Jugal Kishore Saraff vs Cfm Asset Reconstruction Pvt. Ltd

IN THE MATTER OF: Jugal Kishore Saraff Suspended Board of Director of (Machine Works International Limited) ...Appellant

Versus

CFM Asset Reconstruction Pvt. Ltd. & Anr. ...Respondents

Present: For Appellant : Mr. Anupam Lal Das, Sr. Advocate with Mr. Sinha Shrey Nikhilesh, Mr. Swastik Verma, Mr. Nayan Dubey, Mr. Md. Faraaz Khan, Mr. Parth Davar, Advocates. For Respondents : Mr. Abhrajit Mitra, Sr. Advocate with Mr. Abhijeet Sinha, Sr. Advocate with Mr. Pradeep Sancheti, Mr. Siddhartha Chatterjee, Ms. Rajshree Kajaria, Mr. Abir Ghosh, Mr. Jatan Monga, Mr. Naman Sherstra, Mr. Gaurv Kumar, Advocates for R-1.

With

Company Appeal (AT) (Insolvency) No. 374 of 2025 & I.A. No. 1399 of 2025

IN THE MATTER OF: Jugal Kishore Saraff, (Suspended Director of Motijug Agencies Ltd.) ...Appellant

Versus

CFM Asset Reconstruction Pvt. Ltd. & Anr. ...Respondents

Present: For Appellant : Mr. Anupam Lal Das, Sr. Advocate with Mr. Sinha Shrey Nikhilesh, Mr. Swastik Verma, Mr. Nayan Dubey, Mr. Md. Faraaz Khan, Mr. Parth Davar, Advocates. For Respondents : Mr. Abhrajit Mitra, Sr. Advocate with Mr. Abhijeet Sinha, Sr. Advocate with Mr. Pradeep Sancheti, Mr. Siddhartha Chatterjee, Ms. Rajshree Kajaria, Mr.

Cont'd.../ 2

Abir Ghosh, Mr. Jatan Monga, Mr. Naman Sherstra, Mr. Gaurv Kumar, Advocates for R-1.

ORDER

(Hybrid Mode)

17.04.2025: Heard learned counsel for the Appellant as well as learned

counsel appearing for the Respondent. These two appeals have been filed by

the Suspended Director of the Corporate Debtors challenging the order passed

by NCLT Division Bench, Court No.II, Kolkata dated 08.01.2025 admitting

Section 7 application filed by CFM Asset Reconstruction Pvt. Ltd. By a

common order, Section 7 applications filed against the Corporate Guarantors,

Machine Works (International) Limited and Motijug Agencies Ltd. in CP (IB)

No.200/KB/2022 and CP (IB) No.91/KB/2022, respectively have been

admitted. Aggrieved by which order these appeals have been filed.

2. Brief facts in both the appeals being common, we are referring to

pleadings and materials placed in Company Appeal (AT) (Ins.) No.374 of 2024

for deciding both the appeals.

2.1. The Principal Borrower; M/s Ural India Ltd. (UIL) had taken

financial facilities from the then Allahabad Bank. The Appellant

executed a Guarantee Deed in favour of the Financial Creditor on

12.10.2010 and further a fresh guarantee was executed on 28.06.2012.

2.2. The account of the Principal Borrower was declared NPA on

12.07.2014. Notice under Section 13(2) of the SARFAESI Act was issued

on 31.07.2014 to the Principal Borrower and the Guarantor demanding

Company Appeal (AT) (Ins.) No.211 of 2025 and 374 of 2025 3

outstanding amount. Notice under 13(4) was also issued on 24.08.2015

and application under Section 19 of the Recovery of Debts Bankruptcy

Act, 1993 was also filed by the Allahabad Bank on 29.03.2017 being O.A.

No. 151 of 2017 before the DRT, Kolkata against the Principal Borrower

as well as the Guarantor.

2.3. Section 7 application was filed against the Principal Borrower on

13.08.2018. The CIRP against the Principal Borrower commenced on

15.10.2019 with regard to UIL, in which, subsequently, an order for

liquidation has been passed against the Principal Borrower on

15.01.2021.

2.4. An application under Section 7 has been filed by the Indian Bank

in July, 2022 against both the Personal Guarantors - Machine Works

(International) Limited and Motijug Agencies Ltd. Reply was filed in the

Section 7 application. The debt having been assigned to CFM Asset

Reconstruction Pvt. Ltd. application was filed for substitution which was

allowed by the NCLT on 19.03.2024. The Adjudicating Authority heard

both the parties and by impugned order dated 08.01.2025 has admitted

the Section 7 application against both the Corporate Guarantors.

Aggrieved by the said order these appeals have been filed by the

Suspended Directors of the Corporate Guarantors.

3. We have heard learned counsel for the Appellant as well as learned

counsel for the Financial Creditor.

Company Appeal (AT) (Ins.) No.211 of 2025 and 374 of 2025 4

4. Learned counsel for the Appellant challenging the order contended that

present is a case where as per the Guarantee Deed between the parties dated

12.10.2010, no demand notice was issued to the Guarantors, hence, no

proceedings could have been initiated under Section 7 without invoking the

guarantee of the Guarantor. It is further submitted that notice dated

31.07.2014 issued under Section 13(2) is not invoking of guarantee and even

if the said notice is treated as invocation of guarantee, the application filed

under Section 7 in the year 2022 was barred by time.

5. Learned counsel for the Respondent refuting the submissions of learned

counsel for the Appellant submits that in the pleadings before the

Adjudicating Authority the Corporate Debtor has admitted about the

invocation of the guarantee and non-raising of issue of guarantee in no

manner mean that application was barred by time since the guarantee was

invoked in 31.07.2014 and application under Section 7 has been filed in the

year 2022. It is submitted that there being balance sheet confirmation and

acknowledgment by the Principal Borrower, there shall be extension of

limitation under Section 18 of the Limitation Act. OTS proposals were

submitted by the Principal Borrower and the Guarantors, which action was

ground to given benefit of Section 4 of the Limitation Act and application has

rightly been held to be not barred by time.

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

and perused the record.

Company Appeal (AT) (Ins.) No.211 of 2025 and 374 of 2025 5

7. The principal submission which has been advanced by learned counsel

for the Appellant is that no demand notice has been issued as per the

Guarantee Deed dated 12.10.2010, hence, there never been any invocation of

guarantee as per the Deed of Guarantee. Learned counsel for the Appellant

has relied on judgment of this Tribunal in "Company Appeal (AT) (Ins.)

No.191 of 2025, State Bank of India vs. Deepak Kumar Singhania"

decided on 28.02.2025. He submitted that the terms of Guarantee Deed are

decisive of the question as to whether the guarantee has been invoked as per

the Guarantee Deed and in the manner in which guarantee has to be invoked.

Clause 12 of the Guarantee Deed on which reliance has been placed by

learned counsel for the Appellant is as follows:

"12. I/We further agree that in case the Guarantor fails to pay the Bank's dues within one month from the date of receipt of the demand notice from the bank in pursuance of the guarantee furnished by the guarantors herein, the bank shall be at liberty to publish the name and addresses of the Guarantor along with details of the outstanding dues payable by the guarantor (s) to the bank and other relevant details in the Newspaper and other publicity media. The Bank will also be at liberty to provide information about the defaulter guarantors to Reserve Bank Of India enforcement Directorate ECGC, CIBIL or any other statutory Authority as may be deemed necessary."

8. When we look into the aforesaid clause, the clause contemplate that

Guarantors have agreed that in event the Guarantor fails to pay the Bank's

Company Appeal (AT) (Ins.) No.211 of 2025 and 374 of 2025 6

dues within one month from the date of receipt of the demand notice from the

bank in pursuance of the guarantee furnished by the guarantors, the bank

shall be at liberty to publish the name and addresses of the Guarantor along

with details of the outstanding dues payable by the guarantors to the bank

and other relevant details in the Newspaper and other publicity media.

9. Learned counsel for the Respondent submits that in fact the said clause

was only with regard to notice for publishing the name of Guarantor as

defaulter and to intimate the other authorities.

10. A plain reading of Clause 12 indicates the purpose and object of the

said clause. We, however, are of the view that even if we accept the

submission of learned counsel for the Appellant that demand has to be made

by the Bank, we have to look into material for demand of payment by the

Guarantor under Section 13(2) notice, which is relied by the Financial

Creditor. The copy of notice dated 31.07.2014 has been brought on the record

along with IA No.1789 of 2025 filed by the Respondent by which the pleadings

and material which were before the Adjudicating Authority were brought on

record. The notice dated 31.07.2014 has been addressed to the Principal

Borrower as well as the Corporate Guarantors, which is apparent from the

notice which has brought on the record on page 98 of the above IA. In the

notice following has been stated.

"By this notice, you are called upon to repay the entire outstanding dues of Rs. 282936894.28 (Rupees Twenty Eight Crore Twenty Nine Lacs Thirty Six

Company Appeal (AT) (Ins.) No.211 of 2025 and 374 of 2025 7

Thousand Eight Hundred Ninety Four and Paise Twenty Eight only) together with interest thereon at applicable rate since 31.07.2014 till repayment of entire outstanding dues.

By this notice, you are hereby called upon to discharge the entire liability as on date and also future interest thereon alongwith cost, charge and expenses, in the above account to us as Secured Creditor within 60 days from the date of this notice, failing which the Bank shall be constrained to exercise all or any of our right(s) conferred under Section 13(4) and other provisions of the aforesaid Act."

11. The notice indicate that amount of outstanding dues has been

mentioned in the notice and the addressees have been asked to discharge the

entire liability as on date and also future interest. Learned counsel for the

Appellant further referred to notice in application filed under Section 7.

Affidavit in reply filed by the Corporate Debtor in CP (IB) 91 of 2022 has been

filed at page 335 of IA No.1789 of 2025. It is useful to extract Para 3(c) of the

Reply, which is as follows:

"c) It is stated that this application is barred by the laws of limitation. It has been categorically stated in the application that the default in respect of the loan of Ural India Limited was of 12.07.2014. The guarantee was invoked by a letter dated 31.07.2014. An amount claimed by Financial Creditor in Section 13(2) Notice of the SARFAESI Act is Rs. 28,29,36,824.28. Thus guarantee has been invoked on 31.07.2014 and this

Company Appeal (AT) (Ins.) No.211 of 2025 and 374 of 2025 8

application has been filed in the month of March 2022.

Therefore, this application is hopelessly barred by the laws of limitation and on that ground only is liable to be dismissed. A copy of the notice issued under Section 13(2) of the SARFAESI Act dated 31st July, 2014 is annexed herewith and marked as Annexure- A."

12. The Corporate Debtor came with categorical submission that guarantee

was invoked on 31.07.2014, which is clear from the pleadings in Para (c).

Learned counsel for the Appellant has also referred to the application which

has been filed under section 7 where the Financial Creditor has come up with

categorical statement that guarantee has been invoked on 31.07.2014. A copy

of the application has been filed along with IA No.1789 of 2025 as Annexure

A-1 where in Part IV, the Financial Creditor has pleaded following in Para 10:

"10) The Financial Creditor thereafter issued the statutory notice of demand bearing Reference No. ALB_IBK/SARFAESI/URAL/2014-15/368 dated 31.07.2014 under Section 13(2) of SARFAESI Act, 2002 whereby the corporate guarantee given by the Corporate debtor herein has also been invoked demanding payment of Rs.28,29,36,894.28 as on 31.07.2014till repayment of entire outstanding dues and the Borrower and the Guarantors failed and neglected to pay the dues of the Financial Creditor.

Subsequently the Financial Creditor has also taken steps under section 13(4) of the SARFAESI Act, 2002.

Company Appeal (AT) (Ins.) No.211 of 2025 and 374 of 2025 9

The copy of the 13(2) Notice and the 13(4) Notice is annexed herewith and marked as ANNEXURE-1-M."

13. When the Financial Creditor came with specific pleading that guarantee

has been invoked on 31.07.2014 and Corporate Debtor has also made

statement in its reply, accepting that guarantee was invoked on 31.07.2014,

we fail to see any scope for submission of the Appellant that guarantee was

never invoked. The judgment of this Tribunal relied by the Appellant in State

Bank of India vs. Deepak Kumar Singhania in no manner can help the

Appellant where this Appellate Tribunal has held that invocation has to be in

terms of the Guarantee Deed. The issue which came up for consideration in

the above case was whether the demand notice issued under Rule 7(1) in

Form-B of Insolvency and Bankruptcy (Application to Adjudicating Authority

for Insolvency Resolution Process for Personal Guarantors to Corporate

Debtors) Rules, 2019 can be treated as notice invoking guarantee or there has

to be notice or invocation prior to issuance of notice under Rule 7(1) in Form

B. This Tribunal answered the submissions in the said case holding that

invocation of guarantee has to be prior to issuance of notice under Rule 7(1)

in Form B. Following has been held in Para 27:

"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.

Company Appeal (AT) (Ins.) No.211 of 2025 and 374 of 2025 10

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."

14. Thus, the above judgment in no manner help the Appellant in facts of

the present case.

15. Now coming to the submission of the Appellant that the application has

been barred by limitation, the Adjudicating Authority in Para 3.3 has noticed

sequence of events, details of balance sheet and OTS proposals received. The

balance sheet from 2014-15, 2016-17, 2018-19 has been noticed of the

Principal Borrower where acknowledgment of debt is there. OTS proposal

submitted on 17.07.2020, 06.09.2020 have also been noticed which have

been brought on record by the Respondent in the IA. After 31.07.2014 i.e.

issuance of invocation notice when acknowledgment is there in the balance

sheet of the Principal Borrower, the application filed against the Corporate

Guarantor cannot be said to be barred by time. The Adjudicating Authority

has considered the said submission and have returned finding holding that

application under Section 7 is not barred by time. We fully concur with the

view taken by the Adjudicating Authority that application is not barred by

time.

Company Appeal (AT) (Ins.) No.211 of 2025 and 374 of 2025 11

16. Learned counsel for the Respondent has also relied on judgment of

Hon'ble Supreme Court in "Laxmi Pat Surana vs. Union of India & Anr.,

(2021) 8 SCC 481", which fully support the submission made by the

Respondent.

17. In view of the aforesaid, we do not find any substance in the any of the

submissions raised by learned counsel for the Appellant. Appeal is dismissed.

[Justice Ashok Bhushan] Chairperson

[Arun Baroka] Member (Technical) Archana/nn

Company Appeal (AT) (Ins.) No.211 of 2025 and 374 of 2025