TaxTMI 
TaxTMI 
2025 (4) TMI 455
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....Appeal are:- (i) The Corporate Debtor - LML Ltd. was extended Financial Facilities by State Bank of India ("SBI"). The Respondent - Deepak Kumar Singhania executed a Deed of Guarantee dated 28.03.2005 along with other two Personal Guarantors in favour of SBI and a Multi-Partite Agreement dated 28.03.2005 was executed. The Guarantor undertook to pay to the Lender in event any default is committed by the Borrower upon demand. (ii) The SBI filed application under Section 19 of the Recovery of Debts and Bankruptcy Act 1993 before the Debts Recovery Tribunal, which is pending disposal. With respect to Corporate Debtor an order of liquidation has been passed on 23.03.2018. The SBI issued a Demand Notice under Rule 7 of Insolvency and Bankruptcy (Application to Adjudicating Authority for Insolvency Resolution Process for Personal Guarantors to Corporate Debtors) Rules, 2019 (hereinafter referred to as "2019 Rules") upon the Guarantor - Deepak Kumar Singhania, calling upon the Respondent to make payment of Rs.125,05,28,848.56 as on 30.04.2022. (iii) An application under Section 95 has been filed by the Appellant on 28.05.2022. The Adjudicating Authority appointed....
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....details of invocation of guarantee and proof is asked for at Sl. No.14, however, same requirement is not mandated under Section 95 under Form-C. Instead what is mandated is to enclose along with the application form is copy of Demand Notice served on Guarantor in Form-B. The Adjudicating Authority has returned incorrect finding with respect to Rule 3(1)(e) of 2019 Rules. The word 'and' occurring in definition of 'Guarantor' as provided in Rule 3(1)(e) has to be read as 'or' to give effect to the manifest intention of the legislature. The literal reading of the word 'and' in Rule 3(1)(e) would produce an unintelligible and absurd result. If the word 'and' as provided in Rule 3(1) (e) is read as 'or', then the IBC can be workable as per the intention of the legislature and unintelligible and absurd result can be avoided. It is reiterated that Notice under Rule 7(1) in Form-B is a Notice, which has to be treated as Notice for invoking the guarantee, since Demand Notice has been issued by the Appellant on 04.05.2022, which required the repayment within 14 days. The order of Adjudicating Authority rejecting the Application is, thus, unsustainable. 5. The submissions advanced by learn....
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....learned Counsel for the parties and have perused the record. 7. The only question which has arisen for consideration in the present Appeal is "Whether the Demand Notice issued under Rule 7(1) of the 2019 Rules can be considered as Notice for invocation of guarantee for the purposes of filing Section 95 Application by a Creditor?" 8. While noticing the fact, we have noticed that guarantee was executed by the Personal Guarantor on 28.03.2005. Two Clauses of the Deed of Guarantee need to be noticed, i.e. Clause 2 and Clause 21, which are as follows: "2. In the event of any default on the part of the Borrower to comply with or perform any of the terms, conditions and covenants contained in the said Multi-Partite Agreement, the Guarantors shall, upon demand, forthwith pay to the Lender without demur all the amounts payable by the Borrower to it under the said Multi-Partite Agreement. 21. Any demand for payment or notice under this Guarantee shall be sufficiently given if sent by post to or left at the last known address of the Guarantors, their respective heirs, executors and administrators, as the case may be, such demand or notice is to be made or given, and sh....
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....ersonal guarantor" means an individual who is the surety in a contract of guarantee to a corporate debtor;" 13. Application filed by SBI was under Section 95 of the IBC for initiation of insolvency resolution process against the Respondent - Personal Guarantor. Section 95 of the IBC is as follows: "95. Application by creditor to initiate insolvency resolution process. - (1) A creditor may apply either by himself, or jointly with other creditors, or through a resolution professional to the Adjudicating Authority for initiating an insolvency resolution process under this section by submitting an application. (2) A creditor may apply under sub-section (1) in relation to any partnership debt owed to him for initiating an insolvency resolution process against- (a) any one or more partners of the firm; or (b) the firm. (3) Where an application has been made against one partner in a firm, any other application against another partner in the same firm shall be presented in or transferred to the Adjudicating Authority in which the first mentioned application is pending for adjudication and such Adjudicating Authority may give such directions for consol....
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....ency resolution process against the Personal Guarantor and the definition given in Rule 3, sub-rule (1) (e) of 2019 Rules has to be looked into for the purpose of initiating insolvency resolution process against the Personal Guarantor. Rule 7, deals with 'Application by creditor'. Rule 7 of 2019 Rules is as follows: "7. Application by creditor.― (1) A demand notice under clause (b) of sub-section (4) of section 95 shall be served on the guarantor demanding payment of the amount of default, in Form B. (2) The application under sub-section (1) of section 95 shall be submitted in Form C, along with a fee of two thousand rupees. (3) The creditor shall serve forthwith a copy of the application referred to in sub-rule (2) to the guarantor and the corporate debtor for whom the guarantor is a personal guarantor. (4) In case of a joint application, the creditors may nominate one amongst themselves to act on behalf of all the creditors. 16. Rule 7, sub-rule (1) provides that Demand Notice under Clause (b) of sub-section (4) of Section 95 shall be served on the Guarantor demanding payment of the amount of default, in Form B. Sub-section (4) of Sect....
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....ission, i.e. AIR 1968 SC 1450 - Ishwar Singh Bindra and Ors. vs. State of U.P. The Hon'ble Supreme Court in the above case had occasion to consider the definition of 'drug' contained in Section 3(b)(i) of Drugs Act 1940. Expression 'and' used in Section 3(b)(1) of the Drugs Act was considered in the said case and in paragraph 11 of the judgment, following was laid down: "11. Now if the expression "substances" is to be taken to mean something other than "medicine" as has been held in our previous decision it becomes difficult to understand how the word "and" as used in the definition of drug in Section 3(b)(i) between "medicines" and "substances" could have been intended to have been used conjunctively. It would be much more appropriate in the context to read it disconjunctively. In Stroud's Judicial Dictionary, 3rd Edn. it is stated at p. 135 that "and" has generally a cumulative sense, requiring the fulfilment of all the conditions that it joins together, and herein it is the antithesis of or. Sometimes, however, even in such a connection, it is, by force of a contexts, read as "or". Similarly in Maxwell on Interpretation of Statutes, 11th Edn., it has been accepted t....
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....essary to read the conjunctions "or" and "and" one for the other". This Court held that as the word "substances" in the clause is used to mean something other than "medicine", it was not the intention of the legislature that the word "and" was meant to be read conjunctively. Accordingly, this Court held that the two parts of the definitional clause must be read disjunctively. 16. In the above view, Section 3(b)(i) stipulates that medicines or substances used for or in the diagnosis, treatment, mitigation or prevention of any disease or disorder in human beings, or animals shall be included within the ambit of the definition. It is significant to note the use of the phrase "for or in" in the definitional clause. Section 3(b)(i) includes both medicines or substances used for the diagnosis, treatment, mitigation or prevention of any disease or disorder or in the diagnosis, treatment, mitigation or prevention of any disease or disorder. Where the former highlights the direct use of the product in question in diagnosing, treating, mitigating or preventing a disease or disorder, the latter highlights its instrumental use as a facilitative agent in the diagnosis, treatme....
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....ds to some absurdity or unless there is something in the context, or in the object of the statute to suggest the contrary. Where a word has a secondary meaning, the assessment is whether the natural, ordinary or popular meaning flows from the context in which the word has been employed. In such cases, the distinction disappears and courts must adopt the meaning which flows as a matter of plain interpretation and the context in which the word appears." 20. The above judgment reiterates that one of the basic principles of interpretation of statutes is to construe them according to plain, literal and grammatical meaning of the words. When we look into definition of 'Guarantor' in Rule 3(1)(e), fulfilment of both the condition that Debtor is a Personal Guarantor to a Corporate Debtor and in respect of whom guarantee has been invoked, has been cumulatively used. The submission of the Appellant that use of the expression 'and' has to be read as 'or', shall not further the statutory object and purpose. Guarantor with regard to whom guarantee has not been invoked, shall not be a Debtor and no default can be committed by Guarantor, unless guarantee is invoked as per the terms of Deed of ....
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....ty of a guarantor may be limited to a particular sum, instead of the liability being to the same extent as that of the principal debtor. The liability to pay may arise, on the principal debtor and guarantor, at the same time or at different points of time. A claim may even be time-barred against the principal debtor, but still enforceable against the guarantor. The parties may agree that the liability of a guarantor shall arise at a later point of time than that of the principal debtor. We have referred to these aspects only to underline the fact that the extent of liability under a guarantee as also the question as to when the liability of a guarantor will arise, would depend purely on the terms of the contract." 24. This Tribunal in Archana Deepak Wani vs. Indian Bank - Company Appeal (AT) (Ins.) No.301 of 2023 has also held that liability of the Guarantor must be determined strictly in terms of the Deed of Guarantee. In paragraph 26, following has been laid down: "26. The scheme of I&B Code clearly indicate that both the Principal Borrower and the Guarantor become liable to pay the amount when the default is committed. When default is committed by the Principal Borro....