2026 (3) TMI 255 - AT - IBC

Service Validity through supplied contacts and substituted publication upheld, guarantee invocation evidenced by recovery certificate sustained.

The Tribunal held that service was valid where creditor and resolution professional relied on addresses and contact details supplied by the guarantor, ... Invocation of guarantee and maintainability of section 95 petition - unaware of the proceedings before the adjudicating authority because he was not served any of the notices - duty to update registered office details - service by substituted means (email, speed post, publication and electronic messaging) - publication in newspapers as substituted service - assignee steps into shoes of assignor on assignment of debt - deliberate non-participation and abuse of process as ground for costs. Valid invocation of guarantee and maintainability of section 95 petition - Whether the petition under Section 95 was maintainable on the ground that the guarantee had been invoked and demand made and was not barred by limitation - HELD THAT: - The Tribunal found that the financial creditor had produced a Recovery Certificate dated 23.01.2019 and subsequent demand notices (including notices dated 28.07.2021 and 29.03.2022) which together constituted valid demand and invocation of the guarantee. On this basis the petition under Section 95 was held maintainable. The plea of limitation was rejected since the Recovery Certificate and subsequent demand notices established a live cause of action and the guarantee invocation precondition was satisfied. [Paras 7, 30, 46, 47, 63] The guarantee was validly invoked by demand and recovery certificate and the Section 95 petition was maintainable; the plea of limitation is untenable. Service by substituted means (email, speed post, publication and electronic messaging) - Whether service on the personal guarantor was effected by permissible modes and whether non appearance justified ex parte admission - HELD THAT: - The Tribunal examined the steps taken by the Resolution Professional: emails sent to the address in the petition/MCA records, speed post (which returned), substituted service by publication in two newspapers, and direct electronic contact including WhatsApp and telephone calls. The RP also filed an affidavit of service which was taken on record. The record included an acknowledged WhatsApp message from the appellant. On cumulative appraisal the Tribunal concluded that service had been effected by multiple permissible modes and that the appellant, despite being aware, deliberately abstained from participation; the Adjudicating Authority therefore rightly proceeded ex parte and admitted the petition. [Paras 51, 52, 54, 63] Service was duly affected through available modes and the appellant, being aware, chose not to participate; ex parte proceedings and admission were justified. Assignee steps into shoes of assignor on assignment of debt - Whether assignment of the debt to Omkara ARC during pendency vitiated the proceedings or deprived the creditor of locus - HELD THAT: - The Tribunal noted that the assignment occurred after the matter had been reserved by the Adjudicating Authority. Relying on the principle that an assignee under SARFAESI steps into the shoes of the assignor, the Tribunal held that the assignment did not vitiate the proceedings and did not oust the maintainability of the petition. The appellant's contention that SASF lacked locus was therefore rejected. [Paras 13, 26, 35, 55, 63] The assignment did not vitiate the Section 95 proceedings; rights pass to the assignee and the assignment after reservation did not affect maintainability. Deliberate non-participation and abuse of process as ground for costs - Whether the appellant's conduct in not participating and pursuing parallel remedies warranted denial of relief and imposition of costs - HELD THAT: - The Tribunal found overwhelming material that the appellant knew of the proceedings (including acknowledged WhatsApp communication and later cooperation after the admission order) yet deliberately refrained from participating and pursued parallel remedies (recall before NCLT and the present appeal). The conduct was characterised as deliberate avoidance and forum shopping intended to delay the insolvency process. Having regard to these findings, the Tribunal concluded that the appellant was not entitled to relief and that exemplary costs were warranted. [Paras 54, 58, 61, 62, 63] The appellant's deliberate non-participation and forum shopping disentitle him to relief and justify imposition of exemplary costs. Final Conclusion: On cumulative appraisal the appeal is dismissed: the guarantee was validly invoked and the Section 95 petition was maintainable; service was effected by multiple permissible modes and the appellant knowingly abstained from participation; the post reservation assignment did not vitiate the proceedings; the appellant's conduct warranted dismissal and imposition of exemplary costs. Issues: (i) Whether the admission of the Section 95 petition was valid in light of the service of notices and report under Section 99 (service, substituted service and ex parte proceedings); (ii) Whether the petition was maintainable on grounds of invocation of guarantee, demand notices and limitation; (iii) Whether assignment of the debt to an assignee during pendency vitiated the proceedings.Issue (i): Validity of service and ex parte admission.Analysis: The Tribunal examined the material on record showing attempts at service by email and speed post to addresses and contact details provided in the creditor's pleadings, telephonic and WhatsApp communications between the Resolution Professional and the appellant (with an acknowledged WhatsApp message), publication of notice in two newspapers as substituted service under applicable rules, and filing of an affidavit of service which was taken on record by the Adjudicating Authority. The Tribunal also considered the appellant's obligation to keep creditors and statutory records updated and the evidence that the contact details used matched those supplied by the appellant in pleadings.Conclusion: Service, including substituted service by publication and electronic/telephonic communications, was valid and the Adjudicating Authority was justified in proceeding ex parte when the appellant did not participate.Issue (ii): Invocation of guarantee, demand notices and limitation.Analysis: The Tribunal reviewed the recovery certificate, demand notices dated 28.07.2021 and 29.03.2022, registration of the debt with an information utility, and the terms of the guarantee. It noted the recovery certificate and demand notices constituted valid steps evidencing invocation/demand and that the claim was not barred by limitation in view of the recovery certificate and subsequent notices.Conclusion: The guarantee had been validly invoked/demanded and the petition under Section 95 was maintainable; the limitation plea was untenable.Issue (iii): Effect of assignment of debt during pendency.Analysis: The Tribunal considered the timing of the assignment (after the matter was reserved) and the legal effect of assignment under the SARFAESI Act. It noted that under Section 5(3) of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 the assignee steps into the shoes of the assignor and acquires rights qua the debt; the assignment did not invalidate steps already taken in the pending proceeding.Conclusion: The assignment did not vitiate the proceedings and did not render the petition incompetent.Final Conclusion: On cumulative appraisal the Appellant was a liable personal guarantor, the statutory and substituted modes of service were properly employed and recorded, invocation and demand were made and the proceedings were maintainable; the appeal challenging admission is without merit and is dismissed with costs.Ratio Decidendi: Where a creditor and resolution professional effect service using addresses and contact details supplied by the debtor/guarantor, supplement service by required substituted modes (publication) when ordinary service fails, and demonstrate invocation/demand by recovery certificate and demand notices, the Adjudicating Authority's admission under Section 95 is sustainable and an assignee stepping into the creditor's rights does not vitiate such pending proceedings.