Mukul Somany vs Dbs Bank Limited & Anr. & Ors

In the matter of: Mukul Somany ...Appellant Vs. DBS Bank Ltd. & Anr. ...Respondents

For Appellant: Mr. Niranjan Reddy and Mr. Raghenth Basant, Sr. Advocates with Ms. Sonali Jain, Ms. Bhawna Sharma Mr. Mohit Gupta and Ms. Hima Bharadwaj Advocates. For Respondents: Mr. Krishnendu Datta, Sr. Advocate with Mr. Vikram Wadehra, Ms. Smriti Churiwal, Mr. Jaiveer Kant, Adv. Meher Thapar and Mr. Yash Tandon, Advocates for R1. Ms. Anshula Grover, Advocate for R2. With Company Appeal (AT) (Insolvency) No.1000 of 2024

In the matter of: Sanjay Somany ...Appellants Vs. DBS Bank Ltd. & Anr. ...Respondents

For Appellants: Mr. Raghenth Basant, Sr. Advocate with Ms. Sonali Jain, Mr. Mohit Gupta and Ms. Hima Bharadwaj, Advocates. For Respondents: Mr. Krishnendu Datta, Sr. Advocate with Mr. Vikram Wadehra, Ms. Smriti Churiwal, Mr. Jaiveer Kant, Adv. Meher Thapar and Mr. Yash Tandon, Advocates for R1. Ms. Anshula Grover, Advocate for R2 2

JUDGMENT

(04th February, 2026) Ashok Bhushan, J.

These two Appeals have been filed against the order dated 03.05.2024

passed by the Adjudicating Authority (National Company Law Tribunal)

Kolkata Bench (Court - I), Kolkata in Company Petition (I.B) No.

1139/KB/2020 & Company Petition (I.B) No. 1255/KB/2020 admitting

Section 95 application filed by DBS Bank Limited against the Appellants

who are personal guarantors of the Corporate Debtor- Hindustan National

Glass & Industries Limited. These two Appeals have been filed challenging

the two separate orders of the same date dated 03.05.2024 admitting

Section 95 application.

2. It shall be sufficient to notice the facts in the Company Appeal (AT)

(Insolvency) No.999 of 2024 for deciding both the Appeals.

2.1. The Corporate Debtor was extended foreign currency loan on

17.08.2011 by DBS Bank. On 28.09.2011, Facility Agreement was entered

into between DBS Bank and the Principal Borrower- Hindustan National

Glass & Industries Limited. On 13.10.2015, two separate deeds of guarantee

were executed by the Appellants in favour of DBS Bank. On 27.08.2018,

Memorandum of Understanding was executed between Principal Borrower,

its secured creditors and Guarantors specifying manner of payment under

the one-time settlement (OTS). Financial Creditor filed an application under

Section 7 on 03.02.2020 before the Adjudicating Authority against the

principal borrower. A demand notice dated 27.02.2020 was issued by the

Company Appeal (AT) (Insolvency) Nos.999 & 1000 of 2024 3

Financial Creditor in Form B 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.

Demand Notice was replied by Appellant. Application under Section 95 was

filed on 15.10.2020. Notices were issued. Reply was filed by Personal

Guarantor. Report was filed by Resolution Professional under Section 99.

Adjudicating Authority after hearing the parties by order dated 03.05.2024

admitting Section 95 application.

3. In these Appeals notices were issued by this Tribunal on 17.05.2024.

Reply was filed by the Financial Creditor. This Tribunal heard the Appeal

and on 07.04.2025 a detailed order was passed. This Tribunal noticed the

facts of the case and submission raised by both the parties as well as

judgment of this Tribunal in Company Appeal (AT) (Insolvency) No.191 of

2025- 'State Bank of India' Vs. 'Mr. Deepak Kumar Singhania'. In

paragraphs 19 and 20 of the order dated 07.04.2025, this Tribunal

observed:-

"19. The above aspect affects very maintainability of Section 95 application. Notice under Rule 7 can be issued only after invocation of guarantee which has been laid down by this Tribunal in above case. Coming to the fact of the present case, the notice issued under Rule 7 is part of the record as Annexure - 13 of the appeal, which notice mention the date of default 02.10.2017. Copy of the application under Section 95 has also been brought on the record as an Annexure A-14. Apart from mentioning demand notice dated 27.02.2020, the application does not refer to any date

Company Appeal (AT) (Insolvency) Nos.999 & 1000 of 2024 4

for invocation of the guarantee. Whether in the facts of the present case, invocation of guarantee was required, shall depend on terms of personal guarantee agreement. Neither the adjudicating authority has adverted to the said issue nor the parties have addressed the above submission at the time of hearing, however, in view of the judgment of this Tribunal in 'State Bank of India' (Supra) as noticed above the above is relevant aspect with respect to Section 95 application which need to be considered.

20. We, thus are of the view that parties need to be given an opportunity to address submission on following question:

i. Whether deed of guarantee dated 13.10.2015, contemplates invocation of guarantee by the financial creditors before taking any proceeding against the personal guarantor.

ii. If the answer to above question is yes, whether financial creditors at any point of time has invoked the personal guarantee to enable them to file Section 95(1) application.

We direct these appeals to be listed again for further hearing on above issues.

List these appeals for further hearing on 17th April, 2025."

4. After the order dated 07.04.2025, Financial Creditor sought liberty to

file additional affidavit on 04.09.2025. An IA No.5689 of 2025 was filed for

taking the documents as Annexure R-1 and R-9 on record which application

was allowed on 29.10.2025. An IA No.6623 of 2025 dated 03.11.2025 was

filed by the Respondent No.1 for accepting Annexure Nos.1 and 2 on record.

Company Appeal (AT) (Insolvency) Nos.999 & 1000 of 2024 5

5. We have heard Shri Niranjan Reddy and Shri Raghenth Basant,

Learned Senior Counsel for the Appellant and Shri Krishnendu Datta,

Learned Senior Counsel for the Respondent- Financial Creditor.

6. As noted in our order dated 07.04.2025, parties were given

opportunity to address submission on following two questions:-

"i. Whether deed of guarantee dated 13.10.2015, contemplates invocation of guarantee by the financial creditors before taking any proceeding against the personal guarantor.

ii. If the answer to above question is yes, whether financial creditors at any point of time has invoked the personal guarantee to enable them to file Section 95(1) application."

7. Learned Counsel for the Appellant in support of his submission

submits that the guarantee deed dated 13.10.2025 clearly contemplate

issuance of demand notice by the Financial Creditor before taking any

proceeding against the personal guarantor. Despite opportunity being given

to the Financial Creditor, no notice invoking the bank guarantee has been

brought on the record and the only notice of demand which has been issued

by the Financial Creditor is notice dated 27.02.2020 which is noticed in

Form B. It is submitted that the Financial Creditor having never invoked the

guarantee application under Section 95 was not maintainable and the issue

in the present Appeal is fully covered by the judgment of this Tribunal in

'State Bank of India' Vs. 'Mr. Deepak Kumar Singhania' (supra) and

order admitting Section 95 application deserves to be set aside.

Company Appeal (AT) (Insolvency) Nos.999 & 1000 of 2024 6

8. Shri Krishnendu Datta, Learned Senior Counsel appearing for the

Respondent referring to the deed of guarantee although admits that deed of

guarantee contemplated issuance of demand notice, however, it is submitted

that subsequently a Memorandum of Understanding was entered on

27.08.2018 between the Corporate Debtor- Guarantors and secured

creditors as per which there is no necessity to issue any fresh demand

notice by the Financial Creditor and on any default committed the

guarantors were automatically liable. Thus, there is no necessity of issuing

any fresh demand notice. It is submitted thus, there was no necessity to

invoke the guarantee. Learned Counsel for the Respondent has also referred

to Compromise and Settlement Agreement dated 25.09.2018 and submits

that by virtue of Clause 2.1 'acknowledgment and waiver' automatically on

default being committed there was no necessity to issue notice for invocation

of guarantee.

9. For appreciating the submissions of the parties, first we need to notice

the deed of guarantee dated 18.10.2015 executed by the Appellants. Clause

2 of the Guarantee Deed contained statement that guarantor undertakes to

pay to the bank forthwith upon the demand of the Bank without demur.

Clause 2 is as follows:-

"2. In consideration of the Bank/s having entered into the Agreement's and entering into Transactions at the request of Guarantors for so long as the Bank/s may think fit with the Borrower, the Guarantors DO HEREBY IRREVOCABLY AND UNCONDITIONALLY guarantee to the Bank the due and punctual payment of all Guaranteed Money expressed to be payable from

Company Appeal (AT) (Insolvency) Nos.999 & 1000 of 2024 7

time to time by the Borrower as and when the same become due and payable and accordingly undertakes to pay to the Bank forthwith upon the demand of the Bank without demur and/or contestation and in the manner and currency prescribed by the Agreement's for payments by the Borrower, any and every sum or sums which the Borrower is at any time liable to pay In respect of the Guaranteed Money and which the Borrower has failed to pay and the same shall be limited to the Facility amount as mentioned at Serial No. 6 of the Schedule I written hereunder, together with all costs, charges and expenses Incurred by the Bank/s In enforcing or attempting to enforce this Guarantee and any security thereof or in suing for or otherwise attempting to recover any monies guaranteed hereby remaining unpaid to the Bank/s by the Borrower until full payment of the Guaranteed Money is received by the Bank to its satisfaction both after as well as before the judgement."

10. Clauses 14 and 32 also need to be noticed which are as follows:-

"14. If the Bank makes a demand under this Guarantee, the Guarantor shall pay interest on each sum demanded (before and after any judgment and to the extent, Interest at the default rate is not otherwise being paid on such sum(s) from the date of demand until the date of payment calculated on a daily basis at the rate mentioned at Serial No. 7 of the Schedule I written hereunder above the Bank's cost of funding such amount from whatever source the Bank/s may select.

32. Any demand for payment of monies or any other demand or notice under this Guarantee may be made by any officer of the Bank by a letter addressed to the Company Appeal (AT) (Insolvency) Nos.999 & 1000 of 2024 8

Guarantor and sent by post or delivered to the address above stated and a notice or demand so served shall be deemed to be served or received on the day It was so left or the day following that on which it is posted, as the case may be, [In addition any demand or notice may be served by the Bank on the either/any one of the Guarantor only and such service shall be deemed to be sufficient service in respect of both/all the Guarantors."

11. The provision of guarantee thus, clearly contemplated issuance of

demand notice i.e. invoking the guarantee for demanding any amount.

12. Learned Counsel for the Respondent has referred to Compromise and

Settlement Agreement dated 25.09.2018 which is part of the record of the

Appeal. Learned Counsel for the Respondent submits that by virtue of

Clause 2 of the Compromise and Settlement Agreement which contained an

acknowledgment, the earlier deed of guarantee stood modified and there is

no need of invocation of guarantee. Learned Counsel for the Respondent has

relied on Clause 2.1 of Article II which reads as follows:-

"2.1 ACKNOWLEDGEMENT

The Borrower hereby irrevocably acknowledges and confirms the existence of, and in the absence of manifest error, the amount of the Facilities outstanding to each of the Lenders as on Cut-off Date as are set out in Schedule III of this Agreement and acknowledges the payment of dues to the Lenders pursuant to the Resolution Plan and this Agreement.

The Borrower and the Guarantors hereby acknowledge the validity and subsistence of the deeds of guarantee

Company Appeal (AT) (Insolvency) Nos.999 & 1000 of 2024 9

executed by Guarantor 1, Guarantor 2 and Mr. Chandra Kumar Somany being represented by his legal heir Guarantor 3, as more particularly identified under Schedule VII of this Agreement, whereby the Guarantors have unconditionally, absolutely and irrevocably guaranteed and agreed to the Lenders Inter alia that:

(a) the Borrower shall duly and punctually repay/ redeem the Facilities together with all interest, additional interest and all other monies payable in accordance with the terms of the Facility agreements;

and

(b) in the event of any failure on the part of the Borrower in the repayment or payment of any monies due under the Facilities, and/ or in the event of occurrence of any failure or event of default as envisaged under the Facility Agreements, the Guarantors shall forthwith pay to the Lenders all the amounts payable by the Borrower."

13. Learned Counsel for the Respondent has relied on Clause 2.1 (b) and

submits that the above clause contemplated that Guarantors shall forthwith

pay to the Lenders all the amounts payable by the Borrower. It is submitted

that the due to the above clause, the invocation of guarantee is no more

necessary.

14. When we look into Clause 2.1 (a) and (b) on which reliance has been

placed by the Counsel for the Respondent, they are in reference to guarantee

which has been given by guarantors. Before clause (a) & (b), following

expression need to be noticed "whereby the Guarantors have unconditionally,

absolutely and irrevocably guaranteed and agreed to the Lenders Inter alia Company Appeal (AT) (Insolvency) Nos.999 & 1000 of 2024 10

i.e. (a) and (b)". Thus, clause (b) on which reliance has been placed were in

reference to the earlier guarantee but above clause (a) and (b) does not in

any manner dilute or modify the clauses of guarantee deed, as noted above.

15. Learned Counsel for the Appellant has referred to Clause 2.2 which

reads as follows:-

"2.2 SUSPENSION OF EXISTING EVENTS OF DEFAULT

Each Lender hereby suspends any Existing Event of Default and any and all rights, remedies and powers that may have arisen in connection therewith, until the occurrence of Event of Completion.

For avoidance of doubt, it is hereby clarified that the Lenders shall have the right to recover dues under the Facility Agreements and the right to invoke any Event of Default in future, in the event there is a default in accordance with the terms of this Agreement."

16. We, thus, are of the view that clauses of guarantee deed, as noticed

above, were not modified or superseded by Compromise and Settlement

Agreement or MoU. The liability of the guarantor was thus on demand being

made by the Bank, hence, invocation of guarantee was necessary before

issuing demand notice under Form B. We are unable to accept the

submission of the Counsel for the Respondent that after Compromise and

Settlement Agreement dated 25.09.2018, there was no necessity to invoke

the guarantee deed. There being no invocation of the guarantee deed prior to

issuance of demand notice in Form B, the present case is fully covered by

judgment of this Tribunal in 'State Bank of India' Vs. 'Mr. Deepak

Company Appeal (AT) (Insolvency) Nos.999 & 1000 of 2024 11 Kumar Singhania' (supra) where it was held that the default before

issuance of notice under Rule 7(1) must exist on the part of the personal

guarantor and notice under Rule 7(1) cannot be treated as a notice invoking

guarantee. In paragraphs 17 and 18 of the order passed on 07.04.2025, we

have already observed:-

"17. There is one more aspect of the matter which need consideration. As noted above, after filing of Section 7 application against the corporate debtor by the financial creditors on 03.02.2020, Section 7 application was registered as C.P. (IB) 369/KB/2020 against HNG. Thereafter, demand notice was issued on 27.02.2020 under Rule 7 of the 2019 Rules against the personal guarantors and application under Section 95 was filed on 15.10.2020 being C.P. (IB) 1255/KB/2020 and C.P. (IB) 1139/KB/2020. In a recent judgment delivered by this Tribunal in Comp. App. (AT) (Ins.) No. 191/2025, 'State Bank of India' Vs. 'Mr. Deepak Kumar Singhania', this Tribunal has taken the view that default before issuance of notice under Rule 7(1) must exist on the part of the personal guarantor and notice under Rule 7(1) cannot be treated as a notice invoking the guarantee. This Tribunal has also after noticing the judgment of the Hon'ble Supreme Court in 'Syndicate Bank' Vs. 'Channaveerappa Beleri & Ors.' reported in (2006) 11 SCC 506, has held that guarantor liability depends on the terms of his contract. This Tribunal has also considered Rule 3(1)(e) of the 2019 Rules and has held that notice under Rule 7 has to be issued after guarantee is invoked. In the above case, Section 95 application was filed by the financial creditor, relying on notice issued under Rule 7(1) of the notice for invoking the guarantee. Adjudicating Authority dismissed Section 95 application against which the appeal was filed by the SBI. In the above

Company Appeal (AT) (Insolvency) Nos.999 & 1000 of 2024 12

context, provisions of IBC and 2019 Rules were considered. It is useful to extract paragraph 17, 20, 21 & 22 of the judgment, which are as follows:

"17. The Notice, thus, contemplate demanding payment of the amount of default. The above Rule clearly indicate that Demand Notice has to be issued, demanding payment of the amount in default. Thus, the default by Guarantor has to exist on the date when Notice in Form-B is being issued. When we read Section 95, sub-section (4) and Rule 7 of 2019 Rules, the above is the only intendment of the legislative scheme, i.e. default on the part of Guarantor should exist on the date when Notice in Form-B has to be issued. We have noticed the definitions of 'debt' and 'default' in Section 3 (11) and (12) of the IBC. Default shall arise on account of non-payment of debt, when whole or part of it become due. 'Debt' means a liability or obligation in respect of a claim which is due from any person. Thus, for a default, debt has to be due and Debtor shall be only that person, to whom debt is due. A Personal Guarantor becomes a Debtor only when guarantee is invoked, making him liable to make the payment to the Lender. We have noticed Clause 2 and Clause 21 of the Deed of Guarantee in the foregoing paragraphs of this judgment, which clearly contemplate that liability on Guarantor shall arise only when demand is made by the Lender, in event Principal Borrower fails to repay the amount. In the present case, there is no case setup by the Appellant that at any point of time guarantee was invoked, except issuance of Notice in Form-B, which is claimed by the Appellant to be treated as Notice for invocation of guarantee. Further, we have noticed the definition of 'Guarantor' under Rule 3(1)(e), which while defining a 'Guarantor' contain two conditions, i.e. (i) who is a Personal Guarantor to a Corporate Debtor; and (ii) in respect of whom, guarantee has been invoked by the Creditor and remains unpaid in full or part. Learned Counsel for the Appellant has contended that expression 'and' used in Rule 3 (1)(e) needs to be read as 'or' to make the provision workable and to avoid producing an unintelligible and absurd result. Learned Counsel for the Appellant has relied on two judgments of the Hon'ble Supreme Court in support of the above submission, i.e. AIR 1968 SC 1450 - Ishwar Singh Bindra and Ors. vs. State of U.P. The Hon'ble Supreme Court in the above case had occasion to consider the definition of 'drug' Company Appeal (AT) (Insolvency) Nos.999 & 1000 of 2024 13

contained in Section 3(b)(i) of Drugs Act 1940. Expression 'and' used in Section 3(b)(1) of the Drugs Act was considered in the said case and in paragraph 11 of the judgment, following was laid down:

"11. Now if the expression "substances" is to be taken to mean something other than "medicine"

as has been held in our previous decision it becomes difficult to understand how the word "and" as used in the definition of drug in Section 3(b)(i) between "medicines" and "substances" could have been intended to have been used conjunctively. It would be much more appropriate in the context to read it disconjunctively. In Stroud's Judicial Dictionary, 3rd Edn. it is stated at p. 135 that "and" has generally a cumulative sense, requiring the fulfilment of all the conditions that it joins together, and herein it is the antithesis of or. Sometimes, however, even in such a connection, it is, by force of a contexts, read as "or". Similarly in Maxwell on Interpretation of Statutes, 11th Edn., it has been accepted that "to carry out the intention of the legislature it is occasionally found necessary to read the conjunctions 'or' and 'and' one for the other"."

20. The above judgment reiterates that one of the basic principles of interpretation of statutes is to construe them according to plain, literal and grammatical meaning of the words. When we look into definition of 'Guarantor' in Rule 3(1)(e), fulfilment of both the condition that Debtor is a Personal Guarantor to a Corporate Debtor and in respect of whom guarantee has been invoked, has been cumulatively used. The submission of the Appellant that use of the expression 'and' has to be read as 'or', shall not further the statutory object and purpose. Guarantor with regard to whom guarantee has not been invoked, shall not be a Debtor and no default can be committed by Guarantor, unless guarantee is invoked as per the terms of Deed of Guarantee. Thus, the insolvency resolution process against a Guarantor, against whom debt has not become due, is not understandable. We, thus, reject the submission of the Appellant that word 'and' used in Rule 3(1)(e) has to be read as 'or'. Reading of word 'or' in place of 'and' shall be not in accordance with the statutory scheme and shall be against the statutory intendment.

Company Appeal (AT) (Insolvency) Nos.999 & 1000 of 2024 14

21. Learned Counsel for the Appellant further referred to Form-A, which is a form in which Personal Guarantor shall file an application under Section 94, submits that although at Item No.14, one of the information sought is "Whether the guarantee has been invoked and proof thereof", whereas the said requirement is not mentioned in Form-B. He submits that although invocation of guarantee may be thus, relevant for an application under Section 94, but it is not relevant for Section 95 application. When we look into the Form-B, under which application under Section 95 has to be issued under the heading 'Particulars of Debt', at Sl. No.3 and 4, following have been mentioned:

"3 Date when the debt was due 4 Date when the default occurred"

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

18. This Tribunal in paragraph 27 ultimately rejected the submission of the appellant that notice under Rule 7(1) issued in 'Form-B' to the guarantor demanding the repayment of default amount has to be treated as notice for invoking guarantee. It was held that default before issuance of notice under Rule 7 must exists on the part of the guarantor. Following conclusion was recorded in paragraph 27:

"27. In view of the foregoing discussion, we are not persuaded to accept the submission of the Appellant that Notice under Rule 7 (1) issued in Form-B to the Guarantor, demanding repayment of the default amount, has to be treated as Notice for invoking guarantee. Default before issuance of Notice under Rule 7(1), must exist on the part of the Guarantor. Hence, we reject the submission of the Appellant that

Company Appeal (AT) (Insolvency) Nos.999 & 1000 of 2024 15

Notice under Rule 7, sub-rule (1) is a Notice, invoking the guarantee. We, thus, do not find any error in the order of the Adjudicating Authority, rejecting Section 95 Application filed by the SBI. There is no merit in the Appeal. The Appeal is dismissed. There shall be no order as to costs."

17. In view of the foregoing discussions, we are of the view that the

Financial Creditors having not invoked the guarantee prior to issuing

demand notice in Form B, the application under Section 95 could not have

been filed by Financial Creditor before invoking the guarantee.

18. In result, both the Appeals are allowed and order impugned dated

03.05.2024 admitting Section 95 application is set aside. Dismissal of

Section 95 application shall not preclude the Financial Creditor to take such

proceeding as permissible in law.

[Justice Ashok Bhushan] Chairperson

[Barun Mitra] Member (Technical)

[Arun Baroka] Member (Technical) New Delhi

Anjali

Company Appeal (AT) (Insolvency) Nos.999 & 1000 of 2024