2026 (1) TMI 1402 - AT - IBC

Invocation of personal guarantee: guarantee-enforcement petition held maintainable and interim moratorium effective from filing, remitted for fresh orders.

Invocation of a personal guarantee by reliance on a legal notice was held sufficient to render a guarantee-enforcement application maintainable; the ... Invocation of personal guarantee - maintainability of application u/s 95 - interim-moratorium u/s 96 - completion of Section 95 application and documentary requirements - jurisdiction of the Adjudicating Authority and power to pass orders u/s 100 - HELD THAT:- In the present case the Financial Creditor has relied on the legal notice dated 07.12.2024 and the Adjudicating Authority did not advert to the said legal notice and has held the Section 95 application as non-maintainable on the ground that demand notice cannot be said to be notice for invocation. We thus are of the view that the very basis of the order of the Adjudicating Authority rejecting section 95 application is unfounded. Section 96 contemplates commencement of interim moratorium on filing of application under Section 94 or 95. We, thus, are not persuaded to accept the submission of learned counsel appearing for the Auction Purchaser that application filed by the Financial Creditor was defective and interim moratorium will not commence from filing of the application. In Arvind Dham’s case [2024 (4) TMI 1146 - NATIONAL COMPANY LAW APPELLATE TRIBUNAL, PRINCIPAL BENCH, NEW DELHI - LB] appeal was filed by the Personal Guarantor against order dated 28.02.2024 by which Section 95(1) application filed by the State Bank of India was admitted under Section 100. In the above judgment, this Tribunal has held that when application under Section 95 was filed before the Adjudicating Authority it has no jurisdiction to entertain the application, therefore, interim moratorium shall not commence. The finding of non-maintainability was set aside; the guarantee was held invoked by the legal notice dated 07.12.2020, the Section 95 petition was not defective for want of Income-Tax returns, and interim moratorium under Section 96 therefore operated from the date of filing. The Appellate Tribunal allowed the appeal of the Financial Creditor, set aside the Adjudicating Authority's order dismissing the Section 95 petition, revived the company petition and related interlocutory applications, and directed the Adjudicating Authority to pass fresh orders under Section 100 expeditiously. Issues: (i) Whether the personal guarantee was validly invoked prior to filing the Section 95 application; (ii) Whether the Section 95 petition was complete and maintainable.Issue (i): Whether the personal guarantee was validly invoked prior to filing the Section 95 application.Analysis: The guarantee deed required a written demand/communication to the guarantor for invocation. The Section 95 application included a legal notice dated 07.12.2020 and a subsequent demand notice under Rule 7 dated 14.12.2020. The earlier legal notice addressed the guarantor, recalled the outstanding amount and demanded payment, and therefore constituted written communication of demand as contemplated by the guarantee deed. Prior precedent holding that a Form-B/Rule-7 demand alone cannot constitute invocation is distinguishable where a prior written notice exists.Conclusion: The guarantee was invoked prior to filing the Section 95 application. Conclusion in favour of Appellant.Issue (ii): Whether the Section 95 petition was complete and maintainable.Analysis: The Form C application requirements were examined. Item entries for annual income do not mandate filing Income Tax Returns; absence of Income Tax Returns therefore does not render the application defective. Given that the guarantee had been invoked by the 07.12.2020 legal notice and the Resolution Professional had filed a Section 99 report recommending admission, the petition met maintainability requirements and the interim moratorium under Section 96 had commenced on filing.Conclusion: The Section 95 petition was complete and maintainable. Conclusion in favour of Appellant.Final Conclusion: The Adjudicating Authority's order rejecting the Section 95 petition as non-maintainable is set aside; the underlying company petition and related applications are revived for fresh consideration by the Adjudicating Authority under Section 100.Ratio Decidendi: A guarantor's liability is invoked where the creditor issues a written communication that, under the terms of the guarantee deed, demands payment; such written notice suffices for invocation even if a subsequent Rule-7/Form-B demand is also issued.