Pawan Gupta vs M/S. Charm Investments Pvt. Ltd. & Anr. & ...

[Arising out of the Impugned Order dated 04.02.2026 passed by the Adjudicating Authority, National Company Law Tribunal, New Delhi Bench- III in C.P. (IB) No. 56/ND/2026]

In the matter of: PAWAN GUPTA S/o. Late Sh. Munna Lal Gupta, R/o. C-19, Rana Pratap Bagh, Delhi - 110007 .... Appellant Versus

1. M/s. CHARM INVESTMENTS PVT. LTD. Thr. Ms. Nandini Mittal, Regd. Office: 9982, Ahata Thakur Das, Sarai Rohila, New Delhi, India - 110005 .... Respondent No.1 2. MR. PRADEEP KUMAR KAUSHIK Resolution Professional for Mr. Pawan Gupta, R/o. Flat No. 384, 2nd Floor, Pocket 5, Mayur Vihar Phase-I, Opposite Sanjay Lake, East, National Capital Territory of Delhi - 110091 .... Respondent No.2 Present:

For Appellant : Mr. Abhijeet Sinha, Sr. Advocate with Mr. Himanshu Satija, Adv. Ripul Swati, Ms. Simran M., Mr. Anshul Sharma and Ms. Malavika C., Advocates. For Respondent : Mr. Harshvardhan, Ms. Rituparnapatra, Advocates.

Mr. Ankur Mittal, Mr. Arpit Sharma and Ms. Sabhya Jain, Advocates. J U D G M EN T (29th May, 2026)

INDEVAR PANDEY, MEMBER (T)

This Appeal has been preferred under Section 61 of the Insolvency and

Bankruptcy Code, 2016 by the Appellant, Mr. Pawan Gupta, assailing the

Impugned Order dated 04.02.2026 passed by the Adjudicating Authority

(National Company Law Tribunal, New Delhi Bench-III) in CP(IB) No. 56 (ND) of

2026 filed by M/s. Charm Investments Pvt. Ltd./ Respondent No.1. The

Adjudicating Authority vide the Impugned Order, initiated proceedings under

Section 95 of the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to

as 'Code') against the Appellant and appointed Mr. Pradeep Kumar Kaushik/

Respondent No.2 as the Resolution Professional (RP) under Section 99 of the

Code.

2. The Appellant is aggrieved that although the loan documents, sanction

letter, DRT proceedings, SARFAESI notices, and other contemporaneous records

consistently described him merely as a co-borrower in relation to the credit

facilities availed by M/s. L.R. Builders Pvt. Ltd.,/Corporate Debtor, the

Respondent No.1 nevertheless treated him as a "personal guarantor" for the

purpose of invoking insolvency proceedings under Section 95 of the Code.

According to the Appellant, no Deed of Guarantee was ever executed either by

him or by any other person in respect of the subject loan account and even the

Page 2 of 28 Company Appeal (AT) (Ins) No. 374 of 2026 sanction letter issued by Union Bank of India specifically recorded "Guarantors:

NIL".

Brief Facts of the Case

3. Brief facts of the case relevant for deciding the Appeal are as follows:

(i) The Corporate Debtor/L.R. Builders was incorporated was engaged in

the business of real estate services, including contracting, infrastructure

development, and construction activities. The Company formed part of the

PP Jewellers Group and had been incorporated by members of the Gupta

family, including Mr. Kamal Gupta and Mr. Pawan Gupta, who served as

Directors of the Company. Mr. Kamal Gupta and the Appellant Mr. Pawan

Gupta are brothers and were actively associated with the affairs of the

Company at the relevant time.

(ii) A credit facility amounting to Rs.5.55 Crores was sanctioned on

18.11.2011 by Union Bank of India in favour of Corporate Debtor (CD).

Along with the CD, the Appellant Mr. Pawan Gupta and Mr. Kamal Gupta

were reflected in the sanction documents as co-borrowers. The sanctioned

amount was later reduced to Rs.4.95 Crores. The sanction documents

expressly described all three entities, namely M/s. L.R. Builders, Mr.

Pawan Gupta, and Mr. Kamal Gupta, as borrowers/co-borrowers. The

facility was secured by mortgage of three immovable properties and the

sanction documents specifically recorded "Guarantors: NIL".

Page 3 of 28 Company Appeal (AT) (Ins) No. 374 of 2026 (iii) The Ministry of Corporate Affairs issued Gazette Notification S.O.

4126(E) dated 15.11.2019, whereby provisions contained in Sections 94

to 187 of the Insolvency and Bankruptcy Code, 2016 were brought into

force insofar as they related to personal guarantors to corporate debtors.

(vi) Due to defaults in repayment of the loan account and Union Bank of

India issued a legal notice on 09.12.2019 demanding repayment of the

outstanding dues. This was followed by issuance of a notice under Section

13(2) read with Section 13(3) of the SARFAESI Act on 04.01.2020. The

Bank thereafter instituted Original Application No. 74 of 2021 before the

Debt Recovery Tribunal-II, New Delhi for recovery proceedings.

(iv) Union Bank of India entered into an assignment agreement with M/s.

Rishikesh Hire Purchase and Leasing Company Pvt. Ltd., which in turn on

24.11.2025, entered into an Assignment Agreement with the Financial

Creditor/Respondent. In both the assignment agreements, it was recorded

'Guarantors: NIL".

(v) Thereafter, a demand notice dated 10.01.2026 was issued by the

Respondent No.1 to the Appellant under the provisions of the Code. On

27.01.2026, Respondent No.1 filed CP(IB) No. 56 (ND) of 2026 before the

Adjudicating Authority under Section 95 of the Code seeking initiation of

insolvency proceedings against the Appellant by portraying him as a Co

Borrower/ Personal Guarantor to the Corporate Debtor.

Page 4 of 28 Company Appeal (AT) (Ins) No. 374 of 2026 (vi) The Adjudicating Authority thereafter passed the Impugned Order

dated 04.02.2026 whereby Mr. Pradeep Kumar Kaushik/ Respondent No.2,

was appointed as the Resolution Professional under Section 99 of the Code

with directions to submit a report. The Resolution Professional thereafter,

filed his report under Section 99 of the Code on 23.02.2026. Aggrieved by

impugned order dated 04.02.2026 passed by the Ld. Adjudicating

Authority, the Appellant has challenged the same before this Appellate

Tribunal.

Submissions of the Appellant

4. Ld. Counsel for the Appellant submits that the very initiation of

proceedings against the Appellant is fundamentally without jurisdiction and

contrary to the admitted record, inasmuch as the Appellant is not a Personal

Guarantor to the subject loan transaction. It is submitted that despite complete

absence of any deed of guarantee or invocation thereof, the Respondent invoked

provisions applicable only to personal guarantors and succeeded in obtaining

the impugned order on the basis of incorrect and misleading representations

before the Ld. Adjudicating Authority. He further submits that the impugned

order itself records that the Respondent had represented before the Learned

NCLT that a Deed of Guarantee and Letter of Invocation had been placed on

record and that the Appellant was the Corporate Guarantor in respect of the

alleged default amount of Rs.5,70,00,414/-. On such representation, notice

came to be issued to the Appellant and a Resolution Professional was appointed.

Page 5 of 28 Company Appeal (AT) (Ins) No. 374 of 2026 5. He submits that the entire foundation of the proceedings under Section 95

of the Code collapses from the record itself. It is submitted that the sanction

letter dated 18.11.2011 issued by Union Bank of India in relation to the subject

credit facility expressly records "Guarantors: NIL". Ld. Counsel submits that this

document conclusively demonstrates that no personal guarantee was ever

furnished by the Appellant in respect of the subject loan transaction. It is

submitted that the sanctioning bank itself never treated the Appellant as a

guarantor at the inception of the transaction.

6. It is submitted that Union Bank of India instituted Original Application No.

74 of 2021 before the Learned Debt Recovery Tribunal, New Delhi in relation to

the same loan transaction, wherein the Appellant was arrayed only as a co-

borrower and not as a guarantor. It is submitted that the conduct of the original

lender throughout the proceedings unequivocally establishes that the Appellant

was never considered or treated as a personal guarantor. Had there been any

guarantee obligation, the Appellant would necessarily have been impleaded in

the proceedings in the capacity of guarantor.

7. Ld. Counsel further submits that even the subsequent assignment

agreements executed in respect of the debt transaction completely negate the

existence of any guarantee. It is submitted that Union Bank of India entered into

an Assignment Agreement with Rishikesh Hire Purchase and Leasing Company,

which thereafter entered into a further Assignment Agreement dated 24.11.2025

with the present Respondent. Ld. Counsel submits that in both assignment

Page 6 of 28 Company Appeal (AT) (Ins) No. 374 of 2026 agreements, it has been specifically recorded that "Guarantors: NIL". It is

submitted that these contemporaneous contractual records completely demolish

the Respondent's attempt to portray the Appellant as a personal guarantor.

8. It is submitted that even in the application filed under Section 95 of the

Code by the Respondent, there was no proper disclosure or material establishing

the Appellant as a guarantor. It is submitted that the application itself was

devoid of any foundational document demonstrating existence of a guarantee

obligation.

9. Ld. Counsel further submits that the most crucial circumstance exposing

the falsity of the Respondent's case is the filing of I.A. No. 958 of 2026 by the

Respondent itself after issuance of notice in the present Appeal. It is submitted

that in the said application seeking rectification of the order dated 04.02.2026,

the Respondent categorically admitted that no Deed of Guarantee or Letter of

Invocation had been placed on record in the proceedings before the Learned

NCLT. Ld. Counsel submits that this admission completely destroys the very

basis upon which proceedings under Section 95 were initiated.

10. Ld. Counsel submits that apart from complete absence of any deed of

guarantee, the Respondent has also failed to place on record any valid invocation

of the alleged guarantee. It is submitted that invocation of guarantee is a

mandatory jurisdictional requirement before initiation of proceedings under

Section 95 of the Code and in absence thereof, the proceedings are wholly non-

maintainable.

Page 7 of 28 Company Appeal (AT) (Ins) No. 374 of 2026 11. Ld. Counsel further submits that the statutory demand notice relied upon

by the Respondent cannot in law constitute invocation of a personal guarantee.

Reliance is placed upon the judgment in "SBI vs. Deepak Kumar Singhania,

Company Appeal (AT) (Ins.) No. 191 of 2025", wherein this Appellate Tribunal

held that a statutory demand notice does not amount to invocation of guarantee

and consequently proceedings under Section 95 of the Code would not be

maintainable in absence of proper invocation. It is submitted that the

Respondent has failed to satisfy this basic jurisdictional requirement.

12. He submits that despite specifically admitting non-existence of any Deed

of Guarantee or Letter of Invocation, the Respondent thereafter sought to justify

the proceedings by filing an affidavit dated 12.05.2026 before this Hon'ble

Tribunal and placing reliance upon Demand Promissory Notes dated 19.11.2011

and minutes of the meeting of the Board of Directors dated 18.11.2011. It is

submitted that on the basis of such documents, the Respondent attempted to

allege existence of an oral understanding that the Appellant would furnish a

personal guarantee. Ld. Counsel submits that such a contention is wholly

misconceived and legally untenable. It is submitted that a borrower cannot

legally act as guarantor for his own debt and a valid contract of guarantee

necessarily requires existence of three distinct parties, namely the creditor, the

principal borrower and an independent guarantor.

13. Ld. Counsel places further reliance upon the judgment of the Hon'ble

Supreme Court in "UV Asset Reconstruction Co. Ltd. vs. Electrosteel Casting

Page 8 of 28 Company Appeal (AT) (Ins) No. 374 of 2026 Ltd., (2026) SCC Online SC 26", particularly paragraph 22, wherein it has been

held that a mere obligation to arrange funds or ensure financial compliance does

not amount to a guarantee unless there exists a direct and unambiguous

undertaking to discharge liability within the meaning of Section 126 of the Indian

Contract Act. It is submitted that the Respondent is attempting to create a

guarantee obligation through indirect documents and alleged oral

understandings despite complete absence of any actual guarantee agreement.

14. Ld. Counsel submits that the impugned order dated 04.02.2026 has been

obtained by the Respondent through clear misrepresentation and suppression

of material and jurisdictional facts. It is submitted that the Respondent

categorically represented before the Learned NCLT that a valid Deed of

Guarantee and Letter of Invocation existed and had been placed on record and

on such representation the Appellant was treated as a Personal Guarantor and

proceedings under Section 95 of the Code were entertained.

15. He submits that after obtaining the impugned order and securing initiation

of insolvency proceedings against the Appellant, the Respondent subsequently

resiled from its own stand by filing I.A. No. 958 of 2026 and categorically stating

in paragraph 4 thereof that no Deed of Guarantee or Letter of Invocation had

been placed on record and that no such submission had been made during the

course of hearing. It is submitted that the Respondent cannot be permitted to

approbate and reprobate by first obtaining an order based on existence of

Page 9 of 28 Company Appeal (AT) (Ins) No. 374 of 2026 guarantee documents and thereafter admitting that no such documents existed

at all.

16. It is submitted that vide order dated 03.03.2026 passed in I.A. No. 958 of

2026, even the Ld. Adjudicating Authority recorded dissatisfaction regarding the

manner in which the matter had been conducted and represented before it by

placing incorrect facts. It is submitted that the Ld. Adjudicating Authority itself

noted that no Deed of Guarantee or Letter of Invocation was available on record

and that the impugned order had wrongly recorded existence of such documents.

Ld. Counsel submits that this itself demonstrates that the impugned proceedings

are vitiated by fraud and misrepresentation.

17. Ld. Counsel places reliance upon the judgment of the Hon'ble Supreme

Court in "A.V. Papayya Sastry vs. Government of A.P., (2007) 4 SCC 221",

wherein it has been held that an order obtained by fraud and misrepresentation

can be set aside at any stage, including appellate proceedings, writ proceedings

or even collateral proceedings. It is submitted that since the very jurisdiction of

the Ld. NCLT was invoked on the basis of false representation regarding

existence of guarantee documents, the impugned order deserves to be set aside.

Submissions of the Respondent No.1/M/s Charm Investments

18. Ld. Counsel for Respondent No.1 submits that the present dispute arises

out of the admitted default committed in respect of the loan facility availed by

the Appellant from Union Bank of India as a co-borrower and guarantor

Page 10 of 28 Company Appeal (AT) (Ins) No. 374 of 2026 pursuant to the Sanction Letter dated 18.11.2011. It is submitted that the loan

account was subsequently classified as NPA. The loan was first acquired by

Rishikesh Hire Purchase and Leasing Company Private Limited and was

thereafter assigned to Respondent No.1, vide Assignment Agreement dated

24.12.2025. Ld. Counsel submits that by virtue of the said assignment,

Respondent No. 1 stepped into the shoes of the original Financial Creditor. It is

further submitted that the debt and default stand admitted and have never been

disputed by the Appellant in any proceedings. Therefore, the Appellant is not a

stranger to the loan transaction and cannot seek to evade the liabilities arising

therefrom.

19. Ld. Counsel submits that the short issue arising for consideration before

this Appellate Tribunal is whether Respondent No.1 has abused the process of

law by filing the Section 95 application before the Ld. Adjudicating Authority

against the Appellant. It is submitted that the Appellant has alleged abuse of

process primarily on four grounds, namely: firstly, that no deed of guarantee was

signed or executed by the Appellant in favour of Respondent No.1; secondly, that

Respondent No.1 itself allegedly admitted in paragraphs 3 and 4 of IA No. 958 of

2026 that no deed of guarantee exists on record; thirdly, that the Assignment

Deed itself stipulates that no guarantee had been executed; and fourthly, that

the jurisdictional issue contemplated in the judgment of the Hon'ble Supreme

Court in Dilip B. Jiwrajka v. Union of India & Ors. would not apply to the facts

of the present case. Ld. Counsel submits that each of the aforesaid grounds is

wholly misconceived and devoid of merit.

Page 11 of 28 Company Appeal (AT) (Ins) No. 374 of 2026 20. He submits that the judgment of the Hon'ble Supreme Court in "Dilip B.

Jiwrajka v. Union of India & Ors." squarely governs the controversy involved

in the present matter. It is submitted that the Hon'ble Supreme Court has clearly

held that all jurisdictional questions are to be adjudicated by the Learned NCLT

only at the stage contemplated under Section 100 of the Insolvency and

Bankruptcy Code and not prior thereto. Reliance is placed particularly upon

paragraph 68 of the judgment, wherein the Hon'ble Supreme Court expressly

rejected the contention that the Adjudicating Authority could undertake an

adjudicatory exercise at the stage of Section 97(5) of the IBC with regard to the

existence of debt or the subsistence of the relationship between debtor and

creditor. Ld. Counsel further submits that the Hon'ble Supreme Court also

rejected the argument of prejudice arising from the inquiry to be conducted by

the Resolution Professional under Section 99 of the IBC. It is submitted that in

paragraphs 72 to 74 of the said judgment, the Hon'ble Supreme Court

categorically held that the adjudicatory function of the NCLT commences only

after receipt of the report of the Resolution Professional. Accordingly, the

Appellant cannot seek premature adjudication of disputed jurisdictional issues

before the stage prescribed by statute.

21. Ld. Counsel further submits that the present case is also squarely covered

by the judgment of this Hon'ble Appellate Tribunal in Mr. C.L. Sharma v. Bank

of Maharashtra & Anr., wherein it was categorically held that no adjudication

can take place at the stage of appointment of the Resolution Professional under

Section 97 of the IBC. It was further held therein that all objections pertaining

Page 12 of 28 Company Appeal (AT) (Ins) No. 374 of 2026 to maintainability, limitation and jurisdiction are required to be considered only

at the stage of Section 100 proceedings. Ld. Counsel submits that the Resolution

Professional performs merely a facilitative role and the report under Section 99

is only recommendatory in nature. In light thereof, it is submitted that the

present Appeal itself is premature and not maintainable at this stage.

22. Ld. Counsel submits that the controversy involved in the present Appeal

is no longer res integra and stands conclusively settled by the judgment of the

Three-Member Bench of this Appellate Tribunal in Central Bank of India v.

Deepen Arun Parekh. It is submitted that after extensively considering the law

laid down in Dilip B. Jiwrajka v. Union of India & Ors., the Three-Member Bench

categorically held that no adjudicatory exercise can be undertaken before the

stage contemplated under Sections 99 and 100 of the IBC. Ld. Counsel submits

that the Bench specifically held that all questions relating to maintainability,

limitation, subsistence of debt, validity of guarantee and other jurisdictional

objections are matters to be considered, only after submission of the report

under Section 99 and at the stage of adjudication under Section 100. It is

submitted that any adjudication prior thereto would be contrary to the statutory

scheme of the IBC. Ld. Counsel further submits that in the present case, the

Appellant seeks precisely such premature adjudication despite having an

efficacious remedy before the Learned Adjudicating Authority under Section 100.

Judicial discipline therefore requires adherence to the view already taken by the

coordinate Three-Member Bench and any contrary view, if at all, can only be

considered by a larger Bench. Page 13 of 28 Company Appeal (AT) (Ins) No. 374 of 2026 23. Ld. Counsel for Respondent No. 1 further submits that this Appellate

Tribunal in Jaykumar Bramhadev Mane v. Solapur District Central

Cooperative Bank Ltd. also declined to entertain a jurisdictional challenge

founded upon the alleged non-existence of a guarantee and relegated the parties

to the Learned NCLT for consideration of all such issues at the stage of Section

100 of the IBC. It is submitted that all four grounds urged by the Appellant before

this Tribunal are matters which can appropriately be raised, considered and

adjudicated only by the Learned NCLT while exercising adjudicatory powers

under Section 100 of the IBC. Ld. Counsel submits that merely alleging abuse of

process cannot justify this Hon'ble Appellate Tribunal undertaking adjudication

of disputed questions of fact at this premature stage, especially when the

statutory mechanism itself provides a complete remedy before the Adjudicating

Authority.

24. Without prejudice to the aforesaid submissions, Ld. Counsel submits that

the transaction of guarantee stands duly established from the transactional

documents executed between the parties. It is submitted that the principal

borrower, namely LR Builders Pvt. Ltd., availed a loan facility of Rs. 5.5 Crores

from Union Bank of India, being the predecessor-in-interest of Respondent No.

1, and the said loan amount was disbursed into the account of LR Builders Pvt.

Ltd. Ld. Counsel submits that the Appellant and one Mr. Kamal Gupta, who were

brothers and erstwhile directors of LR Builders Pvt. Ltd., expressly conveyed

their willingness to stand as guarantors for the said loan transaction, which is

duly recorded in the minutes of the Board Meeting dated 18.11.2011.

Page 14 of 28 Company Appeal (AT) (Ins) No. 374 of 2026 25. He submits that the Appellant and Mr. Kamal Gupta also signed the loan

documents as co-borrowers. It is submitted that the Appellant executed a

Demand Promissory Note in favour of the creditor on 19.11.2011, whereby he

unequivocally promised to pay on demand, jointly and severally, the loan amount.

Ld. Counsel submits that the Appellant also executed a Take Delivery Letter to

the Demand Promissory Note on 19.11.2011 once again undertaking to pay on

demand the outstanding loan amount along with applicable interest. Reliance is

also placed upon paragraph 14 of the Loan Agreement, which entitled the

creditor to take enforcement action upon occurrence of default. It is submitted

that the creditor thereafter invoked the Demand Promissory Note and called

upon the Appellant to pay the defaulted amount vide demand notice dated

10.01.2026. Ld. Counsel submits that a composite reading of all the aforesaid

transactional documents unequivocally demonstrates that although the

Appellant may have been described as a co-borrower, he effectively stood in the

capacity of a guarantor who guaranteed repayment of the loan disbursed to LR

Builders Pvt. Ltd.

26. In support of the aforesaid contention, Ld. Counsel places reliance upon

the judgment of the Hon'ble Supreme Court in China Development Bank v.

Doha Bank Q.P.S.C., wherein the Hon'ble Supreme Court interpreted a Deed of

Hypothecation executed by certain entities as effectively constituting a deed of

guarantee and held that the nomenclature or title of a document is not

determinative of its true legal character. Reliance is also placed upon the

judgment of the Hon'ble Supreme Court in S. Chattanatha Karayalkar v.

Page 15 of 28 Company Appeal (AT) (Ins) No. 374 of 2026 Central Bank of India, wherein the Hon'ble SC considered whether a Demand

Promissory Note together with a Letter of Continuity would constitute a

document of guarantee or whether the executants thereof would merely be

treated as co-borrowers. It was held that a Demand Promissory Note containing

an undertaking to pay the loan amount on demand would, having regard to

Section 126 of the Indian Contract Act, be construed as a guarantee. Ld. Counsel

submits that the present case stands squarely covered by the aforesaid

principles.

27. Dealing specifically with the four objections raised by the Appellant, Ld.

Counsel submits under the first objection that although no formal deed of

guarantee may have been executed in the conventional sense, the guarantee

furnished by the Appellant is clearly evident upon a holistic reading of the

transactional documents and in light of the law laid down by the Hon'ble

Supreme Court. Under the second objection concerning paragraphs 3 and 4 of

IA No. 958 of 2026, it is submitted that the said paragraphs are being read wholly

out of context. Ld. Counsel submits that the said averments merely state that

no formal deed of guarantee in the ordinary commercial sense was available on

record and cannot by any stretch be construed as an admission that Respondent

No. 1 was not entitled to pursue proceedings under Section 95 of the IBC.In

response to the third objection relating to the Assignment Deed, Ld. Counsel

submits that whether the expression "co-borrower" or "borrower" used in the

transactional documents would, in the context of the Appellant, amount to a

guarantor or merely a borrower is itself a matter of interpretation and

Page 16 of 28 Company Appeal (AT) (Ins) No. 374 of 2026 construction of documents. It is submitted that the Learned NCLT is yet to apply

its mind to the said issue, while exercising jurisdiction under Section 100 of the

IBC. In response to the fourth objection concerning the applicability of the

judgment in Dilip B. Jiwrajka v. Union of India & Ors., Ld. Counsel submits that

the said judgment directly covers the present controversy because the

Appellant's argument essentially raises a question regarding the existence of a

subsisting relationship between debtor and creditor, which is itself a

jurisdictional issue to be adjudicated by the Learned NCLT only after

consideration of rival submissions at the stage of Section 100 proceedings.

28. Ld. Counsel further submits that the allegations levelled by the Appellant

against the Resolution Professional are wholly misconceived, particularly when

the Appellant had an efficacious remedy before the Learned NCLT to file

objections to the report of the Resolution Professional, but consciously failed to

avail the same. It is submitted that instead of pursuing the statutory remedy

available before the Adjudicating Authority, the Appellant has preferred the

present Appeal solely with a view to evade liability arising from the admitted debt

and default. Ld. Counsel further submits that, in any event, the Resolution

Professional has already resigned and an application seeking substitution is

presently pending before the Learned NCLT.

29. He submits that the Hon'ble Courts have repeatedly emphasized that

procedural law is intended to advance the cause of justice and not to defeat

substantive rights on technical grounds. Reliance is placed upon the judgment

Page 17 of 28 Company Appeal (AT) (Ins) No. 374 of 2026 of the Hon'ble Supreme Court in State of Punjab & Anr. v. Shamlal Murari

& Anr., wherein it was held that processual law is not to operate as a tyrant but

as a servant of justice and that Courts are required to advance justice rather

than defeat substantive rights on procedural technicalities.

30. In conclusion, Ld. Counsel submits that the Appellant has admittedly

signed multiple documents unequivocally undertaking to pay the loan amount

on demand together with applicable interest. It is submitted that whether such

undertaking constitutes a guarantee or whether the Appellant acted merely as a

borrower or co-borrower is itself a disputed question of fact dependent upon

interpretation of the transactional documents. Ld. Counsel submits that the

filing of the Section 95 application by Respondent No. 1 on the basis of such

documents therefore cannot be termed as an abuse of process of law. It is

respectfully submitted that the present Appeal seeks premature adjudication of

disputed questions which are required to be considered by the Learned NCLT

under Section 100 of the IBC. Accordingly, this Hon'ble Appellate Tribunal may

not interfere with the order passed by the Learned NCLT under Section 97(5) of

the IBC and the parties may instead be relegated to the Learned NCLT to raise

all questions of law and fact as permissible in law.

Analysis and Findings

31. We have heard the Ld. Counsels in detail and have perused the records

including the written submissions. Respondent No.2/RP is a proforma party in

these proceedings.

Page 18 of 28 Company Appeal (AT) (Ins) No. 374 of 2026 32. The principal issue which arises for consideration in the present Appeal is

whether the Learned Adjudicating Authority committed any illegality or

jurisdictional error in passing the impugned order dated 04.02.2026 under

Section 97 of the Insolvency and Bankruptcy Code, 2016 by appointing a

Resolution Professional in proceedings initiated under Section 95 of the Code

against the Appellant, particularly when the Appellant contends that he is merely

a co-borrower and not a personal guarantor and that no formal deed of guarantee

exists.

33. The case of the Appellant, in brief, is that the loan facility dated 18.11.2011

was sanctioned in favour of M/s L.R. Builders Pvt. Ltd., and Mr. Pawan Gupta

and Mr. Kamal Gupta were co-borrowers and not the guarantors. Even the loan

sanction documents and subsequent proceedings before the DRT described the

Appellant only as a co-borrower. The Appellant has argued that the sanction

letter itself records "Guarantors: NIL" and that no deed of guarantee or invocation

letter was ever executed or placed on record. It has further been argued that

despite absence of a valid guarantee, Respondent No.1 initiated proceedings

under Section 95 of the Code by wrongly portraying the Appellant as a personal

guarantor and thereby obtained the impugned order appointing the Resolution

Professional. According to the Appellant, since proceedings under Part III of the

Code presently apply only to personal guarantors to corporate debtors, initiation

of proceedings against a co-borrower is wholly without jurisdiction and the

impugned order deserves to be set aside.

Page 19 of 28 Company Appeal (AT) (Ins) No. 374 of 2026 34. The Respondent, on the other hand, has contended that the Appeal itself

is premature and contrary to the statutory scheme of Sections 95, 97, 99 and

100 of the Code. It has been argued that the Adjudicating Authority, at the stage

of Section 97, is not required to finally adjudicate disputed questions relating to

existence of guarantee, maintainability, subsistence of debt or status of parties.

According to the Respondent, such issues are required to be examined only after

submission of the report under Section 99 at the stage of adjudication under

Section 100. The Respondent has further argued that the debt and default are

admitted and that a holistic reading of the loan documents, board resolutions,

demand promissory note and related transactional documents clearly

demonstrates that the Appellant had undertaken obligations in the nature of a

guarantor even if a separate document titled as "deed of guarantee" was not

executed.

35. On 04.02.2026 the Ld. Adjudicating Authority passed the following order:

"Order delivered on 04.02.2026

ORDER

This application has been filed by M/s Charm Investments Pvt. Ltd., the Financial Creditor under Section 95 of the Insolvency and Bankruptcy Code, 2016 seeking initiation of Insolvency Resolution Process against Mr. Pawan Gupta, the Corporate Guarantor for the alleged default of Rs. 5,70,00,414/-. The Applicant has placed on record the Deed of Guarantee and Letter of Invocation.

The Applicant has proposed Mr. Pradeep Kumar Kaushik, having Registration No. IBBI/IPA-002/IP-N01141/2021-2022/13997 and e-

Page 20 of 28 Company Appeal (AT) (Ins) No. 374 of 2026 mail ID- law.kaushik1@gmail.com, Insolvency Professional, to be appointed as the Resolution Professional.

We, therefore, appoint Mr. Pradeep Kumar Kaushik as Resolution Professional and direct him to file a report in terms of Section 99 of IBC.

The Applicant seeks liberty to file a valid Authorization for Assignment (AFA) alongwith written consent and registration certificate during the course of the day. He further seeks liberty to file demand promissory note. Liberty granted.

It is needless to mention that interim moratorium has kicked

in, in terms of Section 96 of IBC.

List the matter on 24.02.2026.

-Sd- -Sd- (REENA SINHA PURI) (BACHU VENKAT BALARAM DAS) MEMBER (TECHNICAL) MEMBER (JUDICIAL)" (Emphasis Supplied)

36. The record reflects that the impugned order dated 04.02.2026 appoints a

Resolution Professional under Section 97 and directs submission of a report

under Section 99 of the Code. Subsequent to impugned order the RP has

submitted its report under section 99 of the Code. More importantly, the Ld.

Adjudicating Authority records that the Applicant who is the Respondent 1 here,

has placed Deed of Guarantee and Letter of Invocation on record.

37. The contention of the Appellant is that since the sanction letter records

"Guarantors: NIL" and no formal deed of guarantee exists, the proceedings

themselves are without jurisdiction. The Respondent initially represented before

Page 21 of 28 Company Appeal (AT) (Ins) No. 374 of 2026 the Adjudicating Authority that a deed of guarantee and invocation letter existed

and later clarified that no such formal document was placed on record. The

proceedings therefore are vitiated by fraud and misrepresentation of

jurisdictional facts.

38. At this stage we take a look at relevant portion of the Loan Assignment

Agreement dated 24th December 2025 between the Union Bank of India and

Risikesh Hire Purchase and Leasing Company Private limited. Schedule 1-A of

the agreement gives details of the Financing Documents. The relevant portion of

pages 361-362 of Appeal Paper book is extracted below:

SCHEDULE 1 DETAILS OF LOANS AND DISCLOSURES [SCHEDULE 1-A] (See clauses 1.1 (i) & 10.11) Being the details of the Financing Documents 1. Sl. No. 1

2. Name/ Details of the Borrower M/s L.R. Builder Private Limited PAN AACL1446Q, CIN: U74899DL1995PTC067771, Address: 8233, LR Complex, Rani Jhansi Road, Near Filmistan Cinema, Delhi- 110006

Mr. Kamal Gupta Pan No. AAGPG3472N Address: C-19 Rana Pratap Bagh, New Delhi-110007.

Mr. Pawan Kumar Gupta, Pan No: AAGPG3475M Address: C-19, Rana Pratap Bagh, New Delhi- 110007,

3. Details of the guarantor/ co- Guarantors: Nil borrower

Page 22 of 28 Company Appeal (AT) (Ins) No. 374 of 2026

4. A/c No. as per Assignor's 560331000041101 (Old A/c No. records CMTCC/01/110003)

5. Whether classified as NPA Yes NPA classified on 31.12.2019 along with date of such classification Whether classified as NPA Yes NPA classified on 31.12.2019 along with date of such classification

6. Outstanding amount (Principal As Per [Schedule 2] outstanding + interest) as on Bid Amount: Rs.5,42,00,000/- Cut-off Date (detailed break up (Rupees Five Crore Forty Two Lac as per Schedule 2) Only) Final assignment amount Rs.5.42 Crore + further interest and other charges till the final date of assignment.

7. Nature of the credit facility Fund based limit of Rs. 550.00 Lac (Business and other purpose) and renewed and last limit further reduced to Rs.495 lacs.

8. Details of Documents As per Annexure A

39. We note from the above that the loan agreement did not have any

Guarantors listed. The second and subsequent loan assignment from Rishikesh

Hiring to the Appellant/Financial Creditor reflects exactly the same position

regarding guarantors.

40. We further take a look at the demand notice dated 10.01.2026 sent by the

Respondent No.1 in Form B to the Appellant. The documents relied by the

Respondent in support of Debt and default are mentioned at item at Sl. No. 14

of the Demand Notice, which is extracted below:

14. List of documents attached 1. Sanction letter dated 18.11.2011 and to this notice in order to 30.06.2014 Annexed as Annexure prove the existence of debt No.3 and Annexure No.4. and the amount in default

2. Legal Demand Notice dated 09.12.2019 annexed as Annexure No.5.

3. Request for overdraft/ Cash Credit

Page 23 of 28 Company Appeal (AT) (Ins) No. 374 of 2026 Facility dated 08.08.2017 annexed as Annexure No.6

4. Affidavit cum Encumbrance free declaration dated 08.08.2017 as Annexure No.7

5. Board Resolution dated 07.09.2017 as Annexure No.8.

6. Demand Promissory Note dated 26.09.2017 executed by L.R. Builders as Annexure No.9.

7. Take Delivery Letter to DPN dated 26.09.2017 executed by L.R. Builders as Annexure No.10.

8. Bank Statement annexed as Annexure No. 11.

41. We note from the above that the Respondent No.1 has not listed "Deed of

Guarantee" and "Notice for Invocation of the Guarantee" in the said list.

Appellant has relied on the promissory note dated 26.09.2017 and Take Delivery

Letter of the same date along with other documents.

42. The above omission is significant as the demand notice constitutes the

foundation of the proceedings under Section 95 of the Code. If the case of the

Financial Creditor was based upon a personal Guarantee, one would ordinarily

expect the Guarantee document and its invocation to find mention amongst the

documents relied upon to establish the debt and default.

43. We have also gone through the Application of the Financial Creditor in CP.

IB. No. 56 of 2026 filed before the Ld. Adjudicating Authority, where it has

arrayed the Appellant as Co-Borrower/ Guarantor in the Part-II of the

application. We have also gone through Part-V of the application, which provides

Page 24 of 28 Company Appeal (AT) (Ins) No. 374 of 2026 list of Documents to prove debt and default in particular item 8 of the Part-V,

and note that 'Deed of Guarantee' and 'Notice for Invocation of Guarantee' are

not listed.

44. We further note that subsequent to passing of the impugned order on

04.02.2026, the Appellant filed I.A. No. 958 of 2026 before the Adjudicating

Authority. In para 4 of the Respondent makes the following Statement:

"That it is respectfully submitted that the Applicant had not placed on record any Deed of Guarantee and Letter of Invocation in the present proceedings, nor was any submission made to that effect during the course of hearing."

45. Ld. Adjudicating Authority heard the IA-958 of 2026 on 03.03.2026 and passed the following order:

"Order delivered on 03.03.2026

ORDER New IA-958/2026:-

This application has been filed by M/s. Charm Investments Private Limited/Financial Creditor seeking rectification of order dated 04.02.2026.

It is submitted by the Learned Counsel that in the said order, it has been wrongly recorded that the Applicant has placed on record the deed of guarantee and letter of invocation.

At this stage, Mr. Saurabh Kalia, Learned Counsel appearing for the Personal Guarantor submitted that an appeal has been filed before the NCLAT against the order dated 04.02.2026 passed in IA- 56/ND/2026 and Hon'ble NCLAT vide order dated 27.02.2026 while

Page 25 of 28 Company Appeal (AT) (Ins) No. 374 of 2026 recording the submissions of the Learned Counsel appearing for the Applicant that initiation of proceedings under Section 95 of the Code is abuse of process of the Court and the Resolution Professional has already submitted the report under Section 99 of the Code and directed the Resolution Professional not to take any further steps in the matter.

Having regard to the fact that since the matter is pending before the Hon'ble NCLAT, we are not inclined to entertain this application. However, we may record our dissatisfaction about the manner in which the case has been conducted and represented before this Adjudicating Authority by placing incorrect facts.

IA disposed of.

-Sd/- -Sd/- (REENA SINHA PURI) (BACHU VENKAT BALARAM DAS) MEMBER (TECHNICAL) MEMBER (JUDICIAL)

(Emphasis Supplied)"

46. We note from the above that the Respondent/Financial Creditor has

admitted in IA 958 that it had not placed "Deed of Guarantee" and "Invocation

of Guarantee" on record in its Application under Section 95 of the Code; while in

the same Application it has arrayed the Appellant as Co-Borrower/ Guarantor.

Secondly, we also note that Ld. Adjudicating Authority in its order dated

03.03.2026 has expressed its displeasure about Respondent/Financial Creditor

having misrepresented and placed incorrect facts before it.

47. It comes out clearly that there was no personal Deed of Guarantee or its

invocation placed on record in the proceedings. The two loan assignment deeds

did not have any Guarantee listed in them. Neither the demand notice nor the

application under Section 95 of the code mention any Guarantee Document and

Page 26 of 28 Company Appeal (AT) (Ins) No. 374 of 2026 its subsequent invocation. The order dated 04.02.2026 specifically took note of

Deed of Guarantee and Letter of Invocation. Ld. Adjudicating Authority in its

order dated 03.03.2026 have clearly recorded that there was misrepresentation

on the part of Respondent/Financial creditor before it and incorrect facts were

pleaded.

48. Appellant has also rightly relied on the Judgement of Hon'ble SC in "A.V.

Papayya Sastry vs. Government of A.P., (2007) 4 SCC 221", wherein it was

held that an order obtained by fraud and misrepresentation can be set aside at

any stage, including appellate proceedings, writ proceedings or even collateral

proceedings.

49. Based on the facts on record, we are of the view that the findings of the Ld.

Adjudicating Authority were vitiated by misrepresentation of facts before it. The

'Deed of Guarantee' and 'Letter of Invocation' of the Guarantee are the two most

important documents in a Section 95 proceedings. The impugned order dated

04.02.2026 was passed by the Ld. Adjudicating Authority on the basis of

misrepresentation of relevant jurisdictional facts by the Respondent No.1, which

are foundational to the requirements of Section 95 of the Code. This has been

duly noted by Ld. Adjudicating authority in its order dated 03.03.2026. In view

of the above, we are of the view that the findings of the Ld. Adjudicating authority

were vitiated and therefore are void ab initio.

Page 27 of 28 Company Appeal (AT) (Ins) No. 374 of 2026

50. In view of the findings above, the impugned order dated 0402.2026 is set

aside. The Respondent/ Financial Creditor would however be at liberty to file

fresh application under Section 95 of the code with all relevant documents.

Pending IA's, if any, are closed. No order as to costs.

[Justice Ashok Bhushan) Chairperson

[Mr. Indevar Pandey] Member (Technical) Place: New Delhi

Harleen/ Pragya (LRA)

Page 28 of 28 Company Appeal (AT) (Ins) No. 374 of 2026