Evidence of personal guarantor’s presence precludes denial of awareness of absence of notice u/s 95(1) of IBC: NCLAT

Case Details: Premjit Singh Chadha v. Bank of Baroda - [2023] 148 taxmann.com 65 (NCLAT-New Delhi) [27-05-2022]

Judiciary and Counsel Details

• • Justice Ashok Bhushan, Chairperson & Ms Shreesha Merla, Technical Member
  • Simarpal Singh Sawhney, Sidhant Juyal & Akhilesh Talluri, Advs. for the Appellant.
  • Vivek Sinha, Adv. for the Respondent.

Facts of the Case

In the instant case, the appellant acted as a personal guarantor of the corporate debtor which was currently undergoing liquidation. During the pendency of liquidation, respondent no. 1 (i.e. the financial creditor) issued a demand notice demanding outstanding debt along with an interest. Subsequently, the respondent filed an application u/s 95 of the IBC for initiation of personal insolvency against the appellant.

The Adjudicating Authority (NCLT) by the impugned order admitted the said application and declared an interim moratorium. Then, an appeal was made to the National Company Law Appellate Tribunal (NCLAT) against the order passed by the NCLT.

The appellant contended that limited notice contemplated under section 95(1) was never served upon him and that the demand notice issued by the respondent was defective as necessary documents were not appended with it.

NCLAT Held

The NCLAT observed that the purpose behind the issuance of limited notice to the personal guarantor was to provide him with an opportunity to appear before the Adjudicating Authority in compliance with the principles of Natural Justice. However, since the material on record ‘showed that personal guarantor’/appellant was represented on that date, it couldn’t be said that the appellant was not aware of the proceedings.

The NCLAT, further observed that a demand notice was merely a preliminary notice, and the entire set of detailed annexures was required to be appended to the application.

The NCLAT held that since the CIRP application was admittedly served on the appellant together with all annexures one month prior to the date of hearing, and no objections were raised during that period, the appellant could not later claim that he was unaware of the annexures or the proceedings.

The NCLAT, further held that since the stage of admission of the application had not yet arrived, the appellant could raise all objections opposing the admission of the said application before the NCLT at that stage. Accordingly, the appeal was to be dismissed.

List of Cases Reviewed

• • Bank of Baroda v. Premjit Singh Chandha [2023] 147 taxmann.com 600 (NCLT – New Delhi) (para 12) affirmed (See Annex).

List of Cases Referred to

• • AGI Logistics INC v. Sher Jang Bhadhur [CS (OS) No. 1314 of 2009, dated 16-9-2009] (para 5)
  • Neeraj Jain v. Cloudwalker Streaming Technologies (P.) Ltd. [2020] 114 taxmann.com 589 (NCLAT – New Delhi) (para 5)
  • Ravi Ajit Kulkarni v. State Bank of India [2021] 130 taxmann.com 442 (NCLAT – New Delhi) (para 9)
  • Chandresh Jajoo v. Siemens Financial Services (P.) Ltd. [Company Appeal (AT) (Ins.) No. 284 of 2022, dated 22-3-2022] (para 10).