Prior invocation of personal guarantee is mandatory before insolvency action; Form B notice cannot replace it.

Prior invocation of a personal guarantee is a mandatory precondition for initiating insolvency proceedings against a guarantor under the relevant rules. A demand notice in Form B under Rule 7(1) does not itself amount to invocation of the guarantee, because the statutory scheme and the guarantee deed contemplate prior creditor demand before liability arises. A creditor also cannot rely at appellate stage on a later-produced recall notice that was not pleaded in the Section 95 application, especially where it was disowned before the Adjudicating Authority. The admission order was therefore unsustainable and was set aside, and the application was dismissed.

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Issues: Whether a Section 95 application against a personal guarantor is maintainable without prior invocation of the guarantee, whether a demand notice in Form B under Rule 7(1) itself constitutes invocation of the guarantee, and whether a later-produced recall notice not pleaded in the application can be relied upon.

Analysis: The statutory scheme under Section 95 and Rule 7 of the 2019 Rules requires that the guarantee be invoked before service of the demand notice in Form B. The definition of guarantor in Rule 3(1)(e) also proceeds on the basis that the guarantee has already been invoked and remains unpaid. The Deed of Guarantee itself contemplated demand by the creditor before liability of the guarantor would arise. A demand notice under Rule 7(1) is therefore not a substitute for invocation of the guarantee. Since the Section 95 application relied only on the Form B notice and did not plead any prior invocation notice, the creditor could not introduce the alleged recall notice at the appellate stage, especially after having stated before the Adjudicating Authority that it would not rely upon that document. The later decision reiterating the same legal position was treated as declaring the law applicable to the rule from the outset.

Conclusion: The Section 95 application was not maintainable in the absence of prior invocation of the personal guarantee. The order admitting the application was unsustainable and was set aside; the appeal succeeded and the company petition was dismissed.

Final Conclusion: Prior invocation of the personal guarantee is a mandatory precondition to initiation of insolvency proceedings against a personal guarantor under the relevant rules, and a Form B demand notice cannot by itself perform that function.

Ratio Decidendi: For proceedings against a personal guarantor, the guarantee must be invoked before issuance of the Rule 7 demand notice, and a creditor cannot cure the absence of such invocation by relying on an unpleaded or disowned document at a later stage.

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