Appellate Tribunal Confirms Validity of Demand Notice Service under Insolvency Law

The Appellate Tribunal upheld the decision of the Adjudicating Authority, confirming the validity of the service of the Demand Notice under Section 95 of the Insolvency and Bankruptcy Code, 2016. The Tribunal ruled that the notice was properly served on the Appellant in compliance with the 2019 Rules, rejecting the Appellant's arguments regarding personal service requirements. The Tribunal emphasized adherence to the specific rules governing notice service and directed the Appellant to address any objections during the admission or rejection of the Application as per Section 99 of the Code.

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Issues:
1. Validity of service of Demand Notice under Section 95 of the Insolvency and Bankruptcy Code, 2016.
2. Interpretation of the Insolvency and Bankruptcy (Application to Adjudicating Authority for Insolvency Resolution Process for Personal Guarantors to Corporate Debtors) Rules, 2019.
3. Compliance with the procedural requirements for serving a Demand Notice on a guarantor.
4. Applicability of Order 5 Rule 24 of the Civil Procedure Code to the service of Demand Notice.

Issue 1: Validity of service of Demand Notice under Section 95:
The Appellant challenged the order of the Adjudicating Authority, arguing that the Demand Notice was not validly served on him as required by law. The Respondent Bank contended that the notice was served as per the provisions of the 2019 Rules, and personal service was not mandatory. The Adjudicating Authority held that the Demand Notice was properly served on the Appellant, and the Resolution Professional was directed to submit a report under Section 99 of the Code. The Appellant's plea regarding the service of the notice was dismissed, and the Adjudicating Authority's decision was upheld by the Appellate Tribunal.

Issue 2: Interpretation of the 2019 Rules:
The Tribunal analyzed Rule 3(g) of the 2019 Rules, which defines the term "serve" and provides various modes of communication for serving notices. Rule 7 of the 2019 Rules outlines the procedure for serving a Demand Notice on a guarantor. The Tribunal emphasized that the Demand Notice in this case was sent in accordance with Rule 7, and the service was deemed valid under the prescribed rules.

Issue 3: Compliance with procedural requirements for serving a Demand Notice:
The Tribunal examined the specifics of how the Demand Notice was served on the Appellant, noting that it was sent by India Post to the address mentioned in the Deed of Guarantee. The notice was received by an adult family member of the Appellant, as confirmed by an Affidavit of Service filed by the Bank. The Tribunal concluded that the service of the Demand Notice adhered to the procedural requirements set out in the 2019 Rules.

Issue 4: Applicability of Order 5 Rule 24 of the Civil Procedure Code:
The Appellant relied on Order 5 Rule 24 of the Civil Procedure Code to argue that personal service was required, especially since he was in judicial custody at the time. However, the Tribunal clarified that Rule 24 of the Civil Procedure Code pertains to the service of summons and is not directly relevant to the service of a Demand Notice under the 2019 Rules. The Tribunal emphasized that the specific rules governing service of notices must be followed, as was done in this case.

In conclusion, the Appellate Tribunal dismissed the Appeal, upholding the decision of the Adjudicating Authority regarding the validity of the service of the Demand Notice. The Tribunal found no grounds for interference in the order and emphasized that the Appellant could raise objections during the admission or rejection of the Application under Section 95 after receiving the report from the Resolution Professional as per Section 99 of the Code.

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