TaxTMI 
TaxTMI 
2026 (6) TMI 71
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....ority vide the Impugned Order, initiated proceedings under Section 95 of the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as 'Code') against the Appellant and appointed Mr. Pradeep Kumar Kaushik/ Respondent No.2 as the Resolution Professional (RP) under Section 99 of the Code. 2. The Appellant is aggrieved that although the loan documents, sanction letter, DRT proceedings, SARFAESI notices, and other contemporaneous records consistently described him merely as a co-borrower in relation to the credit facilities availed by M/s. L.R. Builders Pvt. Ltd.,/Corporate Debtor, the Respondent No.1 nevertheless treated him as a "personal guarantor" for the purpose of invoking insolvency proceedings under Section 95 of the Code. According to the Appellant, no Deed of Guarantee was ever executed either by him or by any other person in respect of the subject loan account and even the sanction letter issued by Union Bank of India specifically recorded "Guarantors: NIL". Brief Facts of the Case 3. Brief facts of the case relevant for deciding the Appeal are as follows: (i) The Corporate Debtor/L.R. Builders was incorporated was engaged in the business of real est....
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....proceedings against the Appellant by portraying him as a Co Borrower/ Personal Guarantor to the Corporate Debtor. (vi) The Adjudicating Authority thereafter passed the Impugned Order dated 04.02.2026 whereby Mr. Pradeep Kumar Kaushik/ Respondent No.2, was appointed as the Resolution Professional under Section 99 of the Code with directions to submit a report. The Resolution Professional thereafter, filed his report under Section 99 of the Code on 23.02.2026. Aggrieved by impugned order dated 04.02.2026 passed by the Ld. Adjudicating Authority, the Appellant has challenged the same before this Appellate Tribunal. Submissions of the Appellant 4. Ld. Counsel for the Appellant submits that the very initiation of proceedings against the Appellant is fundamentally without jurisdiction and contrary to the admitted record, inasmuch as the Appellant is not a Personal Guarantor to the subject loan transaction. It is submitted that despite complete absence of any deed of guarantee or invocation thereof, the Respondent invoked provisions applicable only to personal guarantors and succeeded in obtaining the impugned order on the basis of incorrect and misleading representations b....
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.... 95 of the Code by the Respondent, there was no proper disclosure or material establishing the Appellant as a guarantor. It is submitted that the application itself was devoid of any foundational document demonstrating existence of a guarantee obligation. 9. Ld. Counsel further submits that the most crucial circumstance exposing the falsity of the Respondent's case is the filing of I.A. No. 958 of 2026 by the Respondent itself after issuance of notice in the present Appeal. It is submitted that in the said application seeking rectification of the order dated 04.02.2026, the Respondent categorically admitted that no Deed of Guarantee or Letter of Invocation had been placed on record in the proceedings before the Learned NCLT. Ld. Counsel submits that this admission completely destroys the very basis upon which proceedings under Section 95 were initiated. 10. Ld. Counsel submits that apart from complete absence of any deed of guarantee, the Respondent has also failed to place on record any valid invocation of the alleged guarantee. It is submitted that invocation of guarantee is a mandatory jurisdictional requirement before initiation of proceedings under Section 95 of the Code....
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....ssion of material and jurisdictional facts. It is submitted that the Respondent categorically represented before the Learned NCLT that a valid Deed of Guarantee and Letter of Invocation existed and had been placed on record and on such representation the Appellant was treated as a Personal Guarantor and proceedings under Section 95 of the Code were entertained. 15. He submits that after obtaining the impugned order and securing initiation of insolvency proceedings against the Appellant, the Respondent subsequently resiled from its own stand by filing I.A. No. 958 of 2026 and categorically stating in paragraph 4 thereof that no Deed of Guarantee or Letter of Invocation had been placed on record and that no such submission had been made during the course of hearing. It is submitted that the Respondent cannot be permitted to approbate and reprobate by first obtaining an order based on existence of guarantee documents and thereafter admitting that no such documents existed at all. 16. It is submitted that vide order dated 03.03.2026 passed in I.A. No. 958 of 2026, even the Ld. Adjudicating Authority recorded dissatisfaction regarding the manner in which the matter had been conduc....
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....condly, that Respondent No.1 itself allegedly admitted in paragraphs 3 and 4 of IA No. 958 of 2026 that no deed of guarantee exists on record; thirdly, that the Assignment Deed itself stipulates that no guarantee had been executed; and fourthly, that the jurisdictional issue contemplated in the judgment of the Hon'ble Supreme Court in Dilip B. Jiwrajka v. Union of India & Ors. would not apply to the facts of the present case. Ld. Counsel submits that each of the aforesaid grounds is wholly misconceived and devoid of merit. 20. He submits that the judgment of the Hon'ble Supreme Court in "Dilip B. Jiwrajka v. Union of India & Ors." squarely governs the controversy involved in the present matter. It is submitted that the Hon'ble Supreme Court has clearly held that all jurisdictional questions are to be adjudicated by the Learned NCLT only at the stage contemplated under Section 100 of the Insolvency and Bankruptcy Code and not prior thereto. Reliance is placed particularly upon paragraph 68 of the judgment, wherein the Hon'ble Supreme Court expressly rejected the contention that the Adjudicating Authority could undertake an adjudicatory exercise at the stage of Section 97(5) of th....
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....statutory scheme of the IBC. Ld. Counsel further submits that in the present case, the Appellant seeks precisely such premature adjudication despite having an efficacious remedy before the Learned Adjudicating Authority under Section 100. Judicial discipline therefore requires adherence to the view already taken by the coordinate Three-Member Bench and any contrary view, if at all, can only be considered by a larger Bench. 23. Ld. Counsel for Respondent No. 1 further submits that this Appellate Tribunal in Jaykumar Bramhadev Mane v. Solapur District Central Cooperative Bank Ltd. also declined to entertain a jurisdictional challenge founded upon the alleged non-existence of a guarantee and relegated the parties to the Learned NCLT for consideration of all such issues at the stage of Section 100 of the IBC. It is submitted that all four grounds urged by the Appellant before this Tribunal are matters which can appropriately be raised, considered and adjudicated only by the Learned NCLT while exercising adjudicatory powers under Section 100 of the IBC. Ld. Counsel submits that merely alleging abuse of process cannot justify this Hon'ble Appellate Tribunal undertaking adjudication of....
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....ed of guarantee and held that the nomenclature or title of a document is not determinative of its true legal character. Reliance is also placed upon the judgment of the Hon'ble Supreme Court in S. Chattanatha Karayalkar v. Central Bank of India, wherein the Hon'ble SC considered whether a Demand Promissory Note together with a Letter of Continuity would constitute a document of guarantee or whether the executants thereof would merely be treated as co-borrowers. It was held that a Demand Promissory Note containing an undertaking to pay the loan amount on demand would, having regard to Section 126 of the Indian Contract Act, be construed as a guarantee. Ld. Counsel submits that the present case stands squarely covered by the aforesaid principles. 27. Dealing specifically with the four objections raised by the Appellant, Ld. Counsel submits under the first objection that although no formal deed of guarantee may have been executed in the conventional sense, the guarantee furnished by the Appellant is clearly evident upon a holistic reading of the transactional documents and in light of the law laid down by the Hon'ble Supreme Court. Under the second objection concerning paragraphs 3....
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....rt in State of Punjab & Anr. v. Shamlal Murari & Anr., wherein it was held that processual law is not to operate as a tyrant but as a servant of justice and that Courts are required to advance justice rather than defeat substantive rights on procedural technicalities. 30. In conclusion, Ld. Counsel submits that the Appellant has admittedly signed multiple documents unequivocally undertaking to pay the loan amount on demand together with applicable interest. It is submitted that whether such undertaking constitutes a guarantee or whether the Appellant acted merely as a borrower or co-borrower is itself a disputed question of fact dependent upon interpretation of the transactional documents. Ld. Counsel submits that the filing of the Section 95 application by Respondent No. 1 on the basis of such documents therefore cannot be termed as an abuse of process of law. It is respectfully submitted that the present Appeal seeks premature adjudication of disputed questions which are required to be considered by the Learned NCLT under Section 100 of the IBC. Accordingly, this Hon'ble Appellate Tribunal may not interfere with the order passed by the Learned NCLT under Section 97(5) of the I....
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.... examined only after submission of the report under Section 99 at the stage of adjudication under Section 100. The Respondent has further argued that the debt and default are admitted and that a holistic reading of the loan documents, board resolutions, demand promissory note and related transactional documents clearly demonstrates that the Appellant had undertaken obligations in the nature of a guarantor even if a separate document titled as "deed of guarantee" was not executed. 35. On 04.02.2026 the Ld. Adjudicating Authority passed the following order: "Order delivered on 04.02.2026 ORDER This application has been filed by M/s Charm Investments Pvt. Ltd., the Financial Creditor under Section 95 of the Insolvency and Bankruptcy Code, 2016 seeking initiation of Insolvency Resolution Process against Mr. Pawan Gupta, the Corporate Guarantor for the alleged default of Rs. 5,70,00,414/-. The Applicant has placed on record the Deed of Guarantee and Letter of Invocation. The Applicant has proposed Mr. Pradeep Kumar Kaushik, having Registration No. IBBI/IPA-002/IP-N01141/2021-2022/13997 and e-mail ID- [email protected], Insolvency Professional, to be appoi....
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....ILS OF LOANS AND DISCLOSURES [SCHEDULE 1-A] (See clauses 1.1 (i) & 10.11) Being the details of the Financing Documents 1. Sl. No. 1 1 2. Name/ Details of the Borrower M/s L.R. Builder Private Limited PAN AACL1446Q, CIN: U74899DL1995PTC067771, Address: 8233, LR Complex, Rani Jhansi Road, Near Filmistan Cinema, Delhi- 110006 Mr. Kamal Gupta Pan No. AAGPG3472N Address: C-19 Rana Pratap Bagh, New Delhi-110007. Mr. Pawan Kumar Gupta, Pan No: AAGPG3475M Address: C-19, Rana Pratap Bagh, New Delhi- 110007, 3. Details of the guarantor/ co-borrower Guarantors: Nil 4. A/c No. as per Assignor's records 560331000041101 (Old A/c No. CMTCC/01/110003 5. Whether classified as NPA along with date of such classification Yes NPA classified on 31.12.2019 Whether classified as NPA along with date of such classification Yes NPA classified on 31.12.2019 6. Outstanding amount (Principal outstanding + interest) as on Cut-off Date (detailed break up as per Schedule 2) As Per [Schedule 2] Bid Amount: Rs.5,42,00,000/- (Rupees Five Crore Forty Two Lac Only) Final assignment amount Rs.5.42 Crore + further inter....
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....uarantor in the Part-II of the application. We have also gone through Part-V of the application, which provides list of Documents to prove debt and default in particular item 8 of the Part-V, and note that 'Deed of Guarantee' and 'Notice for Invocation of Guarantee' are not listed. 44. We further note that subsequent to passing of the impugned order on 04.02.2026, the Appellant filed I.A. No. 958 of 2026 before the Adjudicating Authority. In para 4 of the Respondent makes the following Statement: "That it is respectfully submitted that the Applicant had not placed on record any Deed of Guarantee and Letter of Invocation in the present proceedings, nor was any submission made to that effect during the course of hearing." 45. Ld. Adjudicating Authority heard the IA-958 of 2026 on 03.03.2026 and passed the following order: "Order delivered on 03.03.2026 ORDER New IA-958/2026:- This application has been filed by M/s. Charm Investments Private Limited/Financial Creditor seeking rectification of order dated 04.02.2026. It is submitted by the Learned Counsel that in the said order, it has been wrongly recorded that the Applicant has placed o....