2022 (3) TMI 796 - Tri - Insolvency and Bankruptcy

Tribunal grants Union Bank's application under IBC Section 95, validates demand notice, appoints Resolution Professional

The Tribunal allowed the application filed by Union Bank of India under Section 95 of the IBC against the Personal Guarantor. It confirmed the validity of ... Service of Form B demand notice under Personal Guarantor Rules - Statutory mode of service versus personal service - Service by registered post/speed post/courier or affixing at residence - Prerequisite of valid service for maintainability of application under Section 95 - Interim moratorium on debts upon filing under Section 95 - Appointment and duties of Resolution Professional under the CodeService of Form B demand notice under Personal Guarantor Rules - Statutory mode of service versus personal service - Service by registered post/speed post/courier or affixing at residence - Prerequisite of valid service for maintainability of application under Section 95 - Form B demand notice was validly served on the personal guarantor and the application under Section 95 is maintainable. - HELD THAT: - The Bench examined Rule 7 read with Rule 3(h) of the Personal Guarantor Rules and Rule 38 of the NCLT Rules and concluded that service contemplated by the statute includes sending communication by registered post/speed post/courier or electronic means and, where service cannot be effected by those modes, affixing at a conspicuous part of the residence. The Petitioner filed an affidavit of service showing delivery at the guarantor's residential address and receipt by his son. The Bench distinguished the procedure for service of summons on an incarcerated defendant under Order 5 Rule 24 CPC and held that the Code prescribes statutory modes of service for Form B and does not mandate personal service. Reliance was placed on precedents interpreting the need to follow the specific statutory mode of service and on authority holding that the copy of the application and demand notice must be served in the prescribed manner before filing; on the facts the Form B notice was validly served and the objection on service was rejected. [Paras 19, 21, 25]Service of the Form B demand notice was held valid; the petition under Section 95 is maintainable.Interim moratorium on debts upon filing under Section 95 - Interim moratorium under Section 96(1) commences from the date of filing of the application. - HELD THAT: - The Bench applied the Code to hold that, upon admission of the application filed under Section 95, interim moratorium as provided by Section 96(1) attaches to all debts of the personal guarantor, staying pending legal actions and restraining creditors from initiating proceedings, subject to exceptions notified by the Central Government in consultation with regulators. [Paras 27]Interim moratorium commences from the date of filing the application.Appointment and duties of Resolution Professional under the Code - The Resolution Professional appointed by the Applicant is confirmed and directed to perform duties under the Code, including filing recommendations under Section 99. - HELD THAT: - The Bench noted the criticality of appointing a Resolution Professional to safeguard the guarantor's assets and confirmed the appointment of the Resolution Professional named in the petition. The Resolution Professional is directed to exercise the powers under Section 99 and the rules thereunder and to submit written recommendations, with reasons, accepting or rejecting the application within the statutory time; a copy of the report is to be provided to the creditor when filed before the Authority. [Paras 28, 29]Appointment of the named Resolution Professional confirmed; he shall exercise powers under the Code and submit the report as directed.Final Conclusion: The Tribunal allowed the Section 95 application: the Form B demand notice was held validly served and the petition is maintainable; interim moratorium under Section 96(1) operates from filing; the named Resolution Professional is confirmed and directed to act and file recommendations; matter listed for further hearing. Issues Involved:1. Validity of service of Form B demand notice.2. Compliance with statutory requirements for serving notice.3. Objection by the Respondent regarding non-receipt of demand notice.4. Commencement of Interim Moratorium.5. Appointment and role of Resolution Professional.Detailed Analysis:1. Validity of Service of Form B Demand Notice:The primary issue was whether the Form B demand notice was duly served upon the respondent as per the provisions of the Insolvency & Bankruptcy Code (IBC). The Petitioner claimed to have served the notice at the respondent's residential address, and it was received by the respondent's son. The Tribunal held that this constituted valid service under Rule 3(h) of the Personal Guarantor Rules, which allows for service by post, speed post, courier, or electronic form, and if these methods fail, by affixing the notice to the outer door of the residence.2. Compliance with Statutory Requirements for Serving Notice:The Respondent argued that since he was in judicial custody, the notice should have been served as per Order 5 Rule 24 of the Civil Procedure Code (CPC), which requires delivery to the officer in charge of the prison. The Tribunal distinguished between the issuance of a demand notice and the service of summons, concluding that the service of Form B notice was in compliance with Rule 7 and Rule 3(h) of the Personal Guarantor Rules.3. Objection by the Respondent Regarding Non-Receipt of Demand Notice:The Respondent contended that the demand notice was not served as mandated by the Code, and thus the petition should be dismissed. The Tribunal referred to precedent cases, including the Supreme Court's judgment in Pepsu Road Transport Corporation vs. Amandeep Singh, which held that personal service is not necessary unless explicitly required by regulation. The Tribunal found that the service of the notice at the respondent's residential address was sufficient and dismissed the respondent's objections.4. Commencement of Interim Moratorium:The Tribunal noted that from the date of filing the application, an interim moratorium commenced as per Section 96(1) of the IBC. This interim moratorium stays any pending legal actions or proceedings regarding debts and prevents creditors from initiating new legal actions.5. Appointment and Role of Resolution Professional:The Tribunal confirmed the appointment of Mr. Santanu T. Ray as the Resolution Professional, emphasizing the importance of safeguarding the assets of the Personal Guarantor. The Resolution Professional is tasked with making recommendations for the acceptance or rejection of the application within the stipulated time under Section 99 of the IBC. The Tribunal directed the Resolution Professional to provide a copy of the report to the creditor once filed.Conclusion:The Tribunal allowed the application filed by the Union Bank of India under Section 95 of the IBC against the Personal Guarantor, confirming the validity of the service of Form B demand notice and initiating the interim moratorium. The appointment of the Resolution Professional was also confirmed, with directions to proceed as per the provisions of the IBC. The matter was listed for further hearing on 01.03.2022.