Personal guarantee invocation and Section 95 maintainability: prior legal notice and missing income-tax returns did not defeat the insolvency application.
A personal guarantee requiring written demand was validly invoked by an earlier legal notice addressed to both the corporate debtor and the guarantor, even though a later Rule 7 notice was also issued. That pre-application notice satisfied the contractual mode of invocation, so the objection to a Section 95 application for want of invocation failed. The omission to file the personal guarantor's income-tax returns did not by itself make the application incomplete or non-maintainable, because the prescribed form required disclosure of annual income only to the extent known and did not mandate filing of returns. The impugned rejection was set aside and the petition was revived for fresh consideration under the insolvency framework.
Issues: (i) Whether the personal guarantee had been validly invoked before filing the Section 95 application. (ii) Whether the Section 95 application was incomplete or non-maintainable for want of invocation of guarantee and for non-filing of the personal guarantor's income-tax returns.
Issue (i): Whether the personal guarantee had been validly invoked before filing the Section 95 application.
Analysis: The guarantee deed contemplated a written demand by the lender to the guarantor for payment of the lessee's dues. The record showed a legal notice dated 07.12.2020 addressed to both the corporate debtor and the personal guarantor, recalling the outstanding amount and demanding payment from the guarantor as well. That notice preceded the Rule 7 notice dated 14.12.2020. The reasoning that only the Rule 7 notice could be considered was incomplete because it did not examine the earlier legal notice, which satisfied the contractual mode of invocation.
Conclusion: The guarantee was validly invoked before the Section 95 application was filed.
Issue (ii): Whether the Section 95 application was incomplete or non-maintainable for want of invocation of guarantee and for non-filing of the personal guarantor's income-tax returns.
Analysis: Once the legal notice of 07.12.2020 was treated as the invocation notice, the foundational objection to maintainability failed. The absence of income-tax returns did not render the application defective because the prescribed form required disclosure of annual income to the extent known, and not compulsory filing of returns. The interim moratorium under Section 96 commences on filing of a valid Section 95 application, and the objection that no moratorium arose therefore could not stand.
Conclusion: The Section 95 application was maintainable and not defective on the grounds accepted by the Adjudicating Authority.
Final Conclusion: The impugned order rejecting the Section 95 petition could not be sustained. The petition and connected applications stood revived for fresh consideration under the insolvency framework.
Ratio Decidendi: Where the guarantee deed requires a written demand, a pre-Rule 7 legal notice expressly demanding payment from the personal guarantor can validly invoke the guarantee, and the omission to annex income-tax returns does not by itself make a Section 95 application non-maintainable unless the prescribed form or the statute makes such filing mandatory.
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