2026 (3) TMI 925 - AT - IBC

Presumption of service at furnished address negates non-service defence; concealment warrants dismissal and costs imposed.

Challenge to initiation of a personal insolvency resolution process on grounds of non-service is rejected where demand notice was sent to addresses ... Validity of Initiation of personal insolvency resolution process under Section 95 - Non-service of the demand notice in Form B - Presumption of service of notice - duty to disclose material developments and consequences of concealment. Presumption of service of notice - service requirement for Form B under Section 95 - HELD THAT:- The Tribunal held that the demand notice in Form B was issued to addresses furnished by the guarantor in the guarantee deed and to other addresses available on the bank's records, giving rise to a deeming presumption that the notice was communicated. The guarantor admitted receipt of the Section 95 application in Form C which enclosed the demand notice, and therefore could not credibly contend ignorance of the demand. The appellant's change of residence without intimating the creditor did not absolve him of responsibility to ensure service and could not vitiate the proceedings. On these grounds the contention of non-service was rejected and the admission under Section 95 was held not to be vitiated. [Paras 7, 8, 9, 10, 11] The challenge based on alleged non-service of the Form B demand notice was rejected and the admission under Section 95 was held not to be vitiated. Duty to disclose material developments and consequences of concealment - HELD THAT:- The Tribunal found that the appellant concealed material facts concerning the personal insolvency proceedings, including the closure of the personal insolvency resolution process and liberty granted to creditors to initiate bankruptcy proceedings, which had occurred after filing the appeal but before rectification of defects and arguments. The concealment, together with delay in rectifying registry defects and failure to submit a revised repayment plan, demonstrated mala fides and justified imposition of costs. Because the subsequent order closing the personal insolvency process was not challenged, continuing to contest the Section 95 admission would be futile. [Paras 13, 14, 15, 16, 17] The appellant's concealment and conduct warranted costs and rendered the appeal ineffective in light of subsequent unchallenged developments; costs were imposed and the appeal dismissed. Final Conclusion: The Tribunal dismissed the appeal, holding that the Form B demand notice was duly served or deemed served and that the appellant's concealment of material developments and delay warranted costs; the appeal was dismissed with costs payable to the Prime Minister's Relief Fund. Issues: (i) Whether the initiation of personal insolvency resolution process under Section 95 of the Insolvency and Bankruptcy Code is vitiated for non-service of the demand notice in Form B; (ii) Whether the appellant's concealment of material developments and conduct before the Tribunal warrants dismissal of the appeal and imposition of costs.Issue (i): Whether the initiation of personal insolvency resolution process under Section 95 of the Insolvency and Bankruptcy Code is vitiated for non-service of the demand notice in Form B.Analysis: The demand notice in Form B contained addresses provided by the personal guarantor in the guarantee deed and other addresses reflected in the creditor's records. A presumption of service arises where notice is sent to the address furnished in the guarantee. The personal guarantor admitted receipt of the copy of the Section 95 application in Form C which enclosed the demand notice as an annexure, establishing knowledge of the demand. Repeated changes of address by the personal guarantor and failure to intimate the creditor negate a defence based on non-service. The record shows the demand notice and related communications were sent to addresses on file, and the personal guarantor thereafter participated in proceedings by filing pleadings before the Adjudicating Authority.Conclusion: The contention that the proceedings under Section 95 are vitiated for non-service of the demand notice is rejected. Conclusion adverse to the appellant and in favour of the Respondent.Issue (ii): Whether the appellant's concealment of material developments and conduct before the Tribunal warrants dismissal of the appeal and imposition of costs.Analysis: Material events occurring after filing of the appeal, including the Resolution Professional's application and the Adjudicating Authority's order closing the personal insolvency resolution process with liberty to creditors to initiate bankruptcy proceedings, were not disclosed by the appellant despite opportunity to do so. The appellant delayed rectification of defects in the appeal, failed to submit a revised repayment plan during the personal insolvency process, and did not place relevant orders on record when given time to do so. This nondisclosure and conduct amount to concealment and mala fides, prejudicing the appellate process and rendering the challenge to the admitted order futile.Conclusion: The appeal is dismissed for want of clean hands and futility of challenge; costs are imposed on the appellant. Conclusion adverse to the appellant and in favour of the Respondent.Final Conclusion: The Adjudicating Authority's order admitting the Section 95 application and initiating the personal insolvency resolution process is upheld; the appeal is dismissed and costs are awarded to the respondent, reflecting that the appellant's procedural defaults and concealment render the challenge unsustainable.Ratio Decidendi: Service of a demand notice at the address furnished by a guarantor in the guarantee deed gives rise to a presumption of service, and subsequent receipt by the guarantor of an application under Section 95 containing the demand notice establishes knowledge sufficient to negate a defence of non-service; non-disclosure of material developments and mala fide conduct before the Tribunal justifies dismissal and imposition of costs.