2026 (4) TMI 76 - AT - IBC

Deemed service under a guarantee deed and an operative decree can sustain personal guarantor insolvency proceedings despite denial of receipt.

A guarantee deed providing deemed service on dispatch to the guarantor's address supported valid notice service where the record showed dispatch to the ... Maintainability of proceedings under Section 95 - Invocation of personal guarantee - Deemed service - Validity of the service of demand notice and subsequent notices on the personal guarantor - joint and several liability - absence of a further opportunity to object to the resolution professional's report - Compliance with insolvency process for personal guarantors. Invocation of personal guarantee - Debt crystallised by DRT decree - HELD THAT: - The Appellate Tribunal held that the earlier proceedings before the DRT had been initiated against both the corporate debtor and the personal guarantors after issuance of demand notice, and a joint and several decree had been passed against them. In the absence of any material showing that the decree had been set aside or had ceased to operate, the liability of the personal guarantors stood established and it was not open to them to contend that the guarantee had not been invoked. [Paras 10, 11] The existence of the operative DRT decree conclusively established invocation of the guarantee and the debt due from the personal guarantors. Deemed service of demand notice - Construction of guarantee deed with statutory rules - HELD THAT: - Relying on clause 20 of the guarantee deed, the Appellate Tribunal held that dispatch of notice by registered post or certificate of posting to the guarantor's stated address or other address intimated to the bank constituted deemed service. Even assuming that the person who received the notice at the Masab Tank address was not connected with the appellant, dispatch to that address satisfied the contractual requirement. Rule 3 of the Personal Guarantors Rules, 2019 was read in conjunction with clause 20, and on that basis no violation of the Rule was found. [Paras 12, 13] Service of the creditor's demand notice at the Masab Tank address was treated as valid deemed service and did not vitiate the proceedings. Service of notice by resolution professional - Subsequent production of service material - HELD THAT: - The Appellate Tribunal found that the Resolution Professional's letter itself showed dispatch to the Masab Tank address and that the postal tracking report had to be read with that letter. It therefore accepted that the notice had been sent and served at the correct address. The later production of material relating to service at the Amba Gardens address was held immaterial, since effective service at one address, namely Masab Tank, was sufficient and the proceedings could not be invalidated on that account. [Paras 14, 15, 16, 17] The insolvency proceedings were upheld, subject to the observation that the appellant must be given opportunity to submit a repayment plan in accordance with law. Final Conclusion: Both appeals were dismissed. The Appellate Tribunal upheld admission of the Section 95 application against the personal guarantors, while observing that the Resolution Professional must afford opportunity to submit a repayment plan in accordance with the Code and the applicable Rules. Issues: (i) Whether the personal guaranty stood invoked so as to sustain the proceedings under Section 95 of the Insolvency and Bankruptcy Code, 2016. (ii) Whether service of the demand notice and the notice issued by the Resolution Professional was valid and in compliance with the applicable rules and the guarantee deed.Issue (i): Whether the personal guaranty stood invoked so as to sustain the proceedings under Section 95 of the Insolvency and Bankruptcy Code, 2016.Analysis: The debt against the personal guarantors had already been the subject of proceedings before the Debt Recovery Tribunal, which culminated in a decree holding the defendants jointly and severally liable and permitting recovery against the person and properties of the guarantors. The decree remained operative and had not been shown to have been set aside. In these circumstances, the contention that the personal guarantee was never invoked could not be accepted.Conclusion: The objection failed and was decided against the appellants.Issue (ii): Whether service of the demand notice and the notice issued by the Resolution Professional was valid and in compliance with the applicable rules and the guarantee deed.Analysis: The guarantee deed contained a deeming clause that treated dispatch of notice by registered post or certificate of posting to the guarantor's address, or any other address intimated to the bank, as sufficient service. The record showed dispatch to the Masab Tank address, which was treated as the correct address in the earlier decree, and the postal tracking report was read with the notice itself. On that basis, service was held to be complete. The subsequent filing of material relating to the alternate address did not vitiate the proceedings, and no non-compliance with the service requirements was found. The Resolution Professional's notice under Section 99(2) was also treated as duly dispatched and served.Conclusion: The objection to service was rejected and held to be without merit.Final Conclusion: The appellate challenge to the admission of the personal guarantor insolvency application failed, while the Resolution Professional was expected to afford the appellants an opportunity to place a repayment plan in accordance with law.Ratio Decidendi: Where a guarantee deed provides for deemed service on dispatch to the guarantor's address, and the record shows dispatch to the correct address supported by the decree and postal record, service cannot be defeated by disputing actual receipt; an operative decree fixing liability against the personal guarantor also defeats the plea that the guarantee was never invoked.