Mr. Harish Kumar Mittal vs State Bank Of India & Anr & Ors

IN THE MATTER OF: Harish Kumar Mittal An adult Indian Inhabitant Residing at 214, 21st Floor, NCPA Apartments, Nariman Point, Mumbai - 400021. ...Appellant

Versus

1. State Bank of India A bank established under the State Bank of India Act, 1955 Having its head office at State Bank Bhavan, Madame Cama Road, Nariman Point-400021.

Also at: Stressed Asset Management Branch-I, 'The Arcade', 2nd floor, World Trade Centre, Cufee Parade, Mumbai - 400005 ...Respondent No.1

2. Rajas Shreeram Bodas Resolution Professional An insolvency professional registered with the Insolvency and Bankruptcy Board of India having registration no. IBBI/IPA-002/IP-NO1200/2021- 2022/14010 Having his address at Survey No. 997/18, Satsang Society, Suraksha Apartments, Navi Peth, Near Vaikunth, Pune, Maharashtra, 411030. ...Respondent No.2

Present: For Appellant : Ms. Salomi Kalwade, Advocate For Respondent : Mr. Asav Rajan, Mr. Kashish Chadha and Mr. Aditya Shah, Advocates for R-1. Ms. Yahya Batatawala, Advocate for RP.

JUDGMENT

(Hybrid Mode)

[Per: Arun Baroka, Member (Technical)] The present Appeal is against the Order December 9, 2024 (Impugned

Order) passed by the Hon'ble National Company Law Tribunal, Bench IV at

Mumbai (NCLT) in Company Petition No. 798 of 2021 (CP 798 of 2021) under

Section 100 of the Insolvency and Bankruptcy Code, 2016 (IBC). By the

Impugned Order, the NCLT admitted CP 798 of 2021 and initiated insolvency

resolution process against the Appellant.

2. On the CP (IB) No. 798/MB/2021 filed by State Bank of India (SBI) against

Harish Kumar Mittal Personal Insolvency Resolution Process(PIRP) has been

initiated against the Appellant under Section 100 of the Code. This Appeal under

Section 61 of the Code challenges the order in the above mentioned Company

Petition.

3. The Appellant is one of the ex-directors of Mercator Limited (Corporate

Debtor). Respondent No. 1 is the State Bank of India, the Petitioner in CP 798 of

2021, one of the financial creditors of the Corporate Debtor. Respondent No. 2

is the Resolution Professional (RP) appointed by the Hon'ble NCLT vide the

Impugned Order. CP No. 798 of 2021 was filed by Respondent No. 1 to initiate

insolvency resolution process against the Appellant under Section 95 of the IBC

on the basis of Deed of Guarantee dated March 25, 2013 (Guarantee Deed). Company Appeal (AT) (Insolvency) No. 2363 of 2024 2 of 39

4. Appellant contends it filed Affidavit in Reply dated March 1, 2024 (Reply)

to CP 798 of 2021 on the website of the Hon'ble National Company Law Tribunal

on March 1, 2024. Further, the Advocates for the Appellant served a copy of the

Reply upon the respective Advocates for Respondent No. 1 and the resolution

professional appointed by the Hon'ble NCLT.

5. On October 15, 2024, the Hon'ble NCLT heard CP No. 798 of 2021 and

reserved the same for orders. Appellant also claims that on October 15, 2024,

the Advocates for the Appellant advanced their arguments and even tendered the

original physical Reply (which was already e-filed) to the Hon'ble NCLT for their

convenience. Further it is claimed that the Advocates for the Appellant advanced

detailed arguments and made various references to the averments made by the

Appellant in their Reply, which were heard and noted by the Hon'ble NCLT. It is

also claimed that the Hon'ble NCLT did not, at any point state either that the

Reply of the Appellant was not filed or that the Reply filed by the Appellant was

not being considered by the Hon'ble NCLT.

6. In the above backdrop, the Impugned Order was pronounced by the

Hon'ble NCLT on December 9, 2024 and the same was uploaded on the website

of the Hon'ble National Company Law Tribunal on December 10, 2024.

Pertinently, the Impugned Order was passed on the basis that the Respondent

had failed to file the Reply.

Company Appeal (AT) (Insolvency) No. 2363 of 2024 3 of 39

7. It will be instructive to note the background of the case in which PIRP has

been initiated against the appellant, which is noted as below:

Date Event

R1 -SBI granted various credit facilities to one Mercator Limited ('Corporate Debtor') 25.03.2013 Appellant executed a Deed of Guarantee in favour of the Respondent thereby providing an irrevocable and continuing guarantee for the repayment of facilities availed by the Corporate Debtor.

02.04.2018 Credit facilities were renewed vide Sanction and Revival And Letters and the Corporate Debtor acknowledged its debt 01.04.2019 and outstandings in respect of the account maintained by the Corporate Debtor with the Respondent.

23.04.2019 Corporate debtor failed to fulfil its obligations in relation to the aforementioned credit facilities and the account of the Corporate Debtor was classified as NPA.

31.10.2019 Respondent issued a Recall Notice for the amount payable by the Corporate Debtor.

01.06.2021 Respondent issued a Demand Notice m Form-B, however the Appellant failed to act upon it.

28.07.2021 Respondent filed a petition under Section 95(1), IBC 2016 titled as State Bank of India vs. Harish Kumar Mittal C.P (IE) No. 798/MB/2021 against the Appellant herein for initiating insolvency resolution process for personal guarantors for recovery of debt amounting to INR 236, 19,05,443,21/-

14.12.2023 Hon'ble bench of NCLT Mumbai directed the Appellant to file its reply within three weeks which was not complied with by the Appellant.

05.02.2024 Hon'ble bench of NCLT Mumbai gave the Appellant the last chance to file its reply, however even then the reply was not filed by the Appellant.

01.03.2024 Reply was e-filed by the Appellant with a delay, and the same was not on record.

09.12.2024 Due to failure of the Appellant to bring its reply on record the Hon'ble bench of NCLT Mumbai proceeded to adjudicate upon the issue without the reply directing initiation of insolvency resolution process against the personal guarantor i.e., the Appellant herein.

RELIEFS SOUGHT

8. The Appellant had prayed for the following relief(s):

Company Appeal (AT) (Insolvency) No. 2363 of 2024 4 of 39

a) Set aside the Order dated December 9, 2024 passed by the Hon'ble National Company Law Tribunal, Mumbai (Bench IV) in Company Petition (IB) No. 798 of 2021;

b) Direct that Company Petition (IB) No. 798 of 2021 be heard afresh by the Hon'ble National Company Law Tribunal, Mumbai after considering the Affidavit in Reply dated March 1, 2024 filed by the Appellant in Company Petition (IB) No. 798 of 2021;

c) During the pendency of the present Appeal, stay the effect and operation of the Order dated December 9, 2024 passed by the Hon'ble National Company Law Tribunal, Mumbai (Bench IV) in Company Petition (IB) No. 798 of 2021;

d) During the pendency of the present Appeal, restrain Respondent No. 2 (the Resolution Professional) from taking any steps on the basis of the Order dated December 9, 2024 passed by the Hon'ble National Company Law Tribunal, Mumbai in Company Petition (IB) No. 798 of 2021; and

e) Pass such other orders as may be deemed necessary in the facts and circumstances of the present case.

Grounds of Appeal

9. The main grounds of the Appellant are noted as below:

9.1. The Impugned Order is ex facie violative of the principles of

natural justice as it proceeds on the incorrect factual premise that no

Reply was filed by the Appellant. The Impugned Order records that the

Appellant (Respondent in the Company Petition) did not file an Affidavit

Company Appeal (AT) (Insolvency) No. 2363 of 2024 5 of 39 in Reply in the Company Petition before the NCLT. The relevant extract

of the Impugned Order dated December 9, 2024 is as follows:

"5...Despite the afore-stated directions of this Tribunal, the Respondent has chosen not to file its Reply, and this Tribunal is constrained to adjudicate the captioned petition apropos the materials on record."

(Emphasized Supplied) The Advocates for the Appellant e-filed the Reply dated March 1, 2024

on March 1, 2024 and served it on SBI and the Resolution Professional

by an email on the same day. Subsequently, the Reply was served

physically as well upon the Advocates for SBI and the Advocate for the

Resolution Professional on March 4, 2024 as well. Significantly, on

October 15, 2024, when the matter was heard, the Advocates for the

Appellant tendered the original physical Reply before the Hon'ble NCLT

and made detailed submissions based on its contents. At no point did

the Hon'ble NCLT reject the Reply, return it, or indicate that it would

not be taken on record. The conclusion that no Reply was filed by the

Appellant before the NCLT is wholly contrary to the record and thus,

vitiates the Impugned Order. The failure of the Hon'ble NCLT to

consider the Appellant's Reply and submissions advanced on October

15, 2024, renders the Impugned Order legally unsustainable. Thus,

the failure of the Hon'ble NCLT to deal with the Appellant's

submissions vitiates the Impugned Order. The Impugned Order is

contrary to these settled principles, as it proceeds on an incorrect

Company Appeal (AT) (Insolvency) No. 2363 of 2024 6 of 39 premise and fails to consider the Appellant's contentions altogether.

Appellant relies on Kranti Associates (P) Ltd. v. Masood Ahmed

Khan, (2010) 9 SCC 496 (Para 12-15) to canvass this argument.

9.2. Appellant further argues that the Impugned Order is unreasoned

and contrary to settled principles requiring application of judicial mind

under Section 100 of the IBC and violates the principles of natural

justice. The Impugned Order is a non-speaking order that fails to deal

with any of the detailed objections raised by the Appellant in the Reply

as well as at the final hearing of the Company Petition. Issues of

insufficient stamping of the Guarantee Deed, defects in the recall

Notice dated October 31, 2019 and Demand Notice dated June 1, 2021

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

Adjudicating Authority for Insolvency Resolution Process for Personal

Guarantors to the Corporate Debtors) Rules, 2019 by SBI, failure to

furnish complete statements of account to the Appellant, and SBI's

arbitrary conduct were specifically raised but wholly ignored by the

Hon'ble NCLT. These issues strike at the root of admissibility and

enforceability of the creditor's claim. The Impugned Order does not

even mention these issues, let alone adjudicate upon them. It is settled

law that judicial orders must contain reasons demonstrating the basis

for passing such orders, as held in the judgment of the Hon'ble

Supreme Court in Assistant Commissioner v. Shukla & Brothers

Company Appeal (AT) (Insolvency) No. 2363 of 2024 7 of 39 (2010) 4 SCC 785 (Para 10, 12, 13 and 14) and Maya Devi v. Raj

Kumari Batra (2010) 9 SCC 486 (Para 30). The Reply of the Appellant

and submissions were not considered by the Hon'ble NCLT. Assuming

(without admitting) there existed procedural defects in accessing the

Reply, the Appellant ought to have been informed that his Reply was

not being considered and allow an opportunity to cure defects. Failure

to do so violates the fundamental principles of natural justice

particularly audi alteram partem. The Impugned Order proceeds as if

the Appellant did not contest the petition, despite the Reply being filed,

served, and relied upon during arguments on October 15, 2024 and it

relies on Dharampal Satyapal Ltd. v. CCE (2015) 8 SCC 519 (Para

23-26)) for this argument.

9.3. Appellant further claims that invocation of the alleged guarantee

was invalid and defective. The entire Company Petition is based on an

alleged invocation of a Deed of Guarantee dated March 25, 2013. As

per the terms of the deed of guarantee, the alleged guarantee is only

payable by the Appellant on demand. It is the SBI's own case that the

alleged guarantee was invoked by a Recall Notice dated October 31,

2019, however, the said notice does not even mention about the Deed

of Guarantee dated March 25, 2013. Instead, the said Recall Notice

dated October 31, 2019 makes a composite and vague demand without

identifying the facility invoked, the guaranteed portion, or the

Company Appeal (AT) (Insolvency) No. 2363 of 2024 8 of 39 computation thereof. Appellant contends that in the absence of a valid

and specific invocation in accordance with law, no liability can be

fastened upon the Appellant, and Impugned Order dated December 9,

2024 is liable to be set aside. It further argues that assuming that the

Recall Notice can be considered as a valid guarantee invocation notice,

it brings to our notice that Recall Notice allegedly called upon the

Corporate Debtor to pay an amount of [●], the demand on the Appellant

was limited to an amount of Rs. 85,86,61,167.45 (Rupees Eighty Five

Crores Eighty Six lakhs Sixty One Thousand One Hundred Sixty Seven

and Forty Five Paise only). Thus, the debt payable by the Appellant was

much less than the debt payable by the Corporate Debtor to SBI.

However, the Company Petition filed by SBI against the Appellant

proceeded on the basis that the entire debt claimed by SBI against the

Corporate Debtor was payable by the Appellant under the alleged

guarantee. The above inconsistency in the Recall Notice and the

Company Petition goes to the very root of the debt which is alleged to

be guaranteed and the contradiction in SBI's case in this regard cannot

be glossed over as a mere issue of quantification. It is submitted that

SBI has claimed guarantee over the debt which is in fact not even

guaranteed by the Appellant. Thus, the Company Petition was liable to

be dismissed.

Company Appeal (AT) (Insolvency) No. 2363 of 2024 9 of 39 9.4. Appellant contends that failure of SBI to provide NOC for Sale of

M/T Nerissa creditor induced prejudice. It claims that Offshore Holding

Company Pte. Ltd. (Offshore Holding), a subsidiary of the Corporate

Debtor, was the owner of a large crude carrier/vessel M/T Nerissa,

which had been acquired under a term loan facility extended by SBI,

Singapore Branch (SBI Singapore). The said facility was inter alia

secured by a Stand-by Letter of Credit (SBLC) issued by State Bank of

India, Respondent No. 1, pursuant to which a first charge on the vessel

Nerissa was created in favor of SBI. Owing to financial distress, it was

decided that it would be in the best interest of all stakeholders and

creditors to sell the vessel Nerissa and utilize the sale proceeds towards

repayment of the outstanding facilities of SBI Singapore. However, for

completion of the sale, it was necessary that both SBI and SBI

Singapore issue NOCs. Pertinently, Offshore Holding had already

identified a prospective buyer who had deposited 15% of the total sale

consideration in an escrow account, thereby demonstrating the bona

fides of the transaction. However, despite repeated discussions and

specific assurances given by SBI that it would issue the requisite NOC,

SBI failed and neglected to do so. Solely on account of SBI's refusal to

issue the NOC, the proposed sale of Nerissa could not fructify. As a

consequence, Offshore Holding and the Corporate Debtor were placed

in an untenable position where they could neither finalize the sale of

the vessel nor repay the outstanding dues of SBI Singapore, Company Appeal (AT) (Insolvency) No. 2363 of 2024 10 of 39 notwithstanding the availability of a ready buyer and escrowed

consideration. The Corporate Debtor addressed several

communications to SBI seeking issuance of the requisite NOC for sale

of Nerissa. However, by an email dated February 21, 2019, SBI

Singapore refused to release its charge over the vessel unless the entire

outstanding dues were first paid. Thereafter, SBI Singapore also

alleged defaults in the term loan facility availed by Offshore Holding.

Solely on account of this refusal to grant the NOC, the vessel could not

be delivered on the agreed delivery date of February 28, 2019,

compelling the Corporate Debtor to seek an extension of the delivery

date till March 28, 2019. The prospective purchaser, however, declined

the request for extension, claimed losses on account of delayed

delivery, and proceeded to obtain an arrest order from the Maritime

Court, China, resulting in arrest of the vessel Nerissa. It was only

thereafter, and after repeated requests, that SBI eventually issued the

NOC permitting sale of the vessel on March 26, 2019. Appellant claims

that solely due to the delayed grant of the NOC by SBI, Offshore

Holding suffered a direct loss exceeding USD 3.3 million, being the

difference between the contracted sale price and the reduced price

ultimately realised. In addition, SBI levied penal interest at the rate of

17.5% p.a. on account of alleged delay in repayment, despite when

delay was itself a direct consequence of SBI's refusal to issue the NOC

in a timely manner. Appellant contends that this arbitrary and Company Appeal (AT) (Insolvency) No. 2363 of 2024 11 of 39 unjustified refusal by SBI to grant the NOC within time caused grave

financial loss to the Corporate Debtor and its subsidiary and materially

aggravated their financial distress. Appellant contends that it is a

settled principle of law that a creditor cannot take advantage of a

default which is caused or materially contributed to by its own acts or

omissions. SBI, having assured issuance of the NOC and thereafter

failed to honour such assurance, cannot be permitted to allege default

or invoke insolvency proceedings based on consequences flowing

directly from its own conduct. Appellant claims that in these

circumstances, SBI is clearly disentitled from invoking any coercive or

insolvency-based remedy, as such invocation would amount to

approbation and reprobation and a clear abuse of the insolvency

process, particularly when the alleged default is demonstrably creditor-

induced.

9.5. Appellant also contends that SBI has overcharged the

commission. In and around September 2018, the Corporate Debtor

discovered that SBI had arbitrarily overcharged commission under the

Stand-by Letter of Credit (SBLC) to the extent of USD 115,000 (US

Dollar One Hundred and Fifteen Thousand only). The said

overcharging was specifically brought to the SBI's notice by emails

dated September 19, 2018 and January 25, 2019. This issue assumes

significance since all payments made by the SBI to SBI Singapore

Company Appeal (AT) (Insolvency) No. 2363 of 2024 12 of 39 under the SBLC was issued as security for the term loan availed by

Offshore Holding and were debited by the SBI directly to the Corporate

Debtor's term loan account, thereby compounding the financial burden

on the Corporate Debtor. Despite the existence of these disputes and

unresolved issues, SBI issued a Recall Notice dated October 31, 2019

to the Corporate Debtor and the Appellant, without addressing the

ongoing disputes relating to overcharging, withholding of NOCs, or

losses caused due to the SBI's own conduct. These issues go to the root

of the existence of the liability of the Corporate Debtor as well the

Appellant. The personal insolvency of the Appellant could not have

been initiated without adjudication of these disputes between the

parties.

9.6. Appellant further contends that due to pendency of commercial

suit before the Bombay High Court, no adverse could have been passed

in the insolvency proceedings. The Appellant along with the Corporate

Debtor had instituted Commercial Suit No. 1353 of 2019 before the

Hon'ble Bombay High Court, inter alia claiming damages from SBI for

losses suffered due to its arbitrary and mala fide actions including

failure to provide the NOC for sale of Nerissa as well as for overcharging

the commission. The said Commercial Suit is pending adjudication.

Since the Hon'ble Bombay High Court is seized of the disputes forming

the very foundation of the alleged default, no adverse orders could have

Company Appeal (AT) (Insolvency) No. 2363 of 2024 13 of 39 been passed in the insolvency proceedings. Despite the commercial

suit in the Bombay High Court, the Impugned Order dated December

9, 2024 was passed and the Company Petition was admitted thereby

commencing insolvency proceedings against the Appellant. Such a

course of action has not only taken away the right of the Appellant to

have these issues adjudicated but also foreclosed these issues against

the Appellant.

9.7. Thus, the action of SBI in overcharging under the SBLC,

withholding of NOCs for Prem Mala and Nerissa, delayed permissions,

penal interest, and selective appropriation thereby caused massive

financial loss, erosion of asset value, and ultimate business

destruction of the Corporate Debtor. These facts unequivocally

demonstrate that the alleged default was not independent or wilful, but

was a direct consequence of SBI's sown mala fide, arbitrary, and

malicious conduct. Appellant contends that in such circumstances,

SBI cannot be permitted to invoke the Guarantee Deed or insolvency

proceedings, having itself led to the event of default.

9.8. Appellant contends that R1-SBI has failed to produce complete

statement of account. SBI has failed to place on record a complete and

continuous statements of account from the date of inception of the

facilities, as required under the IBC or the Rules thereunder. The

Company Appeal (AT) (Insolvency) No. 2363 of 2024 14 of 39 Respondent has specifically pointed out that only selective extracts

have been produced, making verification of the alleged claim

impossible. Appellant contends that this failure to produce assumes

greater significance in view of the glaring inconsistency in the amounts

claimed by SBI in the Company Petition, where the recall notice dated

October 31, 2019 quantified dues at approximately Rs.

85,86,61,167.45 (Rupees Eighty Five Crores Eighty Six lakhs Sixty One

Thousand One Hundred Sixty Seven and Forty Five Paise only),

however, the Company Petition was filed for an amount of Rs.

236,19,05,443.21 (Rupees Two Hundred and Thirty Six Crores

Nineteen Lakhs Five Thousand Four Hundred Forty Three and Twenty

One Paise only) filed in 2021 within a short span of time, without

explanation or workings. Such an unconscionable escalation renders

the Company Petition ex facie untenable.

9.9. Appellant further claims that the alleged Deed of Guarantee is

insufficiently stamped under the Maharashtra Stamp Act, 1958.

Appellant contends that it is settled law that an insufficiently stamped

instrument cannot be admitted in evidence, and cannot be acted upon

by any authority. Consequently, the very foundation of the Petition is

legally non-existent.

10. In view of the above submissions, it is submitted that the Impugned

Order is violative of principles of natural justice, is passed in complete Company Appeal (AT) (Insolvency) No. 2363 of 2024 15 of 39 ignorance and disregard to the contentions raised by the Appellant and is

erroneous even on merits based on the contentions raised by the Appellant.

SBI has failed to demonstrate a valid and legal invocation of the alleged

guarantee executed by the Appellant. Moreover, the Appellant had a large

claim against the SBI on account of its arbitrary conduct which dispute is

pending hearing and adjudication before the Bombay High Court. In these

circumstances, the Impugned Order could not have been passed initiating

the insolvency resolution process against the Appellant.

Reply of Respondent-R1-SBI

11. R1-SBI, while providing brief background of the case informs us that

it granted various credit facilities to the Corporate Debtor for which the

Appellant executed Deed of Guarantee dated 25.03.2013 in favour of the

Respondent thereby providing an irrevocable and continuing guarantee for

the repayment of facilities availed by the Corporate Debtor. The

aforementioned Credit facilities were renewed vide Sanction and Revival

Letters dated 02.04.2018 and 01.04.20219 and the Corporate Debtor

acknowledged its debt and outstandings in respect of the account

maintained by the Corporate Debtor with the Respondent. The Corporate

Debtor failed to fulfil its obligations in relation to the aforementioned credit

facilities and the account of the Corporate Debtor was classified as NPA on

23.04.2019. In furtherance, Respondent issued a Recall Notice dated

31.10.2019 for the amount payable by the Corporate Debtor however the

same was of no avail and finally the Respondent issued a Demand Notice in

Company Appeal (AT) (Insolvency) No. 2363 of 2024 16 of 39 Form-B, upon the personal guarantor i.e., the Appellant herein, however the

Appellant failed to act upon it. Pursuant to the aforementioned Respondent

filed a petition under Section 95(1), IBC 2016 titled as State Bank of India

vs. Barish Kumar Mittal C.P. (IB) No. 798/MB/2021 against the Appellant

for initiating insolvency resolution process for personal guarantor, for the

recovery of debt amounting to INR 236,19,05,443,21/-. The Hon'ble bench

of NCLT Mumbai directed the Appellant to file its reply, however the

Appellant failed to do so during the course of hearing and due to this failure

of the Appellant to bring its reply on record the Hon'ble bench of NCLT

Mumbai proceeded to adjudicate upon the issue without the reply directing

initiation of insolvency resolution process against the personal guarantor i.e.,

the Appellant herein.

12. R1-SBI contends that the appeal filed by the appellant is not

maintainable under Section 61 IBC, 2016. The Appellant has preferred the

instant appeal under Section 61 of the IBC, 2016 which comes under the

Part II of the code. It is further submitted that by way of the present appeal

the Appellant has challenged an order passed under the petition preferred

under Section 95 IBC, 2016 which falls under Part III of the code. That, from

the bare perusal of Section 61(1), it transpires that an appeal under the said

section can only be preferred against an order which is passed under the

same part i.e., Part II and as such the appeal preferred by Appellant against

an order which is passed under Part III cannot be adjudicated upon under

Company Appeal (AT) (Insolvency) No. 2363 of 2024 17 of 39 the garb of Section 61, IBC, 2016. The relevant portion of Section 61 is

reproduced herein as under:

"61. Appeals and Appellate Authority (1) Notwithstanding anything to the contrary contained under the Companies Act 2013 (18 of 2013), any person aggrieved by the order of the Adjudicating Authority under this part may prefer an appeal to the National Company Law Appellate Tribunal."

R1-SBI contends that in view of the provisions of Section 61 (1), IBC, 2016,

the present appeal filed by the Appellant is not maintainable and is liable to

be dismissed on this ground alone.

13. R1 - SBI contends that affidavit in reply filed by the appellant was never

brought on record. It is submitted that the Appellant/Personal Guarantor

was provided the opportunity of being heard. Although the order records the

Reply is not filed; the Appellant was heard. Vide order dated 05.02.2024,

Appellant was granted two weeks' time to file reply. However, despite the said

direction, the reply was e-filed with a delay of2 weeks; only on 01.03.2024.

Pursuant to the said e-filing on 01.03.2024; the matter was listed before the

Ld. Adjudicating Authority nine times i.e.; on 06.03.2024, 12.04.2024,

01.05.2024, 11.06.2024, 05.07.2024, 27.08.2024, 15.10.2024, 13.11.2024

and 09.12.2024. Despite the matter being listed 9 times over a period of7

months post e-filing~ no efforts were taken by the Personal Guarantor to

bring the reply on record or to confirm/ensure that the reply was on record.

Moreover, none of the orders passed by the Adjudicating Authority after

01.03.2024 records that the reply had been filed and was on record. The

Company Appeal (AT) (Insolvency) No. 2363 of 2024 18 of 39 Appellant has annexed a copy of order dated 06.03.2024 and he contends

that the counsels of the Appellant was present, however their appearance

was not marked. The said contention of the Appellant appears to be dubious

in nature, because, if the counsels of the Appellant were present, they could

have made a submission about reply being filed, however the order records

no such submission on that note and as such the presence of counsels of the

Appellant on the said that remains questionable attributable to their failure

to not appear when the Hon'ble Adjudicating Authority rightly recorded the

presence of other counsels who were present. The contention of the Appellant

that the counsel for the Appellant furnished the physical copy of the reply to

the Hon'ble Adjudicating Authority for the convenience of the Tribunal and

that the same was taken on record. However, the Appellant has failed to

produce any documentary proof regarding tendering of the same. The reply

of the Appellant was not on record and as such cannot be considered as filed

and when the matter was finally at the stage of final arguments, the counsel

for the Appellant may have given a copy of the reply to the Tribunal to

consider it, however the said exercise cannot be construed as the reply being

taken on record, more so being filed in accordance with the definition of the

term 'filed' as defined under Rule 2(14), NCLT Rules, 2016 which is

reproduced hereinunder: -

"(14) "filed'' means filed in the office of the Registry of the Tribunal"

14. Due to the negligent and ordinary approach of the Appellant in

contesting the case before the Hon'ble NCLT Mumbai bench that no efforts Company Appeal (AT) (Insolvency) No. 2363 of 2024 19 of 39 were made to get the reply on record, however it cannot be said that the

defences raised by the Appellant have not been considered because the

Appellant has been heard by the Ld. Adjudicating Authority before passing of

the Impugned Order.

15. R1 - SBI further contends that Reply Affidavit of the appellant does not

make out any ground on which the Section 95(1) application filed by the

Respondent No.1 could have been rejected. Without prejudice even if the reply

affidavit of the Appellant was to be considered by the Adjudicating Authority

the same does not raise any ground which shows that debt and default do

not exist. The Appellant has concocted a false narrative and, and has

contested the application filed before the Adjudicating Authority majorly on

the aspects of pre-existing dispute, the deed of Guarantee through which

Respondent No. 1 is acclaimed as Personal Guarantor was insufficiently

stamped and that the debt was only payable on demand.

16. R1 - SBI contends that the Respondent No. 1 is a Financial Creditor

and as such it filed an application under Section 95(1) IBC, 2016 for initiating

the CIRP against the Appellant. The aforementioned Section when read with

Section 7, IBC, 2016, which deals with initiation of CIRP by a financial

creditor nowhere postulates that the application under the said Sections

would not be maintainable in view of the pre-existing dispute. The term

dispute has been defined under Section 5(6), IBC, 2016 which reads as

under:

Company Appeal (AT) (Insolvency) No. 2363 of 2024 20 of 39 "xxx (6) "dispute" includes a suit or arbitration proceedings relating to-

(a) the existence of the amount of debt;

(b) the quality of goods or service; or

(c) the breach of a representation or warranty;

xxx"

It is pertinent to mention here that the commercial suit filed by the corporate

debtor along with the Appellant herein pertains to seeking of alleged damages

suffered by the corporate debtor which does not fall within the ambit of

Clause 6 of Section 5 IBC, 2016.

17. R1 - SBI that this Hon'ble Tribunal while dealing with issue of pre-

existing dispute in the case of Karan Goel v Pashupati Jewellers 2019 SCC

OnLine NCLAT 934 has held as under:

"7. From the aforesaid finding of the Hon'ble Supreme Court, it is clear that once the Adjudicating Authority is satisfied on the basis of records that the debt is payable and there is default, the Adjudicating Authority is required to admit the application. The Respondent - Mis Pashupati Jewellers having enclosed the copy of the 'Corporate Guarantee and Undertaking' Agreement dated 7th April, 2017 instituted on e-Stamp, issued by Government of National Capital Territory of Delhi, it was not open to the Adjudicating Authority to deliberate on the issue whether e-Stamp is a forged document or not. Merely because a suit has been filed by the Appellant and pending, cannot be a ground to reject the application under Section 7 of the I &B Code. Pre-existing dispute cannot be a subject matter of Section 7, though it may be relevant under Section 9 of the I&B Code."

18. R1-SBI contends that in view of the facts of the present case and the

settled position of law existence/ non-existence of pre-existing dispute is

Company Appeal (AT) (Insolvency) No. 2363 of 2024 21 of 39 irrelevant for the purpose of admission of an application under Section 7 or

Section 95 of the Code.

19. On the issue of insufficiently stamped deed of guarantee, it is the

contention of the Appellant in the reply affidavit placed on record that the

Company Petition filed before the Adjudicating Authority was based on

Guarantee Deed which was insufficiently stamped and thus the same could

not have been relied upon in view of the Maharashtra Stamps Act, 1958 by

the Adjudicating Authority. However, the said contention of the Appellant

does not hold much water and as such is not tenable in the eyes of law as

the proceedings before· the Adjudicating Authority are summary in nature

and the IBC, 2016 being a complete code in itself the provisions of the Code

of Civil Procedure, 1908 and the Indian Evidence Act, 1872 do not strictly

apply to the proceedings before the Adjudicating Authority while

adjudicating an application u/s 95 IBC, 2016. Further, unlike a recovery

forum where the court before decreeing a suit or a proceeding against the

debtor in favour of the creditor has to examine the admissibility of

documents is not requirement as such and the proceedings are limited to

an aspect of ascertaining default on the part of the Personal Guarantor.

20. R1 - SBI relies on the case of Innoventive Industries Ltd. v. ICICI

Bank, (2018) 1 SCC 407, wherein the Hon'ble Supreme Court has held as

under:

Company Appeal (AT) (Insolvency) No. 2363 of 2024 22 of 39 "...

29. The scheme of Section 7 stands in contrast with the scheme under Section 8 where an operational creditor is, on the occurrence of a default, to first deliver a demand notice of the unpaid debt to the operational debtor in the manner provided in Section 8(1) of the Code. Under Section 8(2), the corporate debtor can, within a period of 10 days of receipt of the demand notice or copy of the invoice mentioned in sub-section (1), bring to the notice of the operational creditor the existence of a dispute or the record of the pendency of a suit or arbitration proceedings, which is preexisting- i.e. before such notice or invoice was received by the corporate debtor. The moment there is existence of such a dispute, the operational creditor gets out of the clutches of the Code.

30. On the other hand, as we have seen, in the case of a corporate debtor who commits a default of a financial debt, the adjudicating authority has merely to see the records of the information utility or other evidence produced by the financial creditor to satisfy itself that a default has occurred. It is of no matter that the debt is disputed so long as the debt is "due" i.e. payable unless interdicted by some law or has not yet become due in the sense that it is payable at some future date.

It is only when this is proved to the satisfaction of the adjudicating authority that the adjudicating authority may reject an application and not otherwise."

21. R1 - SBI that in view of the abovementioned settled position of law,

the frivolous and baseless contention of the Appellant with regard to invalid

deed of guarantee is not sustainable and as such cannot be accepted to be

a determining factor for initiating the CIRP against him.

22. On the issue of the debt being payable on demand, R1 - SBI informs

us that the execution of a guarantee deed, disbursement of amounts, the

debt is admitted by the Appellant and the Respondent had issued a recall

notice and thereafter issued a demand notice and thus, the contention of Company Appeal (AT) (Insolvency) No. 2363 of 2024 23 of 39 the Personal Guarantor that the amounts were payable on demand only and

no demand was raised is untenable. The Appellant in his reply affidavit has

made frivolous and baseless averments with regard to the issuance of recall

notice which includes - that the Respondent failed to specify the facility

under which the Respondent has called upon the Appellant to pay the said

amount, however the same falls flat on the face of it, which gets further clear

from the perusal of Para 9 of the recall notice dated 31.10.2019 under which

the Respondent No. 1 has called upon the Corporate Debtor to pay an

amount Rs. 140,73,58,277.59 which was the outstanding amount as on

30.10.2019 and further invoking the guarantee deed for further payment of

interest amounting to Rs. 85,86,61,167.45 under Working Capital Credit

Facilities within 7 days of receipt. The recall notice further stated that the

total dues payable by the Corporate Debtor is Rs 226,60,19,445/- which is

the sum total of interest plus outstanding amount as on 30.10.2019. In view

of the non-compliance of the recall notice dated 31.10.2019 by the

Corporate Debtor, the Respondent No. 1 issued a demand notice dated

01.06.2021 detailing the total outstanding amount of debt including interest

and penalties, amount of debt in default, date when the debt was due and

thus the contention of the Appellant that the increase of amount asked in

recall notice as compared to demand notice is not tenable.

23. In light of the abovementioned facts and circumstances, R1-SBI

contends that the appeal is devoid of merits and deserves to be dismissed.

Company Appeal (AT) (Insolvency) No. 2363 of 2024 24 of 39 Appraisal

24. Appellant contends that the impugned order is ex-facie violative for the

principle of natural justice as it incorrectly records that the Appellant did not

file an affidavit in reply and also it is unreasoned and contrary to settled

principles requiring application of judicial mind under Section 100 of the

IBC. Appellant further claims that the Impugned Order is a non-speaking

order that fails to deal with any of the detailed objections raised by the

Appellant in the Reply as well as at the final hearing of the Company Petition.

Issues of insufficient stamping of the Guarantee Deed, defects in the recall

Notice dated October 31, 2019 and Demand Notice dated June 1, 2021 under

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

Authority for Insolvency Resolution Process for Personal Guarantors to the

Corporate Debtors) Rules, 2019 by SBI, failure to furnish complete

statements of account to the Appellant, and SBI's arbitrary conduct were

specifically raised but wholly ignored by the Hon'ble NCLT. Appellant

contends that these issues strike at the root of admissibility and

enforceability of the creditor's claim.

25. On the other hand, Respondent claims that the appeal filed by the

appellant is not maintainable under Section 61 IBC, 2016. The relevant

portion of Section 61 is reproduced herein as under:

"61. Appeals and Appellate Authority (1) Notwithstanding anything to the contrary contained under the Companies Act 2013 (18 of 2013), any person aggrieved by the order of the Adjudicating

Company Appeal (AT) (Insolvency) No. 2363 of 2024 25 of 39 Authority under this part may prefer an appeal to the National Company Law Appellate Tribunal."

R1-SBI contends that in view of the provisions of Section 61 (1), IBC, 2016,

the present appeal filed by the Appellant is not maintainable and is liable to

be dismissed on this ground alone as the instant appeal under Section 61 of

the IBC, 2016 which comes under the Part II of the code. And the present

appeal the has challenged an order passed under the petition preferred under

Section 95 IBC, 2016 which falls under Part III of the code. That, from the

bare perusal of Section 61(1), it transpires that an appeal under the said

section can only be preferred against an order which is passed under the

same part i.e., Part II and as such the appeal preferred by Appellant against

an order which is passed under Part III cannot be adjudicated upon under

the garb of Section 61, IBC, 2016. Such an argument is untenable if both

section 60 and Section 61 are read together.

26. We note that Section 60(1) is in Chapter VI with a heading of

"Adjudicating Authority for Corporate Persons" and states that "The

Adjudicating Authority, in relation to insolvency resolution and liquidation for

corporate persons including corporate debtors and personal guarantors thereof

shall be the National Company Law Tribunal having territorial jurisdiction over

the place where the registered office of the corporate person is located." And

the immediate next section in the same chapter within the same heading

provides for appeal and says that "Notwithstanding anything to the contrary

Company Appeal (AT) (Insolvency) No. 2363 of 2024 26 of 39 contained under the Companies Act 2013 (18 of 2013), any person aggrieved

by the order of the Adjudicating Authority under this part may prefer an appeal

to the National Company Law Appellate Tribunal." Both sections read

together make it clear that the first section [Section 60(1)] provides for the

role of adjudicating authority in deciding cases against the corporate persons

including personal guarantors and the subsequent section [Section 61(1)]

provides for the appeal. Without any provision for appeal, the personal

guarantor cannot be left high and dry. Thus, the contention of the

Respondent with the respect to non-applicability of section 61(1) is untenable

and is rejected.

27. The other major ground raised by the Appellant is that impugned order

is ex-facie violative for the principle of natural justice as the impugned order

incorrectly records that the Appellant did not file an affidavit in reply in the

Company Petition before the Adjudicating Authority. On the other hand, from

the materials placed on record we observe that the reply was e-filed on

01.03.2024, but was never brought on record. Respondent claims it was not

filed in accordance with the definition of the term 'filed' as defined under Rule

2(14), NCLT Rules, 2016 which is reproduced hereinunder:

"(14) "filed'' means filed in the office of the Registry of the Tribunal"

28. Appellant contends that the reply was also tendered to the bench on

15.10.2024 and detail submissions were also made based on that. But the

impugned order incorrectly records that the Appellant's (Respondents before

Company Appeal (AT) (Insolvency) No. 2363 of 2024 27 of 39 Adjudicating Authority) had chosen not to file their reply and the Tribunal

was constrained to adjudicate the petition apropos the materials on records.

29. Stoutly refuting, R1-SBI brings to our notice that affidavit in reply filed

by the appellant was never brought on record. Vide order dated 05.02.2024,

Appellant was granted two weeks' time to file reply. However, despite the said

direction, the reply was e-filed only on 01.03.2024. Later on the matter was

listed before the Adjudicating Authority nine times i.e.; on 06.03.2024,

12.04.2024, 01.05.2024, 11.06.2024, 05.07.2024, 27.08.2024, 15.10.2024,

13.11.2024 and 09.12.2024. But no efforts were made by the Personal

Guarantor to bring the reply on record or to confirm/ensure that the reply

was on record. Moreover, none of the orders passed by the Adjudicating

Authority after 01.03.2024 records that the reply had been filed and was on

record. It is also noted that even though the Appellant has annexed a copy

of order dated 06.03.2024 and contends that the counsels of the Appellant

was present, however their appearance was not marked. The said contention

of the Appellant appears to be questionable in nature, because, if the

counsels of the Appellant were present, they could have made a submission

about reply being filed. At this stage it difficult to ascertain the correctness

of the contention of the Appellant that the counsel for the Appellant

furnished the physical copy of the reply to the Adjudicating Authority for the

convenience of the Tribunal and that the same was taken on record, when

nothing is recorded in the order sheets. Strictly by Rule 2(14), NCLT Rules,

Company Appeal (AT) (Insolvency) No. 2363 of 2024 28 of 39 2016, the reply of the Appellant was not on record and as such cannot be

considered. But the Appellant admits that he argued basis that reply and he

was heard at the stages of final arguments but it is incorrectly recorded that

the Appellant did not file an affidavit in reply. Further we observe that even

though the order records the Reply is not filed, the Appellant/Personal

Guarantor was provided the opportunity of being heard.

30. If however, the Appellant was keen to contest any fact which had

happened before the Adjudicating Authority but was wrongly recorded by the

Tribunal, then in the fitness of things the Appellant should have filed an

affidavit to that effect before the Adjudicating Authority. It, however, was not

done.

31. We have noted contentions of both sides. Bases the material placed on

record, we find that reply has been filed on 1st March 2024 by the respondent

even though it was neither formally taken on record nor noted in any

subsequent court proceedings. The Appellant contends it be a violation of

natural justice and contends it to be set aside on this ground. But we find

that the Appellant has also canvassed all its grounds on merit and we have

considered all of them to decide the case in hand. Be that as it may, at the

Appellate stage we take note of the reply which has been placed on record

and decide the issues involved in this Appeal.

Company Appeal (AT) (Insolvency) No. 2363 of 2024 29 of 39

32. We note that the affidavit in reply filed by the Appellant before the

Adjudicating Authority is on record at pages 424 to 541 APB. We observe

that this affidavit in reply contains almost similar defense as was that of the

Corporate Debtor i.e. the principal borrower, opposing the CIRP, during the

initiation of Section 7 petition. And the grounds raised in the appeal by the

personal guarantor to the Corporate Debtor are also very similar ones, apart

from adding new grounds of violation of principles of natural justice,

insufficient stamping on guarantee deed and the non-submission of the

complete financial statements and also defects in the recall Notice dated

October 31, 2019 and Demand Notice dated June 1, 2021 under Rule 7(1) of

the Code.

33. We find that even if the reply affidavit of the Appellant was to be

considered by the Adjudicating Authority the same does not raise any ground

which shows that debt and default do not exist. We find that the Appellant

has contested the application filed before the Adjudicating Authority manly

on the aspects of pre-existing dispute, the deed of Guarantee through which

Appellant is acclaimed as Personal Guarantor was insufficiently stamped

and that the debt was only payable on demand.

34. Before proceeding further, it will be appropriate to note the report of

the resolution professional under Section 99 of the Code, which it had filed

before the Adjudicating Authority in CP No 798(MB) of 2021, on the

Company Appeal (AT) (Insolvency) No. 2363 of 2024 30 of 39 application filed by Financial Creditor -State Bank of India under Section

95(1). We observe that RP reported that:

"6. That in response to RP's email dated 17.09.2022 and 19.09.2022, seeking details for repayment of debts to the Creditor, Mr. Harish Kumar Mittal vide email dated 21.09.2022, acknowledged the receipt of intimation of RP, further he denied the debts against the Corporate Debtor and mentioned that there are pre- existing disputes regarding the debts claimed by the State Bank of India. The PG further mentioned that a Commercial Suit no. 315 of 2020 has been filed in the Bombay High Court seeking damages to the tune of Rs. 418.43 Crores against State Bank of India and therefore no amount is payable by him. The Copy of the email dated 21.09.2022 sent by the Personal Guarantor, Mr., Harish Kumar Mittal is annexed herewith and marked as Annexure C."

......

.....

"9. That the RP after examining the application filed under section 95(1) of the Code and response received from the Applicant as well as the Personal Guarantor, has observed as under: -

a. The Corporate Debtor was sanctioned a Loan/Credit facility of Rs.236,19,05,443.21 (Rupees Two Hundred Thirty-Six Crores Nineteen Lakhs Five Thousand Four Hundred Forty-Three and Paise Twenty-One only) by the Creditor (State Bank of India) which is in default as on08.02.2021 together with interest and other charges as per the Applicable rate w.e.f. 29.04.2019 vide several Financial Documents, as with terms and conditions of the Security Documents executed in relation thereto. In consideration of the credit facilities granted to the Corporate Debtor, the Guarantor executed a Deed of Guarantee dated 25.03.2013 in favor of the Financial Creditor ("Guarantee Deed"), providing an irrevocable and continuing guarantee for the repayment of the facilities availed by the Borrower. Pursuant to the terms of the Guarantee Deed, the guarantee extended by the Guarantor was a continuing guarantee for all amounts advanced by the Financial Creditor and

Company Appeal (AT) (Insolvency) No. 2363 of 2024 31 of 39 all interests and such sums as may remain unpaid and outstanding under the facilities advanced by the Financial Creditor. Further, any variance to the terms of the facility or security by the Financial Creditor and the Corporate Debtor shall not release or discharge the Guarantor of his obligations under the Guarantee.

d. The Corporate Debtor has, by virtue of various letters from 2013 to 2019, has confirmed and acknowledged its debt and outstanding in respect of the account maintained by the Corporate Debtor with the Financial Creditor.

e. Additionally, upon failure on the part of the Corporate Debtor to repay the amounts due to the Financial Creditor, the account of the Corporate Debtor was classified as a non-performing asset and subsequently the Financial Creditor issued a recall notice dated October 31, 2019 to the Corporate Debtor and the guarantors, including the Guarantor, The Guarantor, being liable to repay the outstanding pursuant to the Guarantee Deed failed to repay the amounts owed to the Financial Creditor by the Guarantor.

f. The Corporate Debtor has defaulted on 31.10.2019 and the Creditor Applicant had issued the Demand Notice dated 01.06.2021 under rule 7 (1) of the Insolvency Resolution process of the Personal Guarantor to Corporate Debtor vide letter no. SBI/SAMB-I/T6/2021-22/000232. Consequently, the Creditor / Applicant has invoked the Personal Guarantee furnished by Mr. Harish Kumar Mittal and thereby called by the Creditor / Applicant to repay the outstanding amount together with interest and other charges. Following that on 28.07.2021, the applicant filed an application with this Hon'ble Tribunal under section 95 of the Insolvency and Bankruptcy Code, 2016.

g. That the Creditor had recorded the default with respect to the Corporate Debtor on the Information Utility and the status of authentication is 'Deemed to be authenticated' on 18.03.2021.

Company Appeal (AT) (Insolvency) No. 2363 of 2024 32 of 39 h. The details of the debts as on 31.10.2019 as per the application stands at of Rs. 236,19,05,443.21 (Rupees Two Hundred Thirty-Six Crores Nineteen Lakhs Five Thousand Four Hundred Forty-Three and Paise Twenty-One only) which includes the cash credit, working capital and term loan. i. According to section 78 of the IBC, where the amount of the default is not less than one thousand rupees, Part III, i.e., provision relating to fresh start, insolvency and bankruptcy of the individuals and partnership firms shall apply. The RP concluded that there is a default of more than One Thousand Rupees from the Guarantor after reviewing the Following: .....

.....

j. That while the Personal Guarantor vide email dated 21.09.2022 has denied any debts against the Corporate Debtor or personal guarantor, however from the available records it is evident that the Corporate Debtor was admitted under CIRP vide Hon'ble NCLT order dated 08.02.2021.

k. That as per Rule 3(e) of the Personal Guarantor Insolvency Rules, "Guarantor" means a debtor who is 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.

l. That section 128 of the Indian Contract Act, 1872 creates a co-extensive ' liability between the surety and the debtor.

m. That the application by the creditor/ Applicant under section 95 (1) of the Code read with Rule 7(2) of the Rules is properly filed in the prescribed Form- C (Application by the Creditor to Initiate Insolvency Resolution Process) along with Prescribed Fee of Rs. 2000/-.

n. That the said application filed by the Creditor satisfies the requirements prescribed under section 95 of the Code. The Creditor/ Applicant has given proper Demand Notice along with relevant evidence of default for non- payment of the debts within 14 days of the service of the Notice of Demand,

Company Appeal (AT) (Insolvency) No. 2363 of 2024 33 of 39 therefore, the first requirement as set out under section 95(1) of the Code is satisfied."

35. Perusal of the report of the resolution professional shows that it clearly

establishes the liability of the personal guarantor. Further the defense which

has been taken by the personal guarantor is almost similar to that by the CD

against the initiation of Section 7 petition, which briefly is that there are pre-

existing disputes regarding the debts claimed by the State Bank of India and

a Commercial Suit no. 315 of 2020 has been filed in the Bombay High Court

seeking damages to the tune of Rs. 418.43 Crores against State Bank of India

and therefore no amount is payable by him. We find the personal guarantor,

while replying to the RP, had not raised the issues of the insufficient

stamping of the guarantee deed, non-provision of complete accounts and also

the ground relating to defect in recall and demand notice and these have

been raised at this appellate stage.

36. We find that the Appellant- personal guarantor had sufficient time and

opportunity to present his case initially before the Resolution Professional

and later on before the adjudicating authority. It cannot be said that the

Appellant was not heard and it is against the principles of natural justice.

Even then the contentions raised by the Appellant have noted by us while

deciding the case and therefore grounds raised the Appellant stand disposed

of and we find do not assist the case of the Appellant at this stage. While

coming to a decision for accepting the report of the resolution professional,

Company Appeal (AT) (Insolvency) No. 2363 of 2024 34 of 39 the adjudicating authority had decided basis the reply of Appellant which

was incorporated in the report of the RP. It therefore cannot be inferred that

the Appellant was not heard and there is a violation of the principles of

natural justice. We also note that the Appellant has admittedly argued before

the Adjudicating Authority based on his reply. At this stage we find these

grounds are frivolous ones and are to delay the completion of the personal

insolvency proceedings against the personal Guarantor.

37. In the facts and circumstances of the case we observe that there was

no violation of the principles of natural justice under Section 95 to Section

100 of the IBC as the Appellant-personal guarantor got the opportunity to

participate in the process of the examination of the application by the RP

under Section 99 of the IBC. The RP had asked for information/explanations

from the debtor before filing the report and the information was provided by

the personal guarantor and basis that the resolution professional had filed

the report before the adjudicating authority. Till this stage the debtor had

the opportunity to provide information/explanation to substantiate their

contentions. Once the report was filed by the RP, the Adjudicating Authority

carried out the actual judicial adjudication under Section 100 of the IBC by

deciding whether to accept or reject the application. The report of the RP is

only recommendatory and is not binding on the Adjudicating Authority.

Though Section 100 of the IBC does not explicitly contemplate a right of

hearing being given to the debtor, the Adjudicating Authority to comply with

Company Appeal (AT) (Insolvency) No. 2363 of 2024 35 of 39 the principles of natural justice and as per judicial precedents proceeded to

provide the debtor a chance to be heard before arriving at a final decision.

38. We find that as per Section 100 of the Code strict timeline has been

prescribed for the Adjudicating Authority to either admit or reject the

application bases the report under Section 99 within 14 days. But in this

case the matter lingered on for very long time as noted by us herein. The

reply was only e-filed and never physically filed or never brought to the notice

of the Adjudicating authority that it has been e-filed. In any case the personal

guarantor was heard by the Adjudicating Authority and basis that only the

order has been passed. The noting of the Adjudicating Authority in the

impugned order to the extent that Appellant's reply has not been filed doesn't

give any ground for the Appellant to claim that natural justice has been

denied to him, particularly in the background that he was personally heard,

all the grounds raised by him as personal guarantor are same as that of the

Corporate Debtor and furthermore the same reply had been noted by us at

Appellate stage and we don't find merit in that. We find these are dilatory

tactics and should be discouraged under IBC which provides strict timelines

at all stages.

39. Thus, in the facts and the circumstances of the case we find that the

appellant has been unduly delaying the proceedings and the Adjudicating

Authority was well within rights to not treat the reply which was not properly

filed.

Company Appeal (AT) (Insolvency) No. 2363 of 2024 36 of 39

40. We also note that the reply raises dispute on the initiation of Section 7

petition against the Corporate Debtor and claims that the application under

Section 7 was not maintainable in view of the pre-existing dispute. The

Appellant has claimed that there is a commercial suit which is filed by the

Corporate Debtor against R1-SBI which seeks alleged damages suffered by

the Corporate Debtor. We also note that the matter relating to existence or

non-existence of a pre-existing dispute is irrelevant for the purpose of

admission of an Application under Section 7 or Section 95 of the Code and

therefore such an argument is unsustainable and that too in Section 95

proceedings. Furthermore, during the hearing, it was informed to us by the

Appellant that the suit in Hon'ble High Court of Bombay has since been

dismissed. It was also brought to our notice this suit was filed subsequent

to the initiation of Section 95 proceedings against the Appellant. Thus, the

ground raised by the Appellant relating to a pending dispute is infructuous.

41. On the issue of insufficient stamp duty on the guarantee deed, we note

that the proceedings before· the Adjudicating Authority are summary in

nature and the IBC, 2016 being a complete code in itself the provisions of

the Code of Civil Procedure, 1908 and the Indian Evidence Act, 1872 do not

strictly apply to the proceedings before the Adjudicating Authority while

adjudicating an application u/s 95 IBC, 2016. Further, unlike a recovery

forum where the court before decreeing a suit or a proceeding against the

debtor in favour of the creditor has to examine the admissibility of documents

Company Appeal (AT) (Insolvency) No. 2363 of 2024 37 of 39 is not requirement as such and the proceedings are limited to an aspect of

ascertaining default on the part of the Personal Guarantor. We thus find that

the ground relating to insufficient stamp duty on the guarantee deed is

another frivolous ground which is untenable and is rejected.

42. On the ground that the debt was payable only on demand we find that

the execution of a guarantee deed, disbursement of amounts and debt is

admitted by the Appellant and the R1-SBI had issued a recall notice and

thereafter issued a demand notice and thus, the contention of the Personal

Guarantor that the amounts were payable on demand only and no demand

was raised is untenable and we reject that argument.

43. Appellant has also argued that the Respondent failed to specify the

facility under which the Respondent has called upon the Appellant to pay

the said amount, however it is clear from recall notice dated 31.10.2019

under which the Respondent No. 1 has called upon the Corporate Debtor to

pay an amount Rs.140,73,58,277.59/-which was the outstanding amount

as on 30.10.2019 and further invoking the guarantee deed for further

payment of interest amounting to Rs. 85,86,61,167.45/- under Working

Capital Credit Facilities within 7 days of receipt. The recall notice further

stated that the total dues payable by the Corporate Debtor is Rs.

226,60,19,445/- which is the sum total of interest plus outstanding amount

as on 30.10.2019. Thus, on the grounds that there was defect in the recall

notice and initial demand notice, we find them to be untenable at this stage, Company Appeal (AT) (Insolvency) No. 2363 of 2024 38 of 39 particularly in the background that it was never raised at the initial stage

when the appellant had the opportunity to provide information to the RP.

44. Thus, in the facts and the circumstances of the case we find that we

conclude that the grounds raised by the Appellant do not justify to grant a

relief for setting aside the order dated 09.12.2024 passed by the Adjudicating

Authority. As we have gone through the affidavit and all the grounds raised

by the Appellant have been noted and evaluated by us, we therefore, cannot

allow NCLT to hear it afresh. Under these conditions, there is no justification

left for the matter to be remanded back to the Adjudicating Authority.

Orders

45. Accordingly, the Appeal is dismissed. All related IAs are also disposed

of. No orders as to costs.

[Justice N Seshasayee] Member (Judicial)

[Arun Baroka] Member (Technical)

[Indevar Pandey] Member (Technical) New Delhi.

February 06, 2026.

Pawan

Company Appeal (AT) (Insolvency) No. 2363 of 2024 39 of 39