TaxTMI 
TaxTMI 
2026 (1) TMI 1402
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.... R-2. Mr. Asav Rajan, Mr. Kashish Chadha, Mr. Devang Shrotriya, Mr. Aditya Shah, Mr. Raghav Bansal and Mr. Akash Saxena, Advocates for R-5. JUDGMENT Ashok Bhushan, J. These two appeals arise out of the same order dated 04.07.2025 passed by the Adjudicating Authority (National Company Law Tribunal), Chandigarh Bench, Court - I in CP (IB) No. 178/Chd/Hry/2021 and in I.A. No. 2026/2024 and I.A. No. 2027/2024. By the impugned order the Adjudicating Authority has rejected Section 95 application filed by the Siemens Financial Services Private Limited - Appellant in Company Appeal (AT) (Ins.) No.1141 of 2025. I.A. No.2027/2024 filed by Ravi Kumar Jain - Personal Guarantor has also been dismissed. Company Appeal (AT) (Ins.) No.1082 of 2025 has been filed by the Personal Guarantor challenging the order in I.A. No.2027/2024 and challenging certain observations and finding in the impugned order dated 04.07.2025. 2. Brief facts of the case necessary to be noticed for deciding these appeals are: 2.1 Siemens Financial Services Private Limited entered into a Master Lease Agreement with RCC Infraventures Ltd. for leasing out certain equipment for a fixed term. Master Lease Agreem....
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....Consortium of five banks including Union Bank of India. Second charge was also created over the above assets with respect to the corporate loan. 2.9 The account of the Corporate Debtor was declared NPA on 29.02.2020. Notice under Section 13(2) of the SARFAESI Act, 2002 dated 28.08.2020 was issued by the Union Bank of India in respect to the corporate loan. Notice under Section 13(4) dated 05.01.2021 was issued and symbolic possession was taken by the Union Bank of India of the assets on which second charge was created. It was, thereafter, on 24.03.2021 Section 95 application being CP (IB) No. 178/Chd/Hry/2021 was filed by Siemens Financial Services Private Limited against Ravi Kumar Jain, Personal Guarantor. 2.10 Home loan account of Ravi Kumar Jain was also declared as NPA. The Union Bank of India has issued notice for auction of the property under second charge on 29.04.2022. Auction was held of the property on 29.04.2022 in which auction the Villa Apartment No. TPV-G-GV-GV02, The Palm Springs situated at Gurgaon was auctioned in favour of Smt. Sangita Narula, Respondent No.2 in Company Appeal (AT) (Ins.) No.1082 of 2025. A sale certificate was issued in favour of Smt. Sang....
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....ion bearing CP (IB) No.178/Chd/2021 is not maintainable and is dismissed and disposed of. Consequently, I.A. No.2027 of 2024 stands dismissed and I.A. No. 2026 of 2024 is rendered infructuous and are disposed of accordingly, without any order as to costs." 2.18 Aggrieved by the above order these two appeals have been filed. Company Appeal (AT) (Ins.) No.1141 of 2025 has been filed by the Financial Creditor who has filed the Section 95 application. In Company Appeal (AT) (Ins.) No.1141 of 2025, the Appellant has prayed for following reliefs: "a) The Impugned Order dated 04.07.2025 passed by the Hon'ble National Company Law Tribunal, Chandigarh Bench passed in CP (IB) No. 178/Chd/Hry/2021 be quashed and set aside. b) That the Company petition (IB) No. 178/Chd/Hry/2021 filed under section of the Code be allowed and CIRP be initiated against the Respondent No.1. c) Any such other relief as the Hon'ble National Company Law Appellate Tribunal may deem fit in the interest of justice be also awarded" 2.19 In Company Appeal (AT) (Ins.) No.1082 of 2025 filed by the Personal Guarantor, Ravi Kumar Jain following reliefs have been prayed for: "A....
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....t conclusion that personal guarantee was never invoked. The Financial Creditor in its application under Section 95 has clearly pleaded legal notice dated 07.12.2020 as notice invoking the guarantee. The Adjudicating Authority also further committed error in observing that Section 95 application filed by the Financial Creditor was incomplete since the Financial Creditor has failed to attach Income Tax Returns of the Personal Guarantor. It is submitted that application filed by the Financial Creditor under Section 95 was clearly maintainable and all requisite requirements for complete application were there. The Resolution Professional has also recommended for admission of Section 95 application. The Adjudicating Authority committed error in holding the application as not maintainable. It is submitted that on the date application was filed by the Financial Creditor i.e. 24.03.2021 under Section 95 interim moratorium came into existence as per Section 96 of the I&B Code and none of the assets of the Personal Guarantor could have been dealt with by the Union Bank of India. 5. Shri Arun Kathpalia, learned senior counsel appearing for the Appellant in Company Appeal (AT) (Ins.) No.108....
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.... by issuance of demand notice under Rule 7 of 2019 Rules whereas in the present case the Financial Creditor invoked guarantee by issued Rule 7 notice. There being no prior invocation of guarantee liability never crystallised, hence, Section 95 application is premature, defective and non-est. Non-invocation of guarantee cannot form basis for insolvency resolution and interim moratorium nor it could restrain SARFAESI enforcement. It is submitted that against the proceedings initiated by the Union Bank of India under SARFAESI Act, 2002, the Corporate Guarantor and the Corporate Debtor unsuccessful filed application before the DRT being S.A. No.462/2021, which was dismissed by the DRT on 17.06.2022, against which appeal was also dismissed by DRAT. A Writ Petition was also filed against the order dated 17.06.2022, in which no relief was granted. Another Writ Petition was filed in Allahabad High Court being Writ Petition No.28216 of 2022 where the High Court directed the Corporate Debtor to deposit at least amount of Rs. 2 Crores to show its bonafide. The amount was not deposited whereas there was huge outstanding against the Corporate Debtor and the Personal Guarantor of more than Rs. 1....
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.... 10. In I.A. No.2027 of 2024 following prayers were made by Ravi Kumar Jain, Personal Guarantor: "1. Pass appropriate directions quashing/ setting aside the steps / proceedings initiated under the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 qua the sole residential premises I personal asset of the Applicant/Personal Guarantor, being property bearing Villa Apartment No. TPV - G - GV - GV02, The Palm Springs, situated in the Revenue Estate of Village Wazirabad, Tehsil & District - Gurgaon (Haryana), during the subsistence of interim-moratorium under Section 96 of Insolvency and Bankruptcy Code, 2016; 2. Pass appropriate directions whereby the operation of steps / proceedings initiated under the Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 qua the sole residential premises I personal asset of the Applicant/Personal Guarantor, being property bearing Villa Apartment No. TPV - G - GV - GV02, The Palm Springs, situated in the Revenue Estate of Village Wazirabad, Tehsil & District - Gurgaon (Haryana), during the subsistence of interim-moratorium under Sectio....
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....l Creditor in Form C as per Rule 7(2) of the 2019 Rules. The copy of the application is filed as Annexure A-1 to the Appeal. In the application under Section 95, the Financial Creditor has pleaded legal notice dated 07.12.2020 as well as notice under Rule 7 in Form B i.e. notice dated 14.12.2020 (wrongly mentioned as 11.12.2020 in the application). In Part III of the application Column No.15 is as follows: 15. List of documents attached to this application in order to prove the existence of debt and the amount in default 1. Copy of the Legal Notice dated 07.12.2020 for termination of the lease facility and invocation of Arbitration under the Master Lease Agreement dated 28.05.2019 (Annexure: "A11") 2. Copy of Demand Notice dated 11.12.2020 under rule of 7(1) Insolvency and Bankruptcy (Application to Adjudicating Authority for Insolvency Process of Resolution Personal Guarantors to Corporate Debtors) Rules, 2019 alongwith postal receipts and track consignment (Annexure: "12") 14. The Resolution Professional was appointed by the Adjudicating Authority who submitted a report under Section 99 of the I&B Code. In the report it was submitted by the Resolution Professional ....
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....be conclusive as regards the correctness of the amount mentioned therein, as having become due and payable by the Lessee having been committed by the Lessee in payment of the amount to to the Lessor for its assigns), and also conclusive as regards default the Lessor for its assigns). The Guarantor agrees that it will not require and shall not be entitled to require any further proof of these facts from the Lessor (or its assigns). 23. Any notice, communication or other correspondence addressed by the Lessor (or its assigns) to the Guarantor may be addressed to the address given herein or to such other address as the Lessor (or its assigns) may be aware. Such notice, communication Correspondence may be served by ordinary post or hand delivery or otherwise and in case of post shall be deemed to have been served on the Guarantor at the time it would have been delivered in the normal course. In the event of any change in address, the Guarantor shall forthwith intimate the same to the Lessor (or its assigns) failing which service of a notice or correspondence to the address last given shall be deemed to be service on the Guarantor. ii. The above-mentioned clauses clear....
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....nvoking arbitration. A demand notice under the Insolvency and Bankruptcy Rules, 2019, was subsequently issued on 11.12.2020." 18. Learned counsel for the Appellant before us has contended that legal notice dated 07.12.2020 has to be treated as notice invoking the personal guarantee, hence, the personal guarantee was invoked prior to issuance of demand notice on 14.12.2020. Thus, the very basis of the order of the Adjudicating Authority that personal guarantee was invoked only by demand notice dated 14.12.2020 is incorrect. Learned counsel appearing for the Personal Guarantor has submitted that notice dated 07.12.2020 was only notice for invoking arbitration clause and was not notice invoking personal guarantee. We need to notice the contents of the legal notice dated 07.12.2020, which is part of the record to find out as to whether the said notice could be treated as only notice for invoking arbitration or said noticed could be said to be notice invoking personal guarantee. 19. The personal guarantee which was signed by the Personal Guarantor - Ravi Kumar Jain need to be noticed to find as to in what manner the Guarantee Deed contemplates invocation. The Adjudicating Authorit....
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.... take such measures without prejudice SFSPL's other rights and remedies under the said Agreement or otherwise in law, to which SFSPL may be entitled to against You for recovery thereof, and You shall be liable for all the costs and consequences." 20. The statement in Para 13 clearly indicate that the said notice was written communication intimating about the outstanding amount of Rs. 9,97,31,150/- and demanding the payment. Para 14 of the notice also relevant which provides as follows: "14. In the event, You Nos. 1 and 2 fails to comply with your payment obligations within thirty (30) days from the date of receipt of this notice, it shall be presumed that disputes, differences, claims, etc, have arisen between You and SFSPL and this notice may be treated as notice under Clause 30 of the Master Lease Agreement dated 28.05.2019 and Clause 24 & 25 of the Form of Guarantee arising out of Master Lease Agreement dated 28.05.2019 invoking the Arbitration clause." 21. Para 14 of the notice refer to Clause 30 of the Master Lease Agreement and Clause 24 and 25 of the Guarantee Deed, which also need to be noticed. Clause 30 of the Master Lease Agreement provides as follows:....
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....e with the terms of the guarantee agreement which is a settled law. Clause 7 of the guarantee agreement does not require any particular mode and manner of the demand notice. When demand notice is issued against the personal guarantor asking the personal guarantor to discharge its liabilities, the guarantee stands invoked. Whether notice under section 13(2) in a particular case invoked the guarantee or not depends on the words and intent of the notice. For finding out as to whether notice under section 13(2) invoked the personal guarantee, the letters and words of the notice has to be looked into to come to any conclusion that whether personal guarantor has been asked to discharge its liabilities or not. In the facts of the present case, we are of the considered opinion that the notice under section 13 (2) issued by the State Bank of India is a clear demand notice from the appellant to pay the amount of Rs. 28,56,64,336.06." The above judgment do support the submission of the Financial Creditor. 25. As far as the documents of Income Tax Return of the Personal Guarantor which have noticed to be not been filed along with the application, said was noticed in Para 21(i). However, ....
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....ely, the Appellant addressed a Legal Notice to the Corporate Debtor and Respondent on 7 December 2020 (the "Legal Notice"), demanding payment of INR 9.97 crore along with penal interest @ 7% and additional default interest @ 3%. The Legal Notice further stated that a failure to clear the dues within 30 days would be treated as a dispute and that the arbitration clause contained in Clause 30 of the Master Lease Agreement would effectively be deemed to have been invoked." 27. From the above discussion it is clear that legal notice dated 07.12.2020 and notice of demand issued under Rule 7 in Form B dated 14.12.2020 were two separate notices and legal notice dated 07.12.2020 was clearly notice of invocation of guarantee as per the Deed of Guarantee, which contemplate written communication from the Lessor to the Lessee. We thus are satisfied that in the present case, the guarantee was invoked by legal notice dated 07.12.2020 prior to issuance of demand notice dated 14.12.2020. There is no dispute to the proposition laid down by this Tribunal in State Bank of India vs. Deepak Kumar Singhania (supra) relied by the Adjudicating Authority that demand notice issued under Rule 7 in Form B ....
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....lows: "96. Interim-moratorium. - (1) When an application is filed under section 94 or section 95- (a) an interim-moratorium shall commence on the date of the application in relation to all the debts and shall cease to have effect on the date of admission of such application; and (b) during the interim-moratorium period- (i) any legal action or proceeding pending in respect of any debt shall be deemed to have been stayed; and (ii) the creditors of the debtor shall not initiate any legal action or proceedingsJ1 in respect of any debt. (2) Where the application has been made in relation to a firm, the interim-moratorium under sub-section (1) shall operate against all the partners of the firm as on the date of the application. (3) The provisions of sub-section (1) shall not apply to such transactions as may be notified by the Central Government in consultation with any financial sector regulator." 30. Section 96 contemplates commencement of interim moratorium on filing of application under Section 94 or 95. We, thus, are not persuaded to accept the submission of learned counsel appearing for the Auction Purchaser that ap....
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.... In the above case, the Personal Guarantor was contesting that application filed by the State Bank of India under Section 95 could not have been admitted since L&T Finance has filed another application against the Corporate Debtor before NCLT, Chandigarh which was pending, hence, no application filed against the Personal Guarantor was maintainable by NCLT, New Delhi. The said submission was not accepted for reason given in Para 13. This judgment of this Tribunal shall not come any aid in any manner as the case of learned counsel for the Auction Purchaser is not that the application filed by the Financial Creditor - Siemens Financial Services Private Limited is not maintainable before NCLT Chandigarh. 32. Another judgment relied by Shri Ganda, learned counsel for the Auction Purchaser is judgment of this Tribunal in "Company Appeal (AT) (Ins.) No. 393 of 2025, Royal Construction vs Gannon Dunkerley and Company Limited" where Section 9 application filed by the Operational Creditor was dismissed. Reliance is placed on Para 14 of the order, where following was observed: "14. The contention of the Appellant that the Adjudicating Authority should have modified the date of def....