Maya Pandey vs Small Industries Development Bank Of ...

(Arising against the impugned order dated 13.02.2025 passed by the National Company Law Tribunal, Allahabad Bench in Company Petition IB No. 50/ALD/2023.

IN THE MATTER OF:

Vijay Pandey S/o Shri Hari Narayan Pandey R/o 645 A/57, P-15, Sector-I Janki Vihar, Near Capital Convent School Lucknow, Uttar Pradesh-226021 ...Appellant

Versus

1. Small Industries Development Bank of India Swavlamban Bhavan, Avenue 3, Lane 2 Bandra Kurla Complex, Bandra East, Mumbai Maharshtra- 400051.

2. Rakesh Kumar Jindal House No. 3656/6, Gali No.6 Narang Colony, Tri Nagar, Near Rose Garden New Delhi- 110035 ...Respondents

Present:

For Appellant: Mr. Sabhay Choudhary, Advocate. For Respondent: Mr. Shubham Raghuwanshi, Mr. Sujoy Dutta, Mr. NPS Chawla, Ms. Mahima Shekhawat and Mr. Surekh Kant B., Advocates for R-1. Ms. Pinki, Advocate for R-2.

WITH Company Appeal (AT) (Ins.) No. 773 of 2025

(Arising against the impugned order dated 13.02.2025 passed by the National Company Law Tribunal, Allahabad Bench in Company Petition IB No. 51/ALD/2023. IN THE MATTER OF: Maya Pandey W/o Sh. Vijay Pandey R/o 645 A/57, P-15, Sector-I Janki Vihar, Near Capital Convent School, Lucknow, Uttar Pradesh-226021 ...Appellant

Versus

1. Small Industries Development Bank of India Swavlamban Bhavan, Avenue 3, Lane 2 Bandra Kurla Complex, Bandra East, Mumbai Maharshtra- 400051.

2. Rakesh Kumar Jindal House No. 3656/6, Gali No.6 Narang Colony, Tri Nagar, Near Rose Garden New Delhi- 110035 ...Respondents

Present:

For Appellant: Mr. Sabhay Choudhary, Advocate. For Respondent: Mr. Shubham Raghuwanshi, Mr. Sujoy Dutta, Mr. NPS Chawla, Ms. Mahima Shekhawat and Mr. Surekh Kant B., Advocates for R-1.

Ms. Pinki, Advocate for R-2.

J U D G M EN T (30th June, 2026)

INDEVAR PANDEY, MEMBER (T)

CA AT (Ins) No. 772 of 2025

The present/first appeal has been preferred by the Appellant- Vijay

Pandey, against the impugned order dated 13.02.2025 passed by the Ld.

Adjudicating Authority (National Company Law Tribunal, Allahabad Bench)

Page 2 of 34 Company Appeal (AT) (Ins.) No. 772 & 773 of 2025 in Company Petition No. CP (IB) No. 50/ALD/2023 in the matter of Small

Industries Development Bank of India vs. Vijay Pandey, whereby the

application filed by Respondent No. 1/ Small Industries Development

Bank of India (SIDBI), under Section 95(1) of the Insolvency and Bankruptcy

Code, 2016 (herein after referred as 'Code') came to be allowed and the

Personal Insolvency Resolution Process (PIRP) was initiated against the

Appellant on the basis of the report submitted by Mr. Rakesh Kumar

Jindal/Respondent No. 2, the Resolution Professional, under Section 99

of the Code.

Company Appeal AT (Ins) No. 773/2025

2. The second appeal has been filed by the Appellant- Maya Pandey,

against the impugned order dated 13.02.2025 passed by the Ld. Adjudicating

Authority (National Company Law Tribunal, Allahabad Bench) in Company

Petition No. CP (IB) No. 51/ALD/2023 in the matter of Small Industries

Development Bank of India vs. Maya Pandey, whereby the application filed by

Financial Creditor-Small Industries Development Bank of India (SIDBI)/

Respondent No.1, under Section 95(1) of the Insolvency and Bankruptcy

Code, 2016 was allowed, and the Personal Insolvency Resolution Process

(PIRP) was initiated against the Appellant on the basis of the report submitted

by Mr. Rakesh Kumar Jindal/Respondent No. 2, the Resolution

Professional, under Section 99 of the Code.

3. Both the first and second appeals arise from the same loan transaction

and involve identical facts and issues. The appellant in first appeal Shri Vijay

Page 3 of 34 Company Appeal (AT) (Ins.) No. 772 & 773 of 2025 Pandey is the husband of Smt. Maya Pandey who is the Appellant in the

second appeal. Both the Appellants are Personal Guarantors to the Corporate

Debtor and have executed the same Deed of Guarantee dated 22.09.2017 in

favour of the financial creditor. Since both appeals arise from the same

transaction and involved identical facts and issues, they are taken up together

for disposal.

Facts of the Case

4. The brief facts relevant to deciding the present appeals are as given

below:-

i. Small Industries Development Bank of India, the Financial Creditor

and Respondent No.1 had sanctioned a loan facility to the corporate

debtor "M/s Bhartiya Micro Credit" vide sanction letter bearing no. 2018

May23/ L3144068, which was issued on 23.05.2017, thereby

establishing the initial financial relationship between the lender and the

borrower.

ii. Pursuant to the sanction of the said facility, the financial creditor had

granted a term loan amounting to Rs. 2,00,00,000/- (Rupees Two Crores)

to the corporate debtor through a loan agreement executed on

22.09.2017, thereby crystallizing the financial obligations of the

borrower towards the creditor.

iii. In furtherance of securing the said financial assistance, the directors

of the corporate debtor, Shri Vijay Pandey and Smt. Maya Pandey who

are the Appellants herein, had executed a Deed of Guarantee on Page 4 of 34 Company Appeal (AT) (Ins.) No. 772 & 773 of 2025 22.09.2017 in favour of the financial creditor, wherein the guarantors

undertook to secure repayment of the loan. The Clause 03 of the said

Deed specifically stipulated that the guarantor would be liable to pay the

outstanding dues only upon demand being made by the financial

creditor, thereby making invocation of guarantee contingent upon

issuance of demand notice.

iv. The account of the corporate debtor was classified as a Non-

Performing Asset (NPA) on 12.12.2019 by the financial creditor,

indicating default in repayment of the loan obligations. Subsequently,

the loan together with the interest and other charges was recalled by

Respondent No.1 on 01.06.2021 on Corporate Debtor. Thereafter, the

Respondent No.1 also invoked the personal guarantees of the Guarantors

to the Corporate Debtor on 26.11.2021.

v. The Respondent No.1 also filed an application under Section 19 of the

Recovery of Debts Due to Banks and Financial Institutions Act, 1993

being OA No. 264 of 2022 before the Ld. Debts Recovery Tribunal,

Lucknow Bench on 05.03.2022.

vi. While the DRT Proceedings were going on, the Financial Creditor

SIDBI issued a demand notice under Rule 7(1) of the Insolvency and

Bankruptcy (Application to Adjudicating Authority for Insolvency

Resolution Process of Personal Guarantors to Corporate Debtors) Rules,

2019 on 20.12.2022 to the guarantors including the appellants, calling

upon them to pay an amount of Rs.1,27,53,256/- within a period of ten

Page 5 of 34 Company Appeal (AT) (Ins.) No. 772 & 773 of 2025 days from receipt thereof, failing which insolvency proceedings were to

be initiated. The Appellants did not reply to the aforesaid demand notice

issued by Respondent No.1.

vii. Thereafter, the financial creditor proceeded to file an application

under Section 95(1) of the Insolvency and Bankruptcy Code, 2016 on

22.06.2023 before the Adjudicating Authority seeking initiation of

Personal Insolvency Resolution Process against the appellant, which

application forms the foundation of the present proceedings.

viii. The Ld. Adjudicating Authority, vide order dated 17.01.2024,

appointed Respondent No. 2, namely Mr. Rakesh Kumar Jindal, as the

Resolution Professional for conducting the insolvency process in respect

of the appellant. Pursuant thereto, the Resolution Professional submitted

his report under Section 99 of the Code on 15.09.2024 recommending

admission of the application filed by the financial creditor.

ix. The record further reveals that the Resolution Professional had filed

a rejoinder to the objections of the appellant, wherein a letter dated

26.11.2021 was sought to be relied upon as evidence of invocation of

personal guarantee.

x. The Ld. Adjudicating Authority, after considering the material placed

on record, passed identical impugned orders dated 13.02.2025 whereby

the application filed under Section 95(1) of the Code was allowed and the

Personal Insolvency Resolution Process was initiated against the

appellants.

Page 6 of 34 Company Appeal (AT) (Ins.) No. 772 & 773 of 2025 xi. Aggrieved by the impugned orders dated 13.02.2025 in both appeals,

the Appellants have preferred these appeals before this Appellate

Tribunal under Section 61(1) of the Code.

Submissions of the Appellants

5. Ld. Counsel for the Appellants submits that Respondent No. 1 had

extended a term loan of Rs. 2,00,00,000/- to the Corporate Debtor, namely

M/s Bhartiya Micro Credit, pursuant to a loan agreement dated 22.09.2017.

On the same date, an Agreement of Guarantee was executed between

Respondent No. 1 and the Appellant. Clause 03 of the said Agreement

specifically stipulates that in the event of default by the borrower, the

guarantor shall, upon demand, pay all amounts due to the financial creditor.

6. He submits that after the account of the Corporate Debtor was declared

as Non-Performing Asset (NPA); Respondent No. 1, without first invoking the

personal guarantee in terms of the Agreement or issuing any prior demand

notice as required under Clause 03 of the Deed of Guarantee, directly

proceeded to initiate insolvency proceedings against the Appellant by issuing

a demand notice under Rule 7(1) of the IBC (Application to Adjudicating

Authority for Insolvency Resolution Process for Personal Guarantors) Rules,

2019.

7. It is further submitted that Respondent No. 1 filed an application under

Section 95(1) of the Code seeking initiation of PIRP against the Appellant,

wherein Respondent No. 2 was appointed as Resolution Professional. The

Resolution Professional submitted his report under Section 99 recommending

Page 7 of 34 Company Appeal (AT) (Ins.) No. 772 & 773 of 2025 admission of the application, without appreciating the fundamental fact that

no valid demand notice had been issued by Respondent No. 1 prior to

initiation of insolvency proceedings.

8. Ld. Counsel submits that Respondent No. 1 has failed to comply with

Clause 03 of the Deed of Guarantee dated 22.09.2017. The said clause

unequivocally provides that upon default by the borrower, the guarantor

becomes liable only "upon demand" made by the financial creditor. Therefore,

the liability of the personal guarantor, i.e., the Appellant, does not arise

automatically upon default by the borrower, but only upon a valid and specific

demand being raised by Respondent No. 1. In absence of such demand, no

enforceable debt can be said to have arisen against the Appellant.

9. He further submits that Respondent No.1, without invoking the

personal guarantee in terms of Clause 03 and without issuing any demand

notice thereunder, directly issued a demand notice dated 20.12.2022 under

Section 95(3) of the Code calling upon the Appellant to pay Rs.1,27,53,256/-

The Learned Adjudicating Authority erred in holding that the liability of the

guarantor is co-extensive with that of the borrower. While Section 128 of the

Indian Contract Act provides that the liability of the surety is co-extensive,

the same is expressly subject to the terms of the contract. In the present case,

Clause 03 clearly modifies this position by requiring a prior demand. Hence,

the finding of the Adjudicating Authority is contrary to the contractual

stipulation governing the parties.

10. It is the submission of the Ld. Counsel that the alleged letter dated

26.11.2021, relied upon by Respondent No. 1, was produced only at the stage

Page 8 of 34 Company Appeal (AT) (Ins.) No. 772 & 773 of 2025 of rejoinder before the Adjudicating Authority, without any proof of service. In

absence of proof of delivery, the said letter cannot be treated as a valid

demand in terms of Clause 03 of the Deed of Guarantee and, therefore, cannot

give rise to liability on the part of the Appellant.

11. He further submits that Respondent No. 1 has sought to rely upon

Clause 23 of the Personal Guarantee Agreement to contend that service of the

letter dated 26.11.2021 stands completed. However, Respondent No. 1 has

failed to produce any documentary evidence such as the envelope, postal

receipt, or certificate evidencing dispatch of the said notice, either before the

Adjudicating Authority or before this Hon'ble Tribunal. In absence of such

foundational proof, the deeming fiction under Clause 23 cannot be invoked,

and therefore, the alleged service cannot be presumed.

12. It is submitted that Respondent No. 1 has also placed reliance upon a

legal notice dated 04.02.2022, allegedly issued to the Appellant. However, this

document was never brought on record along with the Section 95 application

filed before the Adjudicating Authority in the year 2024. The said document

is being introduced for the first time at the appellate stage, which is

impermissible in law. Reliance is placed on the judgment in "Lawrence v.

Renahan Vamakesan (Civil Appeal No. 377/2023)", wherein it has been

held that documents not produced before the Adjudicating Authority cannot

be entertained at the appellate stage unless they fall within the limited

exceptions under Order XLI Rule 27 CPC. The present case does not satisfy

any such exception.

Page 9 of 34 Company Appeal (AT) (Ins.) No. 772 & 773 of 2025

13. Ld. Counsel further submits that Respondent No. 1 has contended that

the letter dated 26.11.2021 formed part of the Original Application (O.A.) filed

before the Debt Recovery Tribunal and that the Appellant was served in those

proceedings and proceeded ex parte. However, it is submitted that the

Appellant was proceeded ex parte only on account of publication of notice of

hearing, and not on account of service of the alleged demand letter dated

26.11.2021. Mere publication of notice for appearance in DRT proceedings

cannot be equated with valid service of demand under Clause 03 of the Deed

of Guarantee.

14. Ld. Counsel submits that the legal position regarding invocation of

guarantee and existence of default stands settled by this Appellate Tribunal

in "SBI vs. Deepak Kumar Singhania (CA (AT) (Insolvency) No. 191 of

2025)", wherein it has been held that default on the part of the guarantor

must exist on the date of issuance of notice under Rule 7(1), and that a

personal guarantor becomes a debtor only upon invocation of the guarantee.

In the present case, since no valid invocation of guarantee was made prior to

issuance of notice, no default can be said to have arisen on the part of the

Appellant.

15. It is his submission that the entire initiation of insolvency proceedings

against the Appellant is vitiated on account of non-compliance with the

mandatory contractual and legal requirements, and the impugned order

deserves to be set aside.

Page 10 of 34 Company Appeal (AT) (Ins.) No. 772 & 773 of 2025 Submissions of the Respondent No. 1/Financial Creditor (SIDBI)

16. The Ld. Counsel for Respondent No. 1 submits that the present Appeals

arise from a fundamentally misconceived and factually incorrect premise

advanced by the Appellants, namely that the Personal Guarantees executed

by them were neither invoked nor served prior to issuance of the demand

notice under Form B. It is respectfully submitted that this contention is

entirely contrary to the material available on record and has been raised in

an attempt to evade liability.

17. He submits that the short and central issue which arises for

consideration before this Hon'ble Tribunal is whether the Personal

Guarantees executed by the Appellants were validly invoked and duly served

in accordance with the contractual stipulations contained in Clause 3 and

Clause 23 of the Deed of Guarantee. The Appellants have sought to contend

that the Learned Adjudicating Authority erred in relying upon the invocation

letter dated 26.11.2021 on the ground that no proof of service was annexed

thereto, and consequently, no default could be said to have arisen.

18. It is submitted that this contention is not only factually incorrect but is

also contrary to the documentary record. The invocation of the Personal

Guarantee is not dependent on a singular act but stands established through

a series of independent, cumulative and corroborative actions undertaken by

Respondent No.1, each of which satisfies the contractual and legal

requirements of invocation and service.

Page 11 of 34 Company Appeal (AT) (Ins.) No. 772 & 773 of 2025

19. Ld. Counsel submits that the Personal Guarantee executed by the

Appellant was duly and unequivocally invoked by way of letter dated

26.11.2021, issued strictly in terms of Clause 3 of the Deed of Guarantee. The

said clause expressly mandates that upon occurrence of default, the

guarantor is liable to make payment "upon demand," and the invocation letter

clearly constitutes such a demand.

20. It is submitted that the invocation letter dated 26.11.2021 was not only

issued but also duly served upon the Appellant. The said invocation was

further reiterated and recorded in the statutory demand notice dated

20.12.2022 issued under Rule 7(1), wherein the invocation letter was

annexed. Additionally, the same formed part of the pleadings in the

proceedings before the Debts Recovery Tribunal (OA No. 264/2022), which

were duly served upon the Appellant.

21. Ld. Counsel further submits that Clause 23 of the Deed of Guarantee

governs the mode and proof of service and clearly stipulates that service shall

be deemed sufficient if the notice is dispatched to the last known address of

the guarantor. The clause further provides that a certificate issued by a

responsible officer of SIDBI confirming dispatch shall constitute conclusive

proof of service, irrespective of whether the notice is actually received or

returned.

22. It is his submission that in the present case, this contractual

requirement stands fully satisfied. Respondent No. 1 has placed on record

multiple affidavits by its authorised officer confirming dispatch of the

invocation letter, recall notice, and demand notice. These affidavits include Page 12 of 34 Company Appeal (AT) (Ins.) No. 772 & 773 of 2025 those filed with the Section 95 application, in the DRT proceedings, and along

with the reply in the present appeal. Each of these independently certifies that

the notices were duly issued and dispatched to the Appellant.

23. He submits that in view of the express contractual stipulation under

Clause 23, such certification constitutes conclusive and binding proof of

service. The Appellant cannot now be permitted to go behind the agreed

contractual mechanism and raise a plea of non-service, particularly in the

absence of any rebuttal evidence.

24. He further submits that the address used for service is the same as that

provided by the Appellant in the Deed of Guarantee and has never been

disputed. Therefore, service at such address is legally valid, and any failure

to update or challenge the address lies solely with the Appellant.

25. It is also submitted that the Appellant did not raise any objection

regarding invocation or service at any stage prior to the proceedings before

the Learned NCLT, including during receipt of the demand notice or during

DRT proceedings. The present plea is therefore clearly an afterthought and

liable to be rejected.

26. He submits without prejudice, that even assuming further proof was

required, the invocation stands independently established through

subsequent communications including the recall notice and DRT proceedings,

each of which satisfies the requirement of demand under Clause 3.

27. Ld. Counsel submits that, without prejudice to the formal invocation

effected by letter dated 26.11.2021, the requirement of demand under Clause

3 stands independently fulfilled through the loan recall notice dated Page 13 of 34 Company Appeal (AT) (Ins.) No. 772 & 773 of 2025 04.02.2022. It is submitted that the recall notice unequivocally called upon

the Appellant to discharge the outstanding dues and clearly manifested the

intention of Respondent No.1 to enforce the Personal Guarantee. Such a

communication, in terms of Clause 3, constitutes a valid and sufficient

demand.

28. He submits that the statutory demand notice dated 20.12.2022 further

reinforces this position by specifically recording that the Personal Guarantee

had already been invoked vide letter dated 26.11.2021, and by annexing the

said invocation letter. The demand notice was duly served and remained

uncontroverted at the relevant stage.

29. It is submitted that the recall notice dated 04.02.2022, issued through

counsel, independently satisfies the requirement of demand and triggers the

liability of the guarantor. No additional formality is required once such

demand is made.

30. The counsel submits that each of these communications--namely the

invocation letter, recall notice, and statutory demand notice--individually and

collectively establish that the Personal Guarantee was invoked repeatedly and

consistently, leaving no scope for dispute on this aspect.

31. The Ld. Counsel further submits that the initiation of proceedings

before the Debts Recovery Tribunal, Lucknow in OA No. 264 of 2022

constitutes independent and conclusive evidence of invocation, service and

default. The said proceedings were instituted against both the Principal

Borrower and the Appellant in her capacity as Personal Guarantor and were

based on the same loan transaction and Deed of Guarantee. The invocation Page 14 of 34 Company Appeal (AT) (Ins.) No. 772 & 773 of 2025 letter and recall notice were annexed to the pleadings in the DRT proceedings,

which were duly served upon the Appellant.

32. It is further submitted that the Learned DRT, being satisfied with

service, proceeded ex parte against the Appellant by order dated 20.02.2023.

Subsequently, the DRT passed judgment dated 17.07.2023 and issued a

Recovery Certificate. The judgment specifically records the invocation notices,

service of pleadings, and the existence of debt and default.

33. The Ld. Counsel submits that despite due service, the Appellant chose

not to appear or contest the proceedings, thereby allowing them to attain

finality. Having failed to raise any objection at that stage, the Appellant is now

estopped from raising such pleas in the present proceedings.

34. It is his submission that the DRT proceedings conclusively establish (i)

invocation of the guarantee, (ii) service of notices, and (iii) existence of debt

and default. These issues cannot be re-agitated in collateral proceedings

under the IBC.

35. Ld. Counsel submits that the Appellant has, in its rejoinder, expressly

admitted the foundational facts relating to invocation and service, thereby

eliminating any factual dispute. It is submitted that the Appellant has

admitted paragraphs 4.5, 4.6 and 4.7 of the Reply filed by Respondent No.1.

These paragraphs clearly record that the Personal Guarantee was invoked

vide letter dated 26.11.2021, that the recall notice was issued and served, and

that DRT proceedings were initiated with the relevant notices annexed and

served. By admitting these paragraphs, the Appellant has unequivocally

Page 15 of 34 Company Appeal (AT) (Ins.) No. 772 & 773 of 2025 admitted the invocation of the guarantee, issuance and service of recall notice,

and service of DRT proceedings.

36. The Ld. Counsel submits that in light of these clear admissions, the

Appellant is precluded from contending otherwise. It is a settled principle of

law that admitted facts need not be proved, and a party cannot be permitted

to approbate and reprobate by taking contradictory stands.

37. The Ld. Counsel submits that all relevant documents evidencing

invocation and service were duly placed on record before the Learned NCLT

and were considered while passing the Impugned Order. These documents

included the invocation letter dated 26.11.2021, recall notice dated

04.02.2022, statutory demand notice dated 20.12.2022, and records of the

DRT proceedings. These documents were not only part of the record but were

also relied upon in pleadings and formed the basis of the decision.

38. It is submitted that the Ld. NCLT has categorically recorded in the

Impugned Order that the Personal Guarantee was invoked and thereafter

admitted the application under Section 95 upon being satisfied that all

statutory requirements were fulfilled.

39. He further submits that the law in this regard is well settled, that the

purpose of service is to ensure knowledge. In the present case, the Appellant

had complete knowledge of the invocation and proceedings, as evident from

demand notices, DRT proceedings, and its own pleadings. Therefore, the

objection regarding service is hyper-technical and untenable.

Page 16 of 34 Company Appeal (AT) (Ins.) No. 772 & 773 of 2025

40. In his final submission, Ld. Counsel states that the invocation of the

Personal Guarantee stands conclusively established through multiple

independent evidences, the requirement of service stands satisfied both

contractually and legally, and the Appellant's objections are devoid of merit.

The Impugned Orders therefore warrant no interference and the Appeals are

liable to be dismissed.

Submissions of the Respondent No.2/ Resolution Professional

41. Ld. Counsel for Respondent No.2/ Resolution Professional submits that

her submission herein are confined to the statutory role and actions

undertaken by the Resolution Professional in discharge of duties under the

Code, and are intended to assist this Hon'ble Tribunal in adjudicating the

present appeal on the basis of correct facts and settled legal principles.

42. She submits that the Resolution Professional (R2), who has been

appointed under Section 97 of the Insolvency and Bankruptcy Code, 2016, is

an independent statutory authority and has no personal or pecuniary interest

in the outcome of the present proceedings. The Resolution Professional has

merely discharged his statutory duties in accordance with Sections 99 and

100 of the Code, and his actions are confined strictly within the framework of

law. There is no basis whatsoever for attributing any bias or partiality to the

Resolution Professional.

43. It is submitted that the contentions by the Appellant whereby the

liability of the Personal Guarantor is sought to be questioned on the basis of

Clause 03 of the Deed of Guarantee dated 22.09.2017, are wholly erroneous

Page 17 of 34 Company Appeal (AT) (Ins.) No. 772 & 773 of 2025 and misconceived. A plain reading of Clause 03 of the said Deed of Guarantee

clearly stipulates that in the event of default by the borrower/Corporate

Debtor, the guarantor(s) shall, upon demand, pay to the Financial Creditor all

sums payable under the Loan Agreement. The legal position is well settled

that the liability of the guarantor is co-extensive with that of the principal

borrower as per Section 128 of the Indian Contract Act, 1872. The Hon'ble

Supreme Court in "Laxmi Pat Surana vs Union Bank of India & Anr.,

Civil Appeal No. 2734 of 2020" has categorically held that the liability of

the guarantor arises immediately upon default by the principal borrower and

is co-extensive in nature. Thus, the attempt of the Appellant to evade liability

is contrary to both contractual stipulations and settled law.

44. She submits that the allegation by the Appellant that no demand notice

was issued by the Financial Creditor prior to the notice dated 20.12.2022, is

factually incorrect and misleading. The Financial Creditor had already

invoked the Deed of Guarantee by issuing an invocation notice dated

26.11.2021 to the Personal Guarantors, including the present Appellant.

45. She further submitted that the invocation notice dated 26.11.2021

clearly constitutes a valid and binding demand upon the Personal Guarantor.

The issuance of this notice establishes beyond doubt that the liability of the

guarantor had already been invoked prior to the subsequent notice dated

20.12.2022. Therefore, the allegation of the Appellant that no prior demand

was ever raised is false, misleading, and liable to be rejected.

Page 18 of 34 Company Appeal (AT) (Ins.) No. 772 & 773 of 2025

46. It is submitted that the Financial Creditor had also issued a Loan Recall

Notice dated 01.06.2021 to the Corporate Debtor, whereby the entire

outstanding loan facilities were recalled and the Corporate Debtor was called

upon to repay the dues forthwith. The Appellant's contention to the contrary

is not only incorrect, but amounts to a deliberate attempt to mislead this

Hon'ble Tribunal.

47. Ld. Counsel further submitted that the report prepared and submitted

by the Resolution Professional under Section 99 of the Insolvency and

Bankruptcy Code, 2016 is purely statutory in nature and forms part of the

procedural mechanism under the Code. The said report is prepared in an

objective and independent manner and cannot, by any stretch of imagination,

be construed as being in favour of or prejudicial to any party.

48. It is further submitted that the contention of the Appellant alleging that

the Invocation Letter dated 26.11.2021 was not produced before the

Adjudicating Authority, is wholly incorrect and misleading. The said

Invocation Letter was duly placed on record before the Adjudicating Authority

by Respondent No. 2 along with the Rejoinder. Furthermore, the same has

also been annexed in the present Appeal as Annexure-6 at Pages 251-271.

49. The Resolution Professional respectfully submitted that the Ld.

Adjudicating Authority has passed a detailed and well-reasoned order dated

13.02.2025 after duly appreciating the facts of the case and the settled

position of law. The order admitting the application under Section 95(1) of the

Insolvency and Bankruptcy Code, 2016 and initiating the Personal Insolvency

Page 19 of 34 Company Appeal (AT) (Ins.) No. 772 & 773 of 2025 Resolution Process against the Appellant does not suffer from any error,

illegality, or infirmity. The present Appeal is founded on incorrect and

misleading assertions and is devoid of merit. It results in unnecessary

consumption of valuable judicial time and is liable to be dismissed in limine.

Analysis and Findings

50. We have gone through the records of the case including the written

submissions filed by the parties and heard the parties in detail.

51. The only issue to be determined in these appeals is whether the

Personal Guarantee executed by the Appellants were validly invoked before

initiation of proceedings under Section 95 of the Insolvency and Bankruptcy

Code, 2016, and whether the Adjudicating Authority rightly admitted the

application against the Appellant-Personal Guarantor.

52. The principal argument advanced by the Appellant is that Clause 3 of

the Deed of Guarantee dated 22.09.2017 specifically provides that in the event

of default by the borrower, the guarantor shall "upon demand" pay the

amounts due to the Financial Creditor. According to the Appellant, the

liability of the guarantor does not arise automatically upon default by the

Corporate Debtor and can arise only after a separate demand is made upon

the guarantor. It has been contended that no such demand notice was ever

served upon them prior to issuance of the statutory demand notice dated

20.12.2022 under Rule 7(1) of the Insolvency and Bankruptcy (Application to

Adjudicating Authority for Insolvency Resolution Process for Personal

Guarantors to Corporate Debtors) Rules, 2019. It is their submission that

Page 20 of 34 Company Appeal (AT) (Ins.) No. 772 & 773 of 2025 notice invoking the guarantee dated 26.11.2021 was never issued and served

upon them. It was only placed before Ld. Adjudicating Authority through the

rejoinder to the objection filed by the financial creditor in its application u/s

95 of the Code. It has also been alleged that there is no proof of service of the

alleged invocation letter dated 26.11.2021. It has also been alleged that the

Respondent no.1 had sent a copy of legal notice dated 04.02.2022 to the

Appellants. It is their submissions that the same was not brought on record

by the Respondent No.1 along with its application filed under Section 95 of

the Code. On this basis, it has been argued that no debt or default existed

against the Appellant on the date of initiation of proceedings under Section

95 of the Code.

53. On the other hand, Respondent No.1/ SIDBI has contended that the

Personal Guarantee was specifically invoked through a letter dated

26.11.2021. It has further been submitted that the said invocation was

followed by a loan recall notice dated 04.02.2022 and subsequently the

statutory demand notice dated 20.12.2022. The financial creditor also

initiated recovery proceedings before the Debts Recovery Tribunal where the

guarantee invocation letter dated 26.11.2021 was also placed on record. The

Respondent No.1 has stated that the Appellant has in its rejoinder filed in this

appeal in paragraph-13 has expressly admitted the contents of para-4.5, 4.6

& 4.7 of the reply filed by the Respondent No.1. Paragraph- 4.5 of the reply

specifically records that the personal guarantee was invoked vide letter dated

26.11.2021 and duly served upon the Appellant. Paragraph- 4.6 records that

the loan recall notice dated 04.02.2022 was issued and served and paragraph-

Page 21 of 34 Company Appeal (AT) (Ins.) No. 772 & 773 of 2025 4.7 records that the DRT proceedings (OA No. 264/2022) were initiated with

the invocation and recall notices annexed thereto and that the said

proceedings were duly served upon the Appellants. According to the

Respondents, these documents and proceedings clearly establish that the

guarantor was called upon to discharge the liability arising under the

guarantee and therefore the requirement contained in Clause 3 stood fully

satisfied.

54. At the outset, we find that there is no dispute regarding the

fundamental facts of the transaction. The facts regarding sanction of the loan

in favour of the Corporate Debtor; the execution of the Deed of Guarantee

dated 22.09.2017 by the personal guarantors; the default by the Corporate

Debtor and classification of loan account as NPA; and recall of the said loan

vide loan recall notice dated 01.06.2021 wherein the entire outstanding

facilities were recalled and the Corporate Debtor was called upon to forthwith

repay the dues, are not disputed. The challenge raised in the present Appeal

is confined to the question whether the guarantee was validly invoked before

commencement of proceedings under Part III of the Code.

55. We find that the controversy is not whether invocation of guarantee was

necessary. Both sides proceed on the basis that Clause 3 contemplates a

demand being made upon the guarantor. The real question, therefore, is

whether such demand was in fact made in the present case.

56. We note that prior to the initiation of the proceedings u/s 95 of the

Code, an application U/s 19 of the recovery of Debts Due to Banks and

Page 22 of 34 Company Appeal (AT) (Ins.) No. 772 & 773 of 2025 Financial Institutions Act, 1993 being OA. No. 264 of 2022, was filed before

the debt Recovery Tribunal, Lucknow Bench on 5.03.2022, against the

Corporate Debtor as well as the Appellants in their capacity of Personal

Guarantor for the recovery of the loan amount of Rs.1,11,82,009/-along with

costs and interests from the personal guarantors. The invocation letter and

recall notice formed part of the proceedings before the DRT. The relevant

portions of para-5 of the Application filed by the Financial Creditor are

extracted below:

"5.....

k) That the applicant bank has sent several letter and reminder on 01.06.2021 with demand of outstanding amount but the defendants did not pay any head after receive the said letter. That ultimately the applicant bank has again sent a notice dated 26.11.2021 but fail to receive any amount. The said negligent and inattentive behaviour put the applicant in loss.

n) The cause of action arose on 23.05.2017 when the applicant sanctioned and granted Term Loan/ Credit Facility of credit facilities/ Term Loan of Rs.2,00,00,000/- (Rupees Two Crore Only) and it further arose on 22.09.2017 when the Defendants executed loan documents in favour of the applicant bank. The cause of action arose subsequently on various date when the default in payment have been made by the defendant or deposit were made or letter/notice were sent by the defendant and when the account of the defendant was classified as non-performing assets and balance confirmation except by defendant dated 22.08.2019 and reminder notice sent by applicant dated 01.06.2021 and 26.11.2021 also legal notice on 04.02.2022, when the applicant bank sent a legal notice through its counsel Shri Gaurav Kumar Srivastava, Advocate and is subsisting till the full outstanding amount is paid along with interest and cost to the applicant bank by the defendant."

Page 23 of 34 Company Appeal (AT) (Ins.) No. 772 & 773 of 2025

57. It is clear from the Records that the Respondent No.1 has been relying

upon the Invocation letter 26.11.2021 in terms of Guarantee Agreement, well

before initiation of the proceedings under 95 before Ld. Adjudicating

authority. This fact was also noted by Ld. DRT in its judgment dated

17.10.2023, wherein it issued. The Recovery Certificate for recovery from the

Corporate Debtor and personal guarantors. Relevant extracts of the

judgement are extracted below:

"5. After availing the credit facility, defendants fails to maintain financial discipline and also failed to comply with the terms and conditions of the loan agreement as required in the matter, the applicant bank made all possible efforts by notices, several applications on various occasions, dates and through oral persuasions regarding irregularities in the said loan account, but defendants on committed regular defaults, did not make any efforts regarding payment to the dues, due to non-deposits of amounts or to adjust/regularise the loan account despite giving various assurances the loan account still remained irregular, consequently, the said loan account of defendants classified as NPA on 23.10.2017 as per RBI Guidelines through issued certificate dated 25.02.2022 (Exhibit No. A-12), availing the credit facility defendants signed and executed the letter of acknowledgment of debts on 13.05.2019 on the applied rate of interest as on 31.03.2019 (Exhibit No. A-13), therefore applicant bank issued and served recall notices on 01.06.2021 and to the guarantors in respect of invocation of guarantee on 26.11.2021 and finally wait a while issued legal notice on 04.02.2022 (Exhibit No. A-14, A-15 & A-16) to the defendants but the defendants did make alacrity to liquidate the dues, hence this original application has been instituted.

Page 24 of 34 Company Appeal (AT) (Ins.) No. 772 & 773 of 2025

8. The summons were served to the defendants through registered post as well as paper publications, the defendants opted not to contest the case before this Tribunal, hence the matter proceeded against the defendants.

9. From the perusal of the record, it is evident that the defendants were provided with fair opportunities to contest the claim of the bank, as the defendants opted not to contest the case, so only point of consideration before this Tribunal is as to whether bank is legally entitled to the amount as claimed in original application on the basis of documents and pleadings submitted by it."

58. What comes out very clearly from the DRT proceedings that the

financial creditor/SIDBI submitted all documents showing debt, default and

invocation of guarantee before the Ld. DRT, but the defendants, corporate

debtor and the personal guarantors, who are appellant in that proceeding did

not choose to appear before the Ld. DRT despite service of summons through

all modes. We also note that Ld. DRT allowed the original application against

the defendants viz. CD and Personal Guarantors herein and allowed the bank

to recover the amount of loan.

59. We also note that in the demand Notice issued by the Respondent No.1

in Form-B on 20.12.2022 under Rule 7(1) of the IB Rules 2019 also the

Invocation Notice is clearly mentioned. The relevant item no.14 of the Form-

B wherein the notice invoking the guarantee is mentioned at Srl. No.6 is

extracted below: -

Page 25 of 34

Company Appeal (AT) (Ins.) No. 772 & 773 of 2025

14. List of documents 6. Copy of Notice dated 26 November attached to this 2021 bearing reference no.

notice in order to 2022NOV26/LOO1250473/BMC issued prove the existence upon Personal Guarantor Shri Vijay of debt and the Pandey and Smt. Maya Pandey for amount in default invoking the guarantee of Guarantor with respect to Term Loan of Rs.2 crore (Two Crore Only) is annexed hereto and marked as "Annexure-9".

We also note in this regard that the appellants did not reply to the notice in

Form-B to the Financial Creditor/ Respondent No.1.

60. The procedure for invocation of personal guarantee has been provided

in the Clause 23 of the Deed of Guarantee and the same is extracted below: -

"CLAUSE 23 of PERSONAL GUARANTEE

"Any demand for payment or notice under this Guarantee shall be sufficiently given if sent by post to or left at the last known address of the Guarantors or their personal representatives, such demand or notice is to be made or given and shall he assumed to have reached the addressee(s) in the course of post, if given by post, and no period of limitation shall commence to run in favour of the Guarantors until after demand for the payment in writing shall have been made or given as aforesaid and in proving such notice which sent by post it shall be sufficiently proved that the envelope containing the notice was posted and a Certificate by any of the responsible officer of SIDBI that to the best of his knowledge and belief, the envelope containing the said notice was so posted shall be conclusive as against the Guarantors/s even though it was returned unserved on account of refusal of the Guarantors/s or otherwise."

61. Clause 23 specifically governs the mode of service of notices between

the parties. The clause provides that any demand or notice shall be deemed

to be sufficiently served if sent to the last known address of the guarantor. It

Page 26 of 34 Company Appeal (AT) (Ins.) No. 772 & 773 of 2025 further provides that certification by a responsible officer of SIDBI regarding

dispatch of such notice would constitute proof of service. The Appellants have

argued that the Respondent No.1 has not attached the envelope or the postal

receipts showing that the guarantee invocation letter dated 26.11.2021 has

been posted to the address of Appellants on record. The Appellants have

argued on this basis that guarantee has never been invoked.

62. The significance of this clause lies in the fact that it represents the

contractual arrangement voluntarily agreed upon between the parties. Once

the parties have agreed to a particular mode of service and a particular

method of proving such service, the issue cannot be examined in disregard of

those contractual terms. The Respondents have placed on record affidavits

affirming dispatch of the invocation notice and subsequent communications

and proceedings which clearly indicate that the Appellants were in know of

such notice. Therefore, the contention that invocation must fail solely because

postal acknowledgments or envelopes have not been produced cannot be

accepted in isolation from the contractual framework governing the parties.

63. Further in this regard, we take a look at the demand letter dated

04.02.2022 which has been issued by the Ld. Counsel of R1 to CD and the

Appellants. It is seen from records that the proof of the dispatch of the said

letter by speed post has been placed on record. These documents have been

duly certified by the competent authority of the Respondent No.1 which

thereby fully meets the criteria of invocation. Thereafter, a statutory demand

notice dated 20.12.2022 was issued, which specifically referred to the earlier

invocation of the guarantee.

Page 27 of 34 Company Appeal (AT) (Ins.) No. 772 & 773 of 2025

64. These events are not isolated or disconnected acts. Rather, they

constitute a continuous chain of actions undertaken by the Financial Creditor

for enforcement of the guarantee. We note from the records that the invocation

letter was issued on 26.11.2021 followed by issuance of the recall notice dated

04.02.2022 calling upon the appellant to clear the outstanding dues.

Thereafter on 05.03.2022 the financial creditor initiated OA No. 264 of 2022

before the DRT, Lucknow against the CDs as well as the Appellants in their

capacity of personal guarantor. When viewed collectively, they indicate that

the Financial Creditor had unequivocally called upon the Appellant to

discharge the liability arising under the guarantee.

65. The Appellant has argued that the invocation letter was not originally

filed along with the application under Section 95 and was subsequently

brought on record through the rejoinder. Even assuming this factual

contention to be correct, the question before us is whether the relevant

material was available before the Adjudicating Authority when the matter was

finally decided. The record indicates that the invocation letter, recall notice

and related documents had been brought before the Adjudicating Authority

and formed part of the material considered while passing the Impugned Order.

Therefore, it cannot be said that the finding regarding invocation was recorded

in the absence of supporting material.

66. We also find it significant that the Appellant has not disputed the

correctness of the address mentioned in the Deed of Guarantee. The

Respondents have specifically contended that the notices were sent to the

address provided by the Appellant and that no change of address was ever Page 28 of 34 Company Appeal (AT) (Ins.) No. 772 & 773 of 2025 communicated. In such circumstances, the contractual presumption

regarding service under Clause 23 assumes importance and cannot be lightly

disregarded.

67. We also note from the records in these appellate proceedings that the

appellant has in its rejoinder expressly admitted to the facts relating to the

invocation and service in para- 13 of the rejoinder which is extracted below: -

"13. That the contents of para no.1-4.13 of the reply are matter of record."

68. It is seen from the records that the Appellant has admitted the facts stated by the Respondent No.1 in paragraphs 4.5, 4.6 & 4.7 of the reply. The aforesaid paras are extracted below:-

"4.5 In view of the continuing default by the principal borrower, the Answering Respondent issued an invocation of the Guarantee Notice dated 26.11.2021 to the Appellant and as well as to the other personal guarantor, Mr. Vijay Pandey calling upon the guarantors / Appellant to honour the obligations under the Deed of Guarantee, which was duly served to the Appellant. True copy of the Invocation of Guarantee Notice dated 26.11.2021 is annexed herewith as Annexure R-2.

4.6 In continuation of the earlier demands and reminders, Answering Respondent through its Advocates issued a formal recall legal notice dated 04.02.2022 to the Principal Borrower as well as the guarantors, including the Appellant herein, thereby recalling the entire outstanding loan amount and calling upon them to make immediate payment of the dues. The said recall notice unequivocally demanded repayment of the outstanding principal, interest, and other charges due under the loan facility and also made it clear that in the event of failure to pay, Answering Respondent would be constrained to initiate appropriate legal proceedings. True copy of the Recall legal notice dated 04.02.2022 is annexed herewith as Annexure R-3.

Page 29 of 34 Company Appeal (AT) (Ins.) No. 772 & 773 of 2025 4.7 It is pertinent to mention that owing to the persistent default and non-clearance of dues, the Answering Respondent has also initiated recovery proceedings before the Debts Recovery Tribunal, Lucknow, by filing Original Application No. 264 of 2022 ("OA") against the Principal Borrower, the Appellant, and other co-borrowers/guarantors for recovery of a sum of INR 1,11,82,009/- along with interest. It is pertinent to mention that the notice invoking the guarantee dated 26.11.2021 was duly annexed to the said OA."

69. The admission of the Appellants to the aforesaid paragraphs 4.5 to 4.7

as above amounts to admission of the following:

a. Invocation of the personal guarantee vide letter dated 26.11.2021;

b. Issuance and service of recall notice dated 04.02.2022; and c. Service of DRT proceedings including the notice invoking guarantee dated 26.11.2021.

70. Another aspect which requires consideration is that the Appellant seeks

to challenge the insolvency proceedings solely on the ground that the

invocation letter was not served in the manner suggested by the Appellant.

However, the surrounding circumstances demonstrate that the Appellant had

knowledge of the recovery actions initiated by the Financial Creditor. The

statutory demand notice, the DRT proceedings and the subsequent

enforcement actions all indicate that the Financial Creditor had consistently

asserted its rights under the guarantee. The objection raised by the Appellant

is therefore essentially technical in nature and does not dislodge the

substantive fact that the guarantee had been enforced by the creditor.

Page 30 of 34 Company Appeal (AT) (Ins.) No. 772 & 773 of 2025

71. In this regard, we take a note of judgment of this Appellate Tribunal in

"State Bank of India vs. Dr. Jitendra Das Maganti & Anr., CA (AT) (CH)

(Ins) No. 360/2024". In paras 24 & 25 it has been held:

"24. Under any legal procedure, admission of a particular fact is the best evidence. All those technical arguments that has been extended by the Ld. Counsel for the Respondents on the basis of variance in the description of addresses as contained in various documents, which the Respondents have referred to during the course of argument will be of no avail, in getting a relief from the proceedings under Section 95 of I & B Code, particularly when the service of notice of demand is a fact which stands admitted by the Respondents in their own pleadings before none other than the Hon'ble Apex Court and that too in a proceedings under Article 32 of the Constitution of India. Hence, they now cannot rescind from their own admission of knowledge and service of notice as provided under Section 95 (4) of I & B Code.

25. Ld. Adjudicating Authority has placed excessive reliance on the concept of 'due' service of the demand notice as laid down in the statute and the documents including the guarantee agreement. It must be kept in mind that service of the demand notice at the correct address is mandated to ensure that the Personal Guarantor is imparted with the knowledge about the impending proceedings which are being initiated. In this case the Respondents have been imparted with the knowledge and that is why they had been able to file the Writ Petition before Hon'ble Apex Court. In that eventuality, when knowledge is already imparted and it is fully evident, harping on technicalities of service of the demand notice appears to be too hyper-technical and redundant, especially when seen from the context and the objective of I&B Code."

Page 31 of 34 Company Appeal (AT) (Ins.) No. 772 & 773 of 2025

72. In the present case we have seen that the Appellants have been served

with invocation of Guarantee through several distinct notices; in different

manners and in different proceedings. The reliance on non-production of

postal receipts for the notice dated 26.11.2021 is the only defence pleaded by

the Appellants to argue that the notice invoking guarantee has not been

served upon them before initiating Section 95 proceedings and therefore no

debt and default could be proved against them. The ratio of the aforesaid

judgement is clearly against their contention.

73. The Appellant has relied upon the judgment of this Appellate Tribunal

in "SBI v. Deepak Kumar Singhania, Company Appeal (AT) (Insolvency)

No. 191 of 2025", wherein it was held that a Personal Guarantor becomes

liable only after invocation of the guarantee and that the statutory demand

notice under Rule 7(1) cannot itself be treated as a notice invoking the

guarantee. In the present case, however, the Respondent has relied upon the

invocation letter dated 26.11.2021, which was issued prior to the statutory

demand notice dated 20.12.2022. The Respondent has also relied upon the

subsequent recall notice and DRT proceeding to establish invocation of the

guarantee. Thus, the decision in SBI (supra) does not help the case of the

Appellants.

74. We are also unable to accept the submission of the Appellant that the

Resolution Professional mechanically recommended admission of the

application. The statutory scheme of Sections 99 and 100 of the Code makes

it clear that the report of the Resolution Professional is recommendatory in

nature. The final satisfaction regarding admission or rejection of the

Page 32 of 34 Company Appeal (AT) (Ins.) No. 772 & 773 of 2025 application rests with the Adjudicating Authority. The Impugned Order

reflects that the Adjudicating Authority considered the report of the

Resolution Professional, the objections filed by the Appellant and the

documents placed on record before arriving at its conclusion. Once the

requirement of invocation under Clause 3 of the guarantee stood satisfied, the

liability of the Appellant as Personal Guarantor became enforceable.

Consequently, the contention that no debt or default existed against the

Appellant on the date of initiation of proceedings under Section 95 cannot be

accepted. Therefore, the admission of the application cannot be faulted merely

because the Appellant disagrees with the recommendation made by the

Resolution Professional.

75. We also note that the Adjudicating Authority had the benefit of

considering all relevant materials before arriving at its satisfaction under

Section 100 of the Code. The findings recorded in the Impugned Order are

supported by the record and cannot be said to be contrary to law. We do not

find any error in the approach adopted by the Adjudicating Authority.

76. After considering the entire factual background, the contractual clauses

governing the parties and the documents relied upon by both sides, we are of

the view that the material placed on record sufficiently establishes that

Respondent No. 1 had invoked the Personal Guarantee and had called upon

the Appellants to discharge the liability arising thereunder. The invocation

letter dated 26.11.2021, the recall notice dated 04.02.2022, the statutory

demand notice dated 20.12.2022 and the recovery proceedings before the

Page 33 of 34 Company Appeal (AT) (Ins.) No. 772 & 773 of 2025 DRT, when read together, clearly demonstrate that the Financial Creditor had

taken consistent steps to enforce the guarantee.

77. In view of the findings above, we do not find any infirmity in the

Impugned Orders. Both the Appeals are accordingly, dismissed. Pending IAs,

if any, are closed. There would be no order as to costs.

Justice N. Seshasayee Member (Judicial)

Arun Baroka Member (Technical)

Indevar Pandey Member (Technical) Place: New Delhi

Harleen/ Pragya (LRA)

Page 34 of 34 Company Appeal (AT) (Ins.) No. 772 & 773 of 2025