Amit Kumar Kejriwal vs Uco Bank & Anr. & Ors

[Arising out of the Order dated 13.08.2024, passed by the 'Adjudicating Authority' (National Company Law Tribunal, Special Bench, Court No.-II, Kolkata), Company Petition (IB) No. 34/KB/2021]

IN THE MATTER OF: Amit Kumar Kejriwal, son of Ashok Kumar Kejriwal, residing at 5th Floor, Ganesh Court, 28 New Road, Alipore, Kolkata - 700 027. ...Appellant

Versus

1. UCO Bank having its head office at 10, B.T.M Sarani Kolkata - 700 001 and having its flagship Corporate Branch, 2, .Respondent No.1 India Exchange Place, Kolkata - 700 001. 2. Suresh Kumar Bokaria, Resolution Professional of Amit Kumar Kejriwal, having Registration No. IBBI/IPA-001/IP- P01625/2019- 2020/12573 and working for gain at 2, Rai Mohan Banerjee Road, Bonhooghly, Kolkata - 700108. Respondent No. 2

Present: For Appellant : Ms. Manju Bhuteria, Sr. Advocate along with Ms. Shreya Choudhary, Ms. Prachi Grover, Mr. Ashish Choudhury & Mr. Abhishek Arora For : Mr. Partha Sil & Mr. Utkarsh Dwivedi, Advocates Respondent JUDGMENT

(Hybrid Mode)

[Per: Justice Mohd. Faiz Alam Khan, Member (Judicial)]

The instant appeal has been preferred by the appellant under Section 61

of the Insolvency and Bankruptcy Code, 2016 (Code) against the judgment

dated 13.08.2024 passed by the National Company Law Tribunal, Kolkata

Bench (Adjudicating Authority) in CP IB No. 34/KB/2021 whereby the

application moved by the Respondent No. 1-UCO Bank under Section 95 of

the Code has been allowed and personal insolvency of the

appellant/personal guarantor has been initiated.

2. Brief facts necessary for disposal of the instant appeal appears to be

that Swati International which is a partnership firm and the predecessor of

Swati Pvt. Ltd. (CD) was given credit facilities to the tune of Rs. 1.75 Crores

by the UCO Bank and Shri Ashok Kumar Kejriwal (Father of the Appellant-

Amit Kumar Kejriwal) Amit Kumar Kejriwal (Appellant) and Sarwan Kumar

Kejriwal executed banking documents to secure the credit facilities and also

later on executed personal guarantees to secure the aforesaid loan on

01.10.2004.

3. On 30.06.2019 the account of the CD was declared as non-performing

asset (NPA) by the bank and on an application moved in this regard being

CP IB No. 1161/KB/2018 the CIRP process was initiated against the CD

vide order dated 08.07.2019, passed therein for a default amount of Rs.

6,89,98,729.90/-.

Company Appeal (AT) (Ins) No. 1775 of 2024 2 of 22

4. An application under Section 95 of the Code was moved by the

Respondent No. 1 for initiation of personal insolvency against the guarantor

i.e. Amit Kumar Kejriwal and which was allowed by passing the impugned

order which is the subject matter of challenge before us.

5. Ld. Counsel for the appellant submits that on an application moved

by the Respondent No. 1 under Section 95 of the Code the Respondent No. 2

was appointed as the Resolution Professional (RP) and prepare a report,

which under the orders of the Ld. Adjudicating Authority was provided to

the appellant and the same was prepared on untruthful and incorrect facts.

6. It is further submitted that appellant has filed its reply affidavit and

has specifically raised the point of maintainability of the petition on the

ground that guarantee extended by the personal guarantor was never

invoked by the Respondent No. 1 and as such no proceedings could have

been filed by the Respondent without invoking the guarantee.

7. It is further submitted that Rule 7(1) of the Insolvency and

Bankruptcy (application to Adjudicating Authority for Insolvency Resolution

Process for Personal Guarantors to CD) Rules 2019 (Personal Guarantor

Rules, 2019) provides that 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 and therefore the requirement of the same is

for the purpose of filing an application before the Ld. Adjudicating Authority

and the liability of a guarantor under the contract of guarantee will not arise

until the guarantee has been invoked.

Company Appeal (AT) (Ins) No. 1775 of 2024 3 of 22

8. It is vehemently submitted that in the instant case Respondent No. 1

has not invoked the guarantee prior to issuing the demand notice dated

24.09.2020 and thus there is no default on the part of personal guarantor.

9. It is also submitted that even the demand notice dated 24.09.2020 is

defective and the petition filed by the Respondent should have been

dismissed on this score also.

10. It is also submitted that the RP has failed to perform his duty under

Section 95 of the Code as he was required to submit a report to the

adjudicating authority recommending for approval and rejection of the

petition and the same is not a mere formality and it is a legal obligation to

verify the due compliances and requirements by the creditor which are

mandated in Sections 95 and 97 of the Code and there is absolute non-

application of mind by the RP and the RP has not examined the petition as

required under Section 99 of the Code.

11. It is further submitted that the Ld. Adjudicating Authority has failed

to understand the law laid down by this appellate tribunal in Pooja Ramesh

Singh vs. State Bank of India and Anr., CA (AT) (Ins) No. 329 of 2023

and has arrived at a wrong conclusion by misinterpreting the law.

12. It is also submitted that Ld. Adjudicating Authority has failed to

understand that the report submitted by the RP is only recommendations

and is not conclusive and binding and therefore there was grave illegality

committed by Ld. Adjudicating Authority in admitting the petition without

there being any invocation of guarantee and therefore the same is liable to

be set aside. Ld. Counsel for the appellant has relied on the law laid down

by this appellate tribunal in Pooja Ramesh Singh vs. State Bank of India

Company Appeal (AT) (Ins) No. 1775 of 2024 4 of 22 and Anr., CA (AT) (Ins) No. 329 of 2023 dated 28.04.2023 and CA (AT)

(Ins) No. 191 of 2025, State Bank of India vs. Deepak Kumar

Singhania 28.02.2025.

13. Ld. Counsel for the Respondent No. 1-UCO Bank submits that the

present appeal is not maintainable and is liable to be dismissed and there is

no illegality in the impugned judgment passed by the Ld. Adjudicating

Authority.

14. It is further submitted that the statutory notice in Form B was issued

to the appellant by the Respondent No. 1 prior to filing of the petition and

upon the non-payment of the amount pertaining to which the guarantee was

extended the petition was filed before the Ld. Adjudicating Authority.

15. It is further submitted that the Rule 7 (Personal Guarantor Rules,

2019) has to be read in its entirety as the heading of the Rule 7 is

'Application by Creditor' and this Regulation states that if after issuance of

Form B notice the same is not paid then the petition under Section 95 can

be filed against the guarantor.

16. It is further submitted that the actual intent of Rule 7 of the (Personal

Guarantor Rules, 2019) is that if the demand notice remains un paid for 14

days the petition can be filed against the guarantor.

17. It is further submitted that the cause of action to file a petition under

Section 95 of the Code is non-payment despite notice issued under Form B,

which is an undisputed fact in the instant case and a conjoint reading of

Section 95 (4) of the IBC lays down the essential pre conditions for filing and

maintaining an application for initiation of Insolvency against the Personal

Guarantor of the corporate debtor and the same includes owing of debt by

Company Appeal (AT) (Ins) No. 1775 of 2024 5 of 22 the debtor to the creditor, failure on the part of the debtor to pay within a

period of 14 days after service of notice of demand and evidence of default in

such payment.

18. It is further submitted that Rule 3 (e) of the Insolvency and

Bankruptcy Code (application to Adjudicating Authority for Insolvency

Resolution Process for Personal Guarantors to Corporate Debtors) Rules,

2019 (Personal Guarantors Rule 2019) provides prior invocation of the

guarantee and it is a settled proposition of law that a delegated legislation

cannot go beyond the purview of parent legislation as has been highlighted

by the Hon'ble Supreme Court in Kerala State Electricity Board and Ors.

vs. Thomas Joseph @ Thomas M.J. & Ors., (2023) 11 SCC 700.

19. It is also submitted that the ratio of Deepak Kumar Singhania

(Supra) is not applicable in this case as the same has not taken into

consideration the definition of debtor provided under Section 79 (12) of the

Code and also overlooked the fact that as per Section 95 (4) (b) of the Code

the term used is debtor and the same is not restricted to only personal

guarantor and moreover the same judgment has been challenged before the

Hon'ble Supreme Court by filing Civil Appeal No. 6556 of 2025 and therefore

could not be regarded as a good law.

20. It is also submitted that a conjoint reading of Section 95(4) of the

Code, with Rule 3(e) and Rule 7 (Personal Guarantor Rules, 2019) would

lead to an irresistible conclusion that failure of the guarantor to pay the

debt within 14 days of receipt of notice under Form B will trigger an

application under Section 95 of the Code, therefore it would be immaterial if

Company Appeal (AT) (Ins) No. 1775 of 2024 6 of 22 any previous demand notice invoking personal guarantee has been given or

not.

21. It is also submitted that the basic principle of the interpretation of

statute is that if a statue prescribes a particular mode and manner of

performance of any action, such action has to be taken accordingly and not

otherwise. Reliance in this regard has been placed on King Emperor vs.

Khawaja Nazir Ahmed, 1944 SCC Online PC 29.

22. It is further submitted that since all the legal provisions have been

followed by the Respondent in moving the application as provided in the

Code as well as in Rule 7 (Personal Guarantor Rules, 2019) the appeal is

liable to be dismissed. Ld. Counsel for the Respondent has also relied on the

law laid down by the Hon'ble Supreme Court in Dilip B. Jiwrajka vs.

Union of India and Ors., (2024) 5 SCC 435 as well as on Kerala State

Electricity Board and Ors. vs. Thomas Joseph Alias Thomas M. J. and

Ors., (2023) 11 SCC 700.

23. We have heard Ld. Counsel for the parties and perused the record.

24. Having considered the above factual matrix and submissions made by

the parties, the only question to our understanding, is required to be

considered in the instant appeal is as to whether the demand notice issued

under Section 7(1) of the 2019 Rules may be considered as notice for

invocation of guarantee for the purpose of filing an application by a creditor

under Section 95 of the Code?

25. At this juncture, it is appropriate to have a glance on the guarantee

deed which is the basis of filing the application before the Ld. Adjudicating

Authority and which has also not been disputed, even by the appellant. The

Company Appeal (AT) (Ins) No. 1775 of 2024 7 of 22 relevant extract of the said guarantee deed of date 01.10.2004 is reproduced

as under:

"If any member of the Customers' firm is adjudicated insolvent or if the Customers firm is dissolved or if the or Customers' company is taken into liquidation whether voluntary or otherwise or if the customers firm or company enters into any arrangement or makes any composition with the creditors thereof the Bank may (notwithstanding payment to the Bank by me/us or any other person of the whole or any part of the amount of my/our liability under these presents) rank as creditors and prove against the assets of such firm or company for the full amount of the Bank's claim or agree to and accept any composition in respect of the same and the Bank may and shall receive and retain the whole of the dividends, composition or other payments thereon to the exclusion of all my/our rights under these presents against such customers in competition with the Bank until the claim of the Bank is fully satisfied and I/we shall not by paying off the amount due by me/us to the Bank under these presents or any part thereof or upon any other ground prove or claim to prove in respect thereof or any part thereof until the whole of the Bank's claim against the customers has been satisfied. To the intent that the Bank may obtain satisfaction of the whole of its claim against the customers, I/we agree that the Bank may enforce the payment of and recover the full amount due by me/us under these presents notwithstanding any such proof of composition as aforesaid and not withstanding any other indemnity, security or remedy which the Bank may hold or be entitled to in respect of the sum due to the Bank by such Customers".

"Notwithstanding anything hereinbefore contained my/our liability under these presents shall extend to all accounts of the Customers whether the same are the account or accounts of such customers solely or are accounts on which such Customers may become liable jointly in any manner whatsoever with any company or firm, person or persons and in whatever name the same may stand and shall not be affected by any change in the constitution or name of the Customers' firm or company or any change in the constitution of the Bank, its successors or assigns or by its absorption in or by Its amalgamation with any other Bank or Banks".

"I/We agree that a statement of account signed by an Officer of the Bank showing amount due by the Customers

Company Appeal (AT) (Ins) No. 1775 of 2024 8 of 22 as appearing in the books of account of the Bank will be sufficient proof of the liability of the Customers and the same, will be binding on me/us and I/we promise and agree to pay on demand being made upon me/us by the Bank the amount due at the foot of the said statement of account with interest mentioned above".

"Any admission or acknowledgment in writing by the customers of the amount of indebtedness of the customers to the Bank shall be binding and conclusive on and against me/us, my/our heirs, executors, administrators and legal representatives in all courts of law or otherwise and the customers shall be my/our agent for giving such acknowledgment from time to time on behalf of myself/ourselves and my/our heirs, executors, administrators and legal representatives".

"The Bank shall also be at liberty to release or discharge any of us from the obligations of this guarantee or to accept any composition from or make any other arrangements with any of us without thereby prejudice or affecting the Bank's rights and remedies against the other or others of us. I/We waive in the Bank's favour all or any or may/our rights against the Bank or the provisions of this guarantee.

The guarantee given by me/us hereunder is in addition and without prejudice to any other guarantee or securities which the Bank may now or hereafter have from me/us or any of us from the customers or from anyone else in respect of any indebtedness or liabilities hereby guaranteed.

I/We further agree that in respect of my/our liability hereunder the Bank shall have a lien on all securities belonging to me/us now or hereafter held by the Bank and all moneys now or hereafter standing to my/our credit with the Bank on any current or any other account whatsoever.

A demand in writing shall be deemed to have been duly given to me/us or my/our heirs or assigns by leaving the same at my/our last known address recorded with the Bank and shall be effectual notwithstanding any change of address or notwithstanding notice thereof to the Bank and such demand if sent by post shall be deemed to be received by me/us or my/our heirs or assigns 24 hours after posting thereof and shall be sufficient if signed by anry officer of the Bank and in proving such service it shall

Company Appeal (AT) (Ins) No. 1775 of 2024 9 of 22 be sufficient to prove that the letter containing the demand was properly addressed and put into the post".

26. It is also relevant at this stage to consider as to in what manner Ld.

Adjudicating Authority has dealt with the submissions of rival parties with

regard to the necessity of invoking guarantee before issuing the demand

notice Rule 7 (Personal Guarantor Rules, 2019). The relevant part of the

impugned judgment is also reproduced as under:

"11.1 We find that the Applicant Bank has issued Form B notice on 24.09.2020 pursuant to Rule 7(1) of the Insolvency and Bankruptcy (Application to Adjudicating Authority for Insolvency Resolution Process for Personal Guarantors to Corporate Debtors) Rule, 2019).

11.2 Learned Counsel appearing for the petitioner Bank rightly submits that if after issuance of section Form B notice, the debt is not paid then the Section 95 petition will be maintainable against the Personal Guarantor.

11.3 Further, the order passed by the Coordinate Bench at Mumbai in C.P. (IB) No. 161/MB/2021 dated 08.12.2021 simply says that:

"3. The Petitioner is to place on record the following information on the next date of hearing:

(a) Consent of IRP.

(b) Invocation of Personal Guarantee.

(c) Issuance of form-B/ proof of delivery of Form-B.

(d) Proof of delivery of Petition on the Personal Guarantor."

Evidently, the Mumbai Bench has asked for details of invocation of personal guarantee, issuance and delivery of Form B but has not laid down any law about separate invocation preceding service of form B notice. 11.5 There is nothing on record to demonstrate a explicate requirement of a distinct invocation of guarantee by the creditor before service of form B notice. 11.6 After examination of the application as per Sub- section (6) of Section 99 of the Insolvency and Bankruptcy Code, 2016, it appears that upon due verification of records and with proper application of mind the

Company Appeal (AT) (Ins) No. 1775 of 2024 10 of 22 resolution professional and the applicant herein has recommended acceptance of the application filed under Section 95(1) of the Insolvency and Bankruptcy Code, 2016 for commencement of Insolvency Resolution Process against the personal guarantor 11.7 We have perused the Report and the documents referred to therein we find no reason to reject the application. Accordingly, it is admitted under Section 100 of 1&B Code".

27. The above placed extract of the impugned order would show that after

considering the law laid down by the Hon'ble Supreme Court in Dilip B.

Jiwrajka (supra) and the law laid down by this Appellate Tribunal in Pooja

Ramesh Singh (supra), Ld. Adjudicating Authority has arrived at the

conclusion that there is nothing on record to demonstrate any explicate

requirement of a distinct notice for invocation of guarantee by the creditor

before service of Form B notice as contemplated in Rule 7(1) (Personal

Guarantor Rules, 2019).

28. We have already noticed the relevant part of the guarantee deed which

provides the manner in which the guarantee may be invoked and

admittedly, the guarantee extended by the Appellant was a continuing

guarantee and that was required to be invoked before filing any

application/petition under Section 95 of the Code.

29. We also recall that it is an admitted case of the Respondent/Financial

Creditor that the application under Section 95 of the Code has been filed

before the Adjudicating Authority, only after giving notice for demand under

Rule 7(1) of the 2019 Rules and before or after that no notice of invocation of

guarantee has been given. The notice given under Rule 7(1) of the 2019

Rules has also been enclosed with the form B which has been filed along

with application filed under Section 95 of the Code. The case of the

Company Appeal (AT) (Ins) No. 1775 of 2024 11 of 22 Respondent/Financial Creditor is that this notice issued in form B under

Rule 7(1) of the 2019 Rules should be deemed to be a notice for invocation of

guarantee and the same was sufficient compliance of Section 95 0f the

Code.

30. It is to be recalled that part I of the Code is placed under the heading

preliminary which contains definition clause and under Section 3, sub-

section (11) of it the "debt" has been defined as under: -

(11) "debt" means a liability or obligation in respect of a claim which is due from any person and includes a financial debt and operational debt;

31. It is also fruitful to mention here the manner in which the "default"

has been defined under the Code under Section 3(12) of the Code which is

also reproduced as under: -

(12) "default" means non-payment of debt when whole or any part or instalment of the amount of debt has become due and payable and is not 1[Paid] by the debtor or the corporate debtor, as the case may be;

32. In part II of the Code which is dedicated to insolvency resolution and

liquidation for corporate persons in Section 5(22) "personal guarantor" has

been defined as under: -

(22) "personal guarantor" means an individual who is the surety in a contract of guarantee to a corporate debtor;

33. Since, the application has been filed by the Respondent No. 1/

Financial Creditor under Section 95 of the code, therefore, the same is also

reproduced as under: -

95. Application by creditor to initiate insolvency resolution process. --

Company Appeal (AT) (Ins) No. 1775 of 2024 12 of 22 (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 consolidating the proceedings under the applications as it thinks just.

(4) An application under sub-section (1) shall be accompanied with details and documents relating to--

(a) the debts owed by the debtor to the creditor or creditors submitting the application for insolvency resolution process as on the date of application;

(b) the failure by the debtor to pay the debt within a period of fourteen days of the service of the notice of demand; and

(c) relevant evidence of such default or non-repayment of debt.

(5) The creditor shall also provide a copy of the application made under sub-section (1) to the debtor.

(6) The application referred to in sub-section (1) shall be in such form and manner and accompanied by such fee as may be prescribed.

(7) The details and documents required to be submitted under sub-section (4) shall be such as may be specified.

34. Thus Sub-Section 4 of Section 95 of the Code provides that an

application under sub-section (1) shall be accompanied with details and

documents as referred to therein. It is also to be recalled that Sub-Section

(7) of Section 95 provides that the details and documents required to be

submitted under sub-section (4) shall be such as may be specified and Rule

2 of the 2019 Rules provides that these rules shall apply to insolvency

resolution process for personal guarantors to CDs.

Company Appeal (AT) (Ins) No. 1775 of 2024 13 of 22

35. It is also to be recalled that Rule 3(1)(e) of 2019 Rules defined

'Guarantor' which is as under: -

"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;

36. It is therefore evident that the guarantor within the meaning of 2019

Rules suggest a debtor who is a personal guarantor to a CD and in respect

of whom guarantee has been invoked by the creditor and the same has

remained unpaid either in full or in part.

37. It is also to be recalled further that Rule 7 of 2019 Rules provides as

under: -

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.

38. A perusal of the aforesaid Rule 1(1) would reflect that demand notice

under clause (b) of sub-section (4) of Section 95 is required to be served on

Company Appeal (AT) (Ins) No. 1775 of 2024 14 of 22 the guarantor demanding payment of the amount of default in form B. Sub-

Section (4) of Section 95 as stated earlier refers to the documents pertaining

to the debts owed by the debtor to the creditor and Rule 7 (1) of 2019 Rules

contemplates service of demand notice under clause (b) of sub-section (4) on

the guarantor, demanding payment of the amount of default in form B.

39. Aforesaid scheme as provided in the Code and relevant Rules would

clearly indicate that demand notice has to be issued demanding payment of

the amount in default, therefore, the default by guarantor has to exist on

the date when notice in Form B has been issued.

40. In Pooja Ramesh Singh vs. State Bank of India and Anr., Comp.

App. (AT) (Ins) No. 329 of 2023, this Appellate Tribunal considered similar

matter and framed following issues and held as under:

"5. We have heard learned counsel for the parties and perused the record. From the submission of learned counsel for the parties and materials on record following issues arise for consideration:

I. Whether default in payment of guaranteed amount by the Corporate Debtor is the same default as is committed by the Principal Borrower and the period of limitation for both the Principal Borrower and the Corporate Guarantor shall be same for the purposes of filing Section 7 application for the Bank? II. Whether the Deed of Guarantee dated 17.05.2019 is guarantee on demand and the limitation of Guarantor shall ensue only when demand is made to the Guarantor?

III. Whether notice dated 01.10.2020 issued by the Bank to Guarantor can be treated to be notice on demand as contemplated in the guarantee and the default on the part of the Guarantor shall be only after notice dated 01.10.2020 i.e. during period of Section 10A?

Company Appeal (AT) (Ins) No. 1775 of 2024 15 of 22 IV. Whether the application filed by the Bank under Section 7 was barred by Section 10A?

24. 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 Borrower the amount becomes due not only against the Principal Borrower but also against the Corporate Guarantor, which is the scheme of the I&B Code. When we read with as is delineated by Section 3(11) of the Code, debt becomes due both on Principal Borrower and the Guarantor, as noted above. The definition of default under Section 3(12) in addition to expression 'due' occurring in Section 3(11) uses two additional expressions i.e "payable" and "is not paid by the debtor or corporate debtor". The expression 'is not paid by the debtor' has to be given some meaning. As laid down by the Hon'ble Supreme Court in "Syndicate Bank vs. Channaveerappa Beleri & Ors." (supra), a guarantor's liability depends on terms of his contract. There can be default by the Principal Borrower and the Guarantor on the same date or date of default for both may be different depending on the terms of contract of guarantee. It is well settled that the loan agreement with the Principal Borrower and the Bank as well as Deed of Guarantee between the Bank and the Guarantor are two different transactions and the Guarantor's liability has to be read from the Deed of Guarantee.

26. The judgment of the Hon'ble Supreme Court in "Syndicate Bank vs. Channaveerappa Beleri & Ors."

has categorically laid down that liability of the Guarantor depends on the terms of his contract. The relevant clauses of the Deed of Guarantee, as noted above, clearly contemplate demand by the Bank upon the Guarantor. Clause 1 provides that "the Guarantors shall forthwith on demand pay to the Bank the whole of such principal sum not exceeding Rs.186,60,00,000/- together with interest". Similarly, Clause 13 uses expression, "the Guarantors shall forthwith on demand made by the Bank deposit with the Bank....". Clause 20 again makes it clear that what was guaranteed by the Guarantor was that amount shall be payable to the Bank on serving the Guarantor with notice requiring payment of the amount.

27. In view of the clear stipulation in the Deed of Guarantee, default on the part of the Guarantor cannot be treated to be on 05.09.2019, when it is alleged that the

Company Appeal (AT) (Ins) No. 1775 of 2024 16 of 22 Principal Borrower committed default, nor the default on the part of the Guarantor can be on date of NPA i.e. 05.12.2019 for the purpose of present case. In the present case, admittedly, the Bank has issued notice dated 01.10.2020 to the Principal Borrower as well as to the Guarantor - Essel Infraprojects Ltd. Notice dated 01.10.2020 which has been brought on the record indicate that notice is addressed to the Principal Borrower and to Guarantors. In Para 8 of the notice following has been stated:

"8. Our Clients states that, You Nos.2 to 4, executed Deed of Guarantee on respective dates inter alia agreeing to pay on demand and without demur to our clients alongwith interest, cost, charges, expenses and/or other money due thereon from time to time in terms of the Agreement of Loan for overall limits, Agreement of Hypothecation of Goods and Assets and Supplemental Agreements."

29. The notice dated 01.10.2020, thus, has been issued invoking the grantee which expression is used in Para 12 above. When the Bank has given time to the Guarantor to make payment on 01.10.2020, there can be no default on part of the Guarantor on any earlier date. The default on part of the Guarantor thus has to be subsequent to the notice dated 01.10.2020 i.e. Non-payment within seven days as required.

32. In view of the foregoing discussion, we arrive at following conclusions:

(i) The Corporate Guarantee Deed dated 17.05.2019 is on demand guarantee deed and the default shall arise on the part of the Guarantor only when demand notice is issued as contemplated in the Deed of Guarantee.

When the State Bank of India invoked the guarantee vide notice dated 01.10.2020, demand on the part of the Corporate Guarantee shall arise only subsequent to the notice dated 01.10.2020 i.e. non-payment of the amount within seven days i.e. default arise on 08.10.2020.

33. In view of the foregoing discussion and conclusions, we answer Issues No. II, III and IV in following manner:

Issue No. II: The Deed of Guarantee dated 17.05.2019 is guarantee on demand and the limitation of Guarantor shall ensue only when demand is made to the Guarantor.

Company Appeal (AT) (Ins) No. 1775 of 2024 17 of 22 Issue No. III: The Notice dated 01.10.2020 issued by the State Bank of India to Guarantor has to be treated to be notice on demand as contemplated in the guarantee and the default on the part of the Guarantor shall be only after notice dated 01.10.2020 i.e. during period of Section 10A. Issue No. IV: The application filed by the Bank under Section 7 was barred by Section 10A.

41. A conjoint reading of Section 95(4) and Rule 7 of 2019 Rules would

indicate the complete mechanism and requirements necessary to move an

application under Section 95 of the Code against Guarantor, as highlighted

by a coordinate bench of this Court in the case of State Bank of India Vs.

Mr. Deepak Kumar Singhania, (2025) ibclaw.in 153 NCLAT in following

words:

"17. The Notice, thus, contemplate demanding payment of the amount of default. The above Rule clearly indicate that Demand Notice has to be issued, demanding payment of the amount in default. Thus, the default by Guarantor has to exist on the date when Notice in Form-B is being issued. When we read Section 95, sub-section (4) and Rule 7 of 2019 Rules, the above is the only intendment of the legislative scheme, i.e. default on the part of Guarantor should exist on the date when Notice in Form-B has to be issued. We have noticed the definitions of 'debt' and 'default' in Section 3 (11) and (12) of the IBC. Default shall arise on account of non-payment of 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

Company Appeal (AT) (Ins) No. 1775 of 2024 18 of 22 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 has contended that expression 'and' used in Rule 3 (1)(e) needs to be read as 'or' to make the provision workable and to avoid producing an unintelligible and absurd result. Learned Counsel for the Appellant has relied on two judgments of the Hon'ble Supreme Court in support of the above submission, 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

Company Appeal (AT) (Ins) No. 1775 of 2024 19 of 22 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 that "to carry out the intention of the legislature it is occasionally found necessary to read the conjunctions 'or' and 'and' one for the other".

42. The coordinate bench of this Appellate Tribunal in the above noted

case further opined as under: -

"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 Guarantee. Thus, the insolvency resolution process against a Guarantor, against whom debt has not become due, is not understandable. We, thus, reject the submission of the Appellant that word 'and' used in Rule 3(1)(e) has to be read as 'or'. Reading of word 'or' in place of 'and' shall be

Company Appeal (AT) (Ins) No. 1775 of 2024 20 of 22 not in accordance with the statutory scheme and shall be against the statutory intendment.

22. The requirement of date, when the default occurred, itself contemplate the default by Guarantor, when Application is filed against Guarantor. Obviously, the default has to be of the Guarantor and mentioning of date when the default occurred, itself contemplate default on the part of Guarantor, i.e. invocation of guarantee as per Deed of Guarantee. Thus, non-mention of requirement of whether guarantee has been invoked and proof thereof, is inconsequential, since the date when default occurred is specifically asked for.

43. It was further held that default shall arise on the part of Guarantor

only when Demand Notice is issued, as contemplated in the Deed of

Guarantee in following words: -

"27. In view of the foregoing discussion, we are not persuaded to accept the submission of the Appellant that Notice under Rule 7 (1) issued in Form-B to the Guarantor, demanding repayment of the default amount, has to be treated as Notice for invoking guarantee. Default before issuance of Notice under Rule 7(1), must exist on the part of the Guarantor. Hence, we reject the submission of the Appellant that Notice under Rule 7, sub-rule (1) is a Notice, invoking the guarantee. We, thus, do not find any error in the order of the Adjudicating Authority, rejecting Section 95 Application filed by the SBI. There is no merit in the Appeal. The Appeal is dismissed. There shall be no order as to costs."

44. The aforesaid law propounded by a Bench of this Appellate Tribunal comprising three Hon'ble Members has clearly laid down the law that it would be mandatory on the part of the Financial creditor to invoke the

Company Appeal (AT) (Ins) No. 1775 of 2024 21 of 22 guarantee before issuing a notice under Rule 7(1) in Form B of 2019 Rules and also that default before issuance of such notice must exist on the part of the guarantor and has therefore rejected the submissions as canvassed by Ld. Counsel for the Appellant by holding that the notice given under Rule 7(1) of 2019 Rules is not a notice for the purpose of invoking the guarantee.

45. Having regard to the facts of the instant case it is an admitted position that no notice for the purpose of invocation of guarantee prior to issuance of notice under Rule 7(1) of 2019 Rules has been given by the financial creditor / Respondent in the instant case and keeping in view the aforesaid facts and circumstances we do not want to take any other view which has been taken by coordinate Benches of this Appellate Tribunal in the aforesaid cases and hold that there is no default in absence of any notice of invocation and therefore, the Adjudicating Authority appears to have committed a mistake in admitting the petition and the impugned order for the reasons mentioned herein before is required to be set aside and is accordingly set aside and as a result, the appeal is allowed.

46. Before parting with the judgment we consider it necessary to place on record the conduct of the concerned officials/officers of the financial creditor-UCO Bank in filing the application under Section 95 of the Code against the guarantor-appellant, without invoking the guarantee. In our considered opinion this lapse on the part of the officials/officers of the Bank is required to be brought in the knowledge of the top officials of the UCO Bank. Thus, a copy of this judgment be also forwarded to the Chairman UCO Bank for information.

[Justice Mohd. Faiz Alam Khan] Member (Judicial)

[Naresh Salecha] Member (Technical) New Delhi.

11.02.2026.

sr/sc

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