Dheeraj Wadhawan vs Union Bank Of India

(Arising out of Order dated 01.02.2022 passed by the Adjudicating Authority (National Company Law Tribunal), Mumbai Bench in CP (IB) No. 4/2021)

IN THE MATTER OF:

Dheeraj Wadhawan Presently in judicial custody Maharashtra. Email: mail@aglaw.in .... Appellant

Vs

Union Bank of India Industrial Finance Branch Union Bank Bhavan, 1st Floor 239, Vidhan Bhavan Marg, Nariman Point Mumbai - 400 021 Through its Chief Manager ... Respondent

Present: For Appellant: Mr. J. P. Sen, Senior Advocate with Mr. Rohan Dakshini, Mr. Ankur Saigal, Mr. Prakhar Parekh, Mr. Mahesh Agarwal, Mr. Shivam Shukla, Mr. Vishesh Malviya, Ms. Pooja Vasandani, Advocates. For Respondent: Mr. Raunak Dhillon, Ms. Saloni Kapadia, Mr. Animesh Bisht, Ms. Madhavi Khanna, Mr. Shubhankar Jain, Advocates.

JUDGMENT

ASHOK BHUSHAN, J.

This Appeal has been filed against the judgment and order dated

01.02.2022 passed by the Adjudicating Authority (National Company Law

Tribunal), Court No.5, Mumbai Bench by which order the Adjudicating

Cont'd.../ -2-

Authority on Application under Section 95 Sub-section (1) of the Insolvency

and Bankruptcy Code, 2016 (hereinafter referred to as 'Code') filed by the

Union Bank of India directed the Resolution Professional (RP) to submit

report under Section 99 of the Code for acceptance for rejection of the

Application. The Appellant aggrieved by said order has come up in this

Appeal.

2. Few facts in the case need to be noted for deciding this Appeal are:

(i) Dewan Housing Finance Corporation Ltd. availed financial

facilities from consortium of lenders lead by Union Bank of

India.

(ii) The credit facilities were secured by the personal guarantee by

the Appellant and Mr. Kapil Wadhawan furnished vide Joint

Deed of Guarantee dated 22.06.2020. Under the Deed of

Guarantee the address of the Appellant was mentioned as Plot

No. 32/A, Union Park, Road No. 5, Bandra (W), Mumbai.

(iii) Union Bank of India sent letter dated 10.09.2020 at the

residential address of the Appellant invoking the guarantee

and calling upon the Appellant and Mr. Kapil Wadhawan to

pay outstanding amount. The Invocation Notice was sent and

accepted on the residential address of the Appellant.

(iv) A Demand Notice dated 07.10.2020 was sent by the Union

Bank of India at the residential address of the Appellant by

India Post which was received by the nephew of the Appellant

Mr. Karthik Wadhawan on 13.10.2020.

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(v) After service of the notice, Application under Section 95 Sub-

section (1) was filed by the Union Bank of India against the

Appellant on 01.12.2020 for total debt of INR

Rs.3,958,30,48,96.71/- as on 31.08.2020.

(vi) In the application notice was issued by the Adjudicating

Authority which was served on the Appellant through his

Advocate on 19.01.2021.

(vi) When the Application under Section 95 came for consideration

before the Adjudicating Authority on 07.12.2021, a

submission was raised before the Adjudicating Authority that

Demand Notice issued by the Bank having not been served on

the Appellant Application need not be entertained.

(vii) The Applicant Bank, who is Respondent before us, contended

that Demand Notice under Rule 7 of the Insolvency and

Bankruptcy (Application to Adjudicating Authority for

Insolvency Resolution Process for Personal Guarantors to

Corporate Debtors) Rules, 2019 (hereinafter referred to as

'2019 Rules') has been duly served by post at the residential

address of the Appellant which was received by adult member

of the family of the Appellant i.e. his nephew Mr. Karthik

Wadhawan, therefore service is complete and Application filed

under Section 95 be entertained.

(viii) The Adjudicating Authority after hearing the parties held that

the Demand Notice was served on the Appellant and

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Application filed by the Bank was entertained. Resolution

Professional was directed to submit a report as required by

Section 99 of the Code.

(ix) Aggrieved by this order, this Appeal has been filed.

3. Shri J. P. Sen, learned senior counsel for the Appellant challenging

the order passed by the Adjudicating Authority contends that the

Respondent Bank has failed to serve mandatory notice on the Appellant

prior to filing of Company Petition. It is submitted that at the time when

notice is claimed to be served, the Appellant was in judicial custody.

Hence, it was incumbent on the Bank to serve notice at Taloja, Navi

Mumbai. It is submitted that statutory rules require personal service and

personal service having not been effected on Appellant the Company

Petition is not maintainable. It is submitted that the notice dated

07.10.2020 which was delivered on the residential address of the Appellant

and received by nephew of the Appellant - Mr. Karthik Wadhawan, who by

letter dated 10.11.2020 returned the envelop to the Bank stating that

Appellant is in judicial custody at Taloja, Navi Mumbai pending

investigation. It is submitted that personal service of the notice is

mandatory and without personal service of notice Company Petition cannot

be entertained and the Adjudicating Authority committed error in

entertaining the Application under Section 95 by directing the Resolution

Professional to submit report under Section 99. Learned counsel for the

Appellant contends that notice on the Appellant was required to be served

as per provisions of Order 5 Rule 24 of the Civil Procedure Code.

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4. Counsel for the Respondent, Shri Raunak Dhillon, refuting the

submissions of the Appellant contends that Demand Notice was served on

the Appellant as per requirement of the 2019 Rules. Notice was sent by

India Post on the last known address of the Appellant which was duly

received by the nephew of the Appellant. Hence, service is complete. It is

submitted that 2019 Rules does not require any personal service on the

Appellant. Learned counsel for the Respondent submits that provisions of

Order 5 Rule 24 of the Civil Procedure Code are not attracted since it is for

service of summons and 2019 Rules provides for mode of service which was

duly followed by the Bank in serving the Demand Notice. It is submitted

that when statute provides for particular mode of service of notice general

rule regarding service are not to be adhered to.

5. We have considered submissions of learned counsel for the parties

and perused the record.

6. The Company Petition filed by the Bank against the Appellant -

Personal Guarantor is under Section 95 of the Code Rule has been framed

namely, The Insolvency and Bankruptcy (Application to Adjudicating

Authority for Insolvency Resolution Process for Personal Guarantors to

Corporate Debtors) Rules, 2019. Rule 3 (g) defines service in following

manner:

"(g) "serve" means sending any communication by any means, including registered post, speed post, courier or electronic form, which is capable of

Company Appeal (AT) (Insolvency) No. 214 of 2022 -6-

producing or generating an acknowledgement of receipt of such communication:

Provided that where a document cannot be served in any of the modes, it shall be affixed at the outer door or some other conspicuous part of the house or building in which the addressee ordinarily resides or carries on business or personally works for gain;"

7. Rule 7 of 2019 Rules is with regard to application by Creditor. Rule

7 is to the following effect:

"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."

8. Rule 7 Sub-rule (1) provides that Demand Notice under Section 95

(4) be served on the Guarantor regarding payment of amount of default, in

Form B.

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9. In the present case, Demand Notice as contemplated under Rule 7

sub-rule (1) of the 2019 Rules was sent by India Post on the address of the

Appellant as mentioned in the Deed of Guarantee. The Demand Notice

dated 07.10.2020 was duly delivered on the said address on 13.10.2020

and accepted by Mr. Karthik Wadhawan, an adult member of the

Appellant's family. In the Company Petition filed under Section 95 an

Affidavit of Service of the Demand Notice was filed by the Bank wherein in

Para 1 and 2 following has been stated:

"1. I say that pursuant to the instructions from the Petitioner, on 9th October 2020, I visited the office of India Post for service of demand notice dated 9 th October 2020 ("Notice") issued by the Petitioner, on the Respondent at Wadhawan House, Plot No. 32/A, Union Park Road No.5, Petit Girls School, Bandra (W), Mumbai 400050. The copy of the postal receipt bearing number CM080850026IN is annexed as "Exhibit A".

2. The said Notice was delivered to Respondent at Wadhawan House, Plot No. 32/A, Union Park Road No.5, Petit Girls School, Bandra (W), Mumbai 400050 on 13th October, 2020. The screenshot of the delivery status made available on the website of India Post confirming delivery of the Notice on 13th October, 2020 is annexed as "Exhibit B"."

10. Fourteen days after service of Demand Notice, Application under

Section 95 was filed on 01.12.2021. Rule 3(g) of the 2019 Rules provides

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mode and manner of sending any communication. As per Rule 3(g) "serve"

means sending any communication by any means, including registered

post, speed post, courier or electronic form. The proviso of 3(g) contemplate

the situation where a document cannot be served in any of the modes, it

shall be affixed at the outer door or some other conspicuous part of the

house or building in which the addressee ordinarily resides or carries on

business or personally works for gain. The statute provides a particular

manner of service of notice. Demand Notice is to be served at house or

building in which the addressee ordinarily resides. In the present case,

proviso to Rule 3(g) was not resorted to since the Notice dated 07.10.2020

was sent and received on 13.10.2020. The Adjudicating Authority in

impugned judgment after considering the submissions has come to the

conclusion that notice served in Form B at the address of the Appellant is

valid service. The Adjudicating Authority also came to the conclusion that

service of Demand Notice is not requirement of personal service. Learned

counsel for the Appellant has relied on Order 5 Rule 24 of the Civil

Procedure Code, which is to the following effect:

"24. "Service on defendant in prison.- Where the

defendant is confined in a prison, the summons

shall be delivered or sent [or by post or by such

courier service as may be approved by the High

Court, by fax message or by Electronic Mail service

or by any other means as may be provided by the

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rules made by the High Court] to the officer in charge

of the prison for service on the defendant."

11. Order 5 Rule 24 of the Civil Procedure Code is provision for issuance

and service of summons. Said provision is not relevant in so far as service

of Demand Notice is contemplated as per 2019 Rule 3(g) read with Rule 7.

12. It is also on the record that after service of the demand notice when

Company Petition was filed under Section 95, notices were issued by the

Adjudicating Authority which were also duly served on the Appellant

through his counsel on 19.01.2021. Company Petition under Section 95(1)

was taken up by the Adjudicating Authority on 07.12.2021 before which

date the Appellant was served and represented before the Adjudicating

Authority.

13. In view of the facts as noted above, we are of the opinion that Demand

Notice which was dated 07.10.2020 was duly served on the Appellant as

per Rule 3(g) read with Rule 7 of 2019 Rules. Service of Notice of Demand

has been effected in accordance of procedure prescribed in 2019 Rules. We

do not find any infirmity in the order of the Adjudicating Authority by which

the Adjudicating Authority has held that the Demand Notice has been duly

served and report under Section 99 of the Code by the Resolution

Professional has been called for. The Application filed under Section 95(1)

is yet to be admitted or rejected under Section 100 of the Code. After receipt

of the report by the Resolution Professional as contemplated under Section

99, it is open for the Appellant to raise all his pleas and objections at the

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time of admission or rejection of Application under Section 95. We do not

find any infirmity in the order of the Adjudicating Authority dated

01.02.2022 warranting any interference in exercise of our Appellate

Jurisdiction of this Tribunal. The Appeal is dismissed.

[Justice Ashok Bhushan] Chairperson

[Dr. Alok Srivastava] Member (Technical)

NEW DELHI

16th March, 2022

Archana

Company Appeal (AT) (Insolvency) No. 214 of 2022