TaxTMI 
TaxTMI 
2026 (3) TMI 1536
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.... (i) Various loan agreements were executed between M/ s. Ortel Communications Ltd. and M/s SREI Equipment Finance Ltd. - Respondent No.1 herein on 01.07.2018. Deed of Guarantee was executed by the Appellant on 01.07.2018 giving guarantee for repayment of money received by the Corporate Debtor from the Financial Creditor. Default was committed by the Corporate Debtor and CIRP against the Corporate Debtor commenced on 27.11.2018. (ii) On 15.02.2022, the Financial Creditor issued a demand notice in Form B under Rule 7(1) of the Insolvency and Bankruptcy (Application to Adjudicating Authority for Insolvency Resolution Process for Personal Guarantors to Corporate Debtors) Rules, 2019 demanding an amount of Rs. 113,38,41,436/-. (iii) The Personal Guarantor issued a response by letter dated 05.04.2022 to the notice. (iv) The Financial Creditor filed an application under Section 95 in May, 2022 in which the Resolution Professional was appointed by the Adjudicating Authority. The Resolution Professional submitted a report under Section 99 recommending for admission of Section 95 application. The Personal Guarantor filed an objection pleading that guarantee h....
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....ting Authority for placing the notice dated 11.06.2019, which notice was not permitted to be taken on record and both the Financial Creditor and the Resolution Professional has made statement that they will not rely on the said document i.e. notice dated 11.06.2019. When the Respondents clearly stated that they are not relying on the notice dated 11.06.2019, they cannot be permitted to rely on said notice in this appeal. 4. Shri Sanjiv Sen, learned counsel for the Respondent submits that by notice dated 11.06.2019, the personal guarantee was invoked which is filed along with I.A. No.910 of 2026. It is submitted that by said notice the Bank had already invoked the personal guarantee, hence, bank was fully entitled to issue notice under Rule 7(1) of 2019 Rules and the application has rightly been admitted by the Adjudicating Authority under Section 95. It is submitted that law which is laid down by this Tribunal in State Bank of India vs. Deepak Kumar Singhania dated 28.05.2025 was not law on the date when order was passed by the Adjudicating Authority on 22.07.2024, hence, application was filed by the Financial Creditor relying on the existing law which did not require separate i....
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....ture, unsustainable and illegal and thus, requested the Applicant/Personal Guarantor to withdraw the Demand Notice dated 15.02.2022. A copy of the reply of the Respondent/Personal Guarantor dated 05.04.2022 in response to the Form - B Demand Notice dated 15.02.2022 is annexed herewith and marked as Annexure - 5." 7. When we look into the Part-III of the application, according to the Financial Creditor the date on which default occurred was 27.11.2018 and on 15.02.2022 when notice under Rule 7 was issued. 27.11.2018 is the date when default was committed by the Principal Borrower. In the list of documents referred to in the Part-III apart from loan agreement, personal guarantees only notice annexed was notice under Rule 7 in Form B dated 15.02.2022. Column 15 of Part-III of the Section 95 application 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. Loan Agreements bearing nos. 1725751 172573, 172530, 171853, 172577, 172576 and 172529 dated 01.07.2018 are annexed herewith and marked as Annexure - 8 (Colly). 2. Personal Guarantees bearing nos. 172575! 172573, 172530, 171853, 1....
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...."14. Sub-section (4) of Section 95 provides that an application under sub-section (1) shall be accompanied with details and documents as referred to therein. Sub-section (7) provides that details and documents required to be submitted under sub-section (4) shall be such as may be specified. Rule 2 of 2019 Rules provides that these rules shall apply to insolvency resolution process for personal guarantors to Corporate Debtors. The application under Section 95 has been filed against the Respondent - Personal Guarantor of the Corporate Debtor - LML Ltd. Hence, the application under Section 95 has to be as per 2019 Rules. Rule 3, sub-section (1) (e) defines 'guarantor', which is as follows: "3(e) "guarantor" means a debtor who is a personal guarantor to a corporate debtor and in respect of whom guarantee has been invoked by the creditor and remains unpaid in full or part;" 15. The 'Guarantor' within the meaning of 2019 Rules, means a Debtor who is a Personal Guarantor to a Corporate Debtor and in respect of whom guarantee has been invoked by the Creditor and remains unpaid in full or part. Learned Counsel for the Appellant has relied on definition of 'Personal Guarant....
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....f debt, when whole or part of it become due. 'Debt' means a liability or obligation in respect of a claim which is due from any person. Thus, for a default, debt has to be due and Debtor shall be only that person, to whom debt is due. A Personal Guarantor becomes a Debtor only when guarantee is invoked, making him liable to make the payment to the Lender. We have noticed Clause 2 and Clause 21 of the Deed of Guarantee in the foregoing paragraphs of this judgment, which clearly contemplate that liability on Guarantor shall arise only when demand is made by the Lender, in event Principal Borrower fails to repay the amount. In the present case, there is no case setup by the Appellant that at any point of time guarantee was invoked, except issuance of Notice in Form-B, which is claimed by the Appellant to be treated as Notice for invocation of guarantee. Further, we have noticed the definition of 'Guarantor' under Rule 3(1)(e), which while defining a 'Guarantor' contain two conditions, i.e. (i) who is a Personal Guarantor to a Corporate Debtor; and (ii) in respect of whom, guarantee has been invoked by the Creditor and remains unpaid in full or part. Learned Counsel for the Appellant h....
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....cation is set aside. Dismissal of Section 95 application shall not preclude the Financial Creditor to take such proceeding as permissible in law." 11. In view of the law laid down by this Tribunal, as noted above, view taken by the Adjudicating Authority in Para 17 that notice under Rule 7 is the notice invoking the guarantee cannot be said to be in accordance with correct proposition of law. 12. A copy of the Deed of Guarantee is on record. In Para 16 of the order, Col. 3(a) of the Deed of Guarantee has been extracted, which is to the following effect: "16. Clause 3 (a) of the Deed of Guarantee provides as under: "In the event of any default on the part of the Customer in payment/ repayment of any of the moneys referred to in Clause 2 above, or in the event of any default on the part of the Customer to comply with or perform any of the terms, conditions and covenants contained in the Facility Documents, the Guarantor (s) shall, upon demand, forthwith pay to SEFL without demur all the amounts payable by the Customer under the Facility Documents. Any such demand made by SEFL on the Guarantor(s) shall be final, conclusive and binding notwithstanding any differ....
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....ments without relying upon the said document. Mr. Vinod Chaursia, Learned Counsel appearing for the Resolution Professional has also submitted that he will not be relying upon on the said affidavit filed on 09.04.2024 and the document in question. We have heard the submissions made by Mr. Anirban Bhattacharya, Learned Counsel appearing for the Applicant. Arguments heard. The parties are at liberty to file written submissions along with case laws, if any, within one week. List the matter on 17.05.2024 for compliance." 15. We, thus, are unable to accept the prayer of the Respondent No.1 by I.A. No.910 of 2026 taking notice dated 11.06.2019 on record. When the Respondent - Financial Creditor and Resolution Professional both made submission before the Adjudicating Authority that they will not rely on the notice dated 11.06.2019, they cannot be allowed to rely on said notice in this appeal. 16. One more submission made by the Respondent needs to be noticed. It is submitted by the Respondent that at the time when order was passed by the Adjudicating Authority, the judgment of this Tribunal in State Bank of India vs. Deepak Kumar Singhania was not delivere....