose to file a rejoinder affidavit. Appeal was heard on 13.05.2025.

We have heard Shri Arjun Sanjay, learned Counsel appearing for the Appellant; Shri Ankur Mittal, learned Counsel appearing for the SBI; and Shri Abhishek Anand, learned Counsel appearing for the RP.

Learned Counsel for the Appellant in support of the Appeal submits that notice invoking the guarantee dated 10.10.2017 was never served on the Appellant. It is submitted that along with notice dated 10.10.2017, neither postal receipt nor the service report has been annexed. No proof of delivery of notice to the Appellant has been brought on the record along with Section 95 Application. The Appellant in his written submissions has raised the issue that failure to place any document reflecting invocation of guarantee issued by the Financial Creditor is a material irregularity. No document has been placed on record to prove service of notice under Section 13, sub-section (2). It is submitted that Adjudicating Authority has failed to deal with the said contention. It is submitted that Bank was allowed to bring proof of service of notice, but the Bank has placed notice dated 01.09.2017 for invocation of guarantee, which was neither averred in Section 95 Application, nor was the case of the Bank. Had the notice dated 10.10.2017 was served, proof of service of notice dated 10.10.2017, ought to have been brought on record. The Bank has not even annexed, postal receipt of notice dated 01.09.2017. Although in the additional affidavit, publication in both Hindi and English newspapers has been claimed, however, only Hindi version has been placed on record, but no publication in the English newspaper has been placed. Ther is also no service of Rule 7(1) Demand Notice.

Learned Counsel for the Respondent – Bank refuting the submissions of learned Counsel for the Appellant, submits that Appellant despite opportunity did not appear before the Adjudicating Authority, nor filed any reply, raising any issue, including the issue of non-service of notice invoking the guarantee or Demand Notice. Only two contentions were raised in the oral submissions made by the Personal Guarantor, i.e., application is barred by limitation and notice has not been issued by Security Trustee. Even no argument was raised with regard to non-service of either, notice invoking the guarantee or Demand Notice. The Appellant as an afterthought is trying to raise the issue of non-service of Demand Notice, which is wholly incorrect. Notice invoking the guarantee under Section 13, sub-section (2) was issued to the CD and the Personal Guarantors, which notice has been brought on the record and which was duly delivered on 11.09.2017 by Speed Post at Aligarh address as well as at Gurgaon address. It is submitted that Demand Notice dated 10.10.2017 was also issued, postal receipt of which is also attached in the reply. When the Appellant failed to make requisite payment, the SBI issued Demand Notice in Form-B under Rule 7(1) dated 28.10.2020, which was served by Speed Post on 09.11.2020, which proof has also been brought on record. It is submitted that under the Guarantee Agreement between the parties, the SBICAP was only Agent of the Lenders and Lenders had full authority and jurisdiction to invoke guarantee and initiate proceedings.

Learned Counsel appearing for the RP submits that the Appellant never raised any issue with regard to the non-service of notice invoking the guarantee or Demand Notice under Form-B. It is submitted that several dates were fixed before the Adjudicating Authority and despite repeated opportunities granted to the Appellant, no reply was filed and lastly right to reply was struck off by the Adjudicating Authority. Even during hearing before the Adjudicating Authority, the Counsel for the Appellant never raised any issue regarding non-service of notice and in the Appeal, for the first time non-service of notice is raised as an afterthought with an intent to delay the proceedings. It is submitted that against other Personal Guarantors of the CD, Section 95 application has already been admitted. It is submitted that additional documents have been brought on record by the RP along with additional affidavit dated 23.09.2024, bringing on record the relevant materials to prove the service of notice, including the notice dated 01.09.2017 and proof of service, which need to be accepted on record for deciding the Appeal.

We have considered the submissions of learned Counsel for the parties and have perused the records.

Only issue which is sought to be raised by the Appellant in the Appeal is that notice invoking the personal guarantee has not been served and no proof of service of notice dated 10.10.2017 was brought on record by the SBI along with Section 95 application, which submission has been refuted by both, the SBI as well as RP stating that despite opportunity, the Appellant did not file any reply, objecting to the service of notices before the Adjudicating Authority and only two issues regarding limitation and issuance of notice by Lenders had been raised, which were noticed by the Adjudicating Authority. Notice invoking guarantee and demand notice were duly served on the Personal Guarantor, proof of which have been brought on record in this Appeal. 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, which have been brought on record along with the reply of RP. The RP was appointed by the Adjudicating Authority by order dated 07.09.2022. Notice was issued to the Personal Guarantor by order dated 28.11.2023. On 21.12.2023, learned Counsel for the Personal Guarantor appeared, on which date the Adjudicating Authority passed following order:

Again on 16.01.2024, Counsel for the Personal Guarantor prayed for time. The Adjudicating Authority on 16.01.2024 passed the following order:

The matter was again taken up on 01.03.2024, where Court noticed that inspite of several opportunities, no reply has been filed by the Personal Guarantor. Learned Counsel for the Personal Guarantor made further request for opportunity, which was allowed subject to payment of costs of Rs.25,000/-. Paragraph 2, 3 and 4 of the order are as follows:

Again on 17.04.2024, Court noticed that no reply has been filed by the Personal Guarantor and right to file reply was struck off. Order dated 17.04.2024 is as follows:

The most relevant proceeding of the Adjudicating Authority held on 08.05.2024, where parties appeared and Court noticed that right to file reply has been struck off. However, Court granted opportunity to the Personal Guarantor of hearing and to make oral submissions. Paragraph 6 of the order notices the submissions made by learned Counsel for the Personal Guarantor opposing Section 95 application. Paragraphs 5 and 6 of the order dated 08.05.2024 are as follows:

When we look into the above arguments of the Personal Guarantor, noticed by the Court, only two submissions were raised, i.e. limitation and notice having been issued by SBI instead of Security Trustee. In the Appeal as noted above, learned Counsel for the Appellant has confined his submissions only to non-service of notice invoking the bank guarantee as well as Demand Notice. Both, SBI and RP have brough on record the relevant materials to prove service of notice on the Personal Guarantor. Copy of the notice dated 01.9.2017 has been brought on the record in the reply filed by the SBI at pages 271-280. The said notice is delivered on the Appellant on 11.09.2017 vide Speed Post at Aligarh address and at Gurgaon address. At page 283 of the reply of the SBI, Postal Tracking Report has been brought on the record. Page 281 is the details of Speed Post sent to the CD and Personal Guarantors, which indicate that vide Postal Receipt No. ED450797725IN notice was sent to the Appellant at Gurgaon address and by another Receipt No. ED450797711IN notice was sent to the Appellant at Aligarh address. Tracking Report of both the above receipts have been brough on the record, which indicate that at Gurgaon address item was delivered on 08.09.2017, whereas at Aligarh address, it was delivered on 11.09.2017. From pages 281 to 286 details of the Postal Receipts and the Postal Tracking Reports have been brought on the record, which clearly proves the service of notice.

Learned Counsel for the Appellant has submitted that in the application, the SBI has claimed Demand Notice dated 10.10.2017 and proof of service of which notice has not been brought on record. In the reply, notice dated 10.10.2017 sent to the Appellant has also been brough on record along with Postal Receipt, showing sending of notice to all.

As noted above, the RP along with the additional affidavit has brough on the record relevant materials to prove service of notice, invoking bank guarantee. Reply was also filed by the RP, pleading the service of notice invoking bank guarantee. The Appellant, although took time to file rejoinder affidavit on 18.02.2025 and 20.03.2025, however on 08.04.2025, following statement was made by the Appellant:

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, 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. 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. We, thus, are fully satisfied that notice invoking the bank guarantee was duly served.

We, thus, do not find any 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. Interim order stands vacated. Pending IAs, if any, are also disposed of. There shall be no order as to costs.