Shri Chand Narain Kuchroo vs State Bank Of India & Anr

NATIONAL COMPANY LAW APPELLATE TRIBUNAL, PRINCIPAL BENCH, NEW DELHI Company Appeal (AT) (Insolvency) No. 1466 of 2024 & I.A. No. 5339 of 2024 (Arising out of Order dated 04.06.2024 passed by the Adjudicating Authority (National Company Law Tribunal), Allahabad Bench, Prayagraj in CP (IB) No.52/ALD/2022)

IN THE MATTER OF: Shri Chand Narain Kuchroo ...Appellant

Versus

State Bank of India & Anr. ...Respondents

Present:

For Appellant : Mr. Arjun Sanjay, Advocate For Respondents : Mr. Ankur Mittal and Ms. Preety Choudhary, Advocates for SBI/R-1. Mr. Abhishek Anand, Mr. Karan Kohli and Mr. Palak Kalra, Advocates for RP. JUDGMENT

ASHOK BHUSHAN, J.

This Appeal by a Personal Guarantor of the Corporate Debtor ("CD")

- M/s K K Milk Fresh India Ltd. has been filed challenging the order dated

04.06.2024 passed by National Company Law Tribunal ("NCLT"),

Allahabad Bench, Prayagraj admitting Section 95 application filed by the

State Bank of India ("SBI"). Aggrieved by the order initiating Personal

Insolvency Resolution Process ("PIRP") against the Appellant, this Appeal

has been filed.

2. Brief facts of the case necessary to be noticed for deciding the

Appeal are:

Company Appeal (AT) (Ins.) No.1466 of 2024 1

(i) The Consortium of Banks led by SBI sanctioned credit

facilities to the CD. A Credit Facility Agreement dated

19.11.2013 was executed between the Consortium of Lenders

and the CD - M/s K K Milk Fresh India Ltd.

(ii) For an amount of Rs.172 crores, the Appellant executed a

Deed of Personal Guarantee on 22.11.2013. Security Trustee

Agreement dated 22.11.2013 was also executed, where

SBICAP Trustee Co. Ltd. was appointed as Security Trustee to

act for Lenders in respect of creation of security under the

loan facility. A Supplemental Facility Agreement dated

16.09.2015 and a Supplemental Deed of Guarantee dated

16.09.2015 were also executed.

(iii) Account of the CD was declared as NPA on 28.09.2016. The

SBI issued Demand Notice on 01.09.2017 under Section 13,

sub-section (2) of the SARFAESI Act, 2002 seeking repayment

of debt of Rs.110,16,95,531 as on 31.08.2017. The SBI filed

OA No.264 of 2018 under Section 19 of the RDB Act before

the DRT II, New Delhi. The SBI also issued a legal Demand

Notice on 10.10.2017 for total outstanding liabilities of

Rs.1,11,89,59,417/-.

(iv) On an application filed against the CD, Corporate Insolvency

Resolution Process ("CIRP") commenced on 24.09.2019. In

the CIRP of the CD, SBI filed its claim for an amount of

Company Appeal (AT) (Ins.) No.1466 of 2024 2 Rs.144,34,78,998/-, which was admitted by the Resolution

Professional ("RP")

(v) A Demand Notice dated 28.10.2020 was issued by the SBI

under Rule7(1) of 2019 Rules. No reply was received from the

Appellant to the Demand Notice dated 28.10.2020.

(vi) The SBI filed an application under Section 95 of the

Insolvency and Bankruptcy Code, 2016 (hereinafter referred

to as the "IBC") being CP (IB) No.52/ALD/2022 seeking

initiation of PIRP against the Appellant.

(vii) The Adjudicating Authority vide order dated 20.04.2021

appointed Mr. Manish Agarwal, RP. Application under

Section 95 was served on the Appellant. Several

opportunities were given to the Appellant to file reply. The

Appellant appeared before the Adjudicating Authority on

21.12.2023 and prayed for time to file a reply. Two weeks'

time was allowed by the Adjudicating Authority on

21.12.2023 to the Appellant. Again on 16.01.2024, the

Appellant prayed for one week's time to file the reply, which

was allowed. The matter was again listed on 01.03.2024,

where the Adjudicating Authority noticed that no reply has

been filed. The Adjudicating Authority allowed one week's

time to file reply, on payment of cost of Rs.25,000/-. The

Appellant did not file any reply. Right to reply was closed on

17.04.2024 and matter was fixed for hearing on 08.05.2024.

Company Appeal (AT) (Ins.) No.1466 of 2024 3 On 08.05.2024, learned Counsel for the Appellant was heard

and has raised their contentions namely - application is

barred by time and further under the Deed of Personal

Guarantee, the Security Trustee was required to issue a

notice of demand, whereas notice of demand has been issued

by the SBI and not the Security Trustee. Counsel for the SBI

was also heard. Parties were heard on limitation as well as

on merits and orders were reserved on 08.05.2024.

(viii) The Adjudicating Authority delivered the order on 04.062024

admitting Section 95 application. Aggrieved by which order,

this Appeal has been filed

3. Notice was issued in this Appeal on 29.10.2024. Learned Counsel

for the SBI as well as learned Counsel for the RP, have filed their replies.

The RP has also filed an additional affidavit dated 23.09.2024 to bring on

record additional documents. Reply has been filed by the RP dated

31.01.2025. Learned Counsel for the Appellant took time to file rejoinder

affidavit, however, no rejoinder was filed and on 08.04.2025, the

Appellant made a statement that he does not purpose to file a rejoinder

affidavit. Appeal was heard on 13.05.2025.

4. We have heard Shri Arjun Sanjay, learned Counsel appearing for

the Appellant; Shri Ankur Mittal, learned Counsel appearing for the SBI;

and Shri Abhishek Anand, learned Counsel appearing for the RP.

5. Learned Counsel for the Appellant in support of the Appeal submits

that notice invoking the guarantee dated 10.10.2017 was never served on

Company Appeal (AT) (Ins.) No.1466 of 2024 4 the Appellant. It is submitted that along with notice dated 10.10.2017,

neither postal receipt nor the service report has been annexed. No proof

of delivery of notice to the Appellant has been brought on the record along

with Section 95 Application. The Appellant in his written submissions

has raised the issue that failure to place any document reflecting

invocation of guarantee issued by the Financial Creditor is a material

irregularity. No document has been placed on record to prove service of

notice under Section 13, sub-section (2). It is submitted that

Adjudicating Authority has failed to deal with the said contention. It is

submitted that Bank was allowed to bring proof of service of notice, but

the Bank has placed notice dated 01.09.2017 for invocation of guarantee,

which was neither averred in Section 95 Application, nor was the case of

the Bank. Had the notice dated 10.10.2017 was served, proof of service of

notice dated 10.10.2017, ought to have been brought on record. The

Bank has not even annexed, postal receipt of notice dated 01.09.2017.

Although in the additional affidavit, publication in both Hindi and English

newspapers has been claimed, however, only Hindi version has been

placed on record, but no publication in the English newspaper has been

placed. Ther is also no service of Rule 7(1) Demand Notice.

6. Learned Counsel for the Respondent - Bank refuting the

submissions of learned Counsel for the Appellant, submits that Appellant

despite opportunity did not appear before the Adjudicating Authority, nor

filed any reply, raising any issue, including the issue of non-service of

notice invoking the guarantee or Demand Notice. Only two contentions

Company Appeal (AT) (Ins.) No.1466 of 2024 5 were raised in the oral submissions made by the Personal Guarantor, i.e.,

application is barred by limitation and notice has not been issued by

Security Trustee. Even no argument was raised with regard to non-

service of either, notice invoking the guarantee or Demand Notice. The

Appellant as an afterthought is trying to raise the issue of non-service of

Demand Notice, which is wholly incorrect. Notice invoking the guarantee

under Section 13, sub-section (2) was issued to the CD and the Personal

Guarantors, which notice has been brought on the record and which was

duly delivered on 11.09.2017 by Speed Post at Aligarh address as well as

at Gurgaon address. It is submitted that Demand Notice dated

10.10.2017 was also issued, postal receipt of which is also attached in the

reply. When the Appellant failed to make requisite payment, the SBI

issued Demand Notice in Form-B under Rule 7(1) dated 28.10.2020,

which was served by Speed Post on 09.11.2020, which proof has also

been brought on record. It is submitted that under the Guarantee

Agreement between the parties, the SBICAP was only Agent of the Lenders

and Lenders had full authority and jurisdiction to invoke guarantee and

initiate proceedings.

7. Learned Counsel appearing for the RP submits that the Appellant

never raised any issue with regard to the non-service of notice invoking

the guarantee or Demand Notice under Form-B. It is submitted that

several dates were fixed before the Adjudicating Authority and despite

repeated opportunities granted to the Appellant, no reply was filed and

lastly right to reply was struck off by the Adjudicating Authority. Even

Company Appeal (AT) (Ins.) No.1466 of 2024 6 during hearing before the Adjudicating Authority, the Counsel for the

Appellant never raised any issue regarding non-service of notice and in

the Appeal, for the first time non-service of notice is raised as an

afterthought with an intent to delay the proceedings. It is submitted that

against other Personal Guarantors of the CD, Section 95 application has

already been admitted. It is submitted that additional documents have

been brought on record by the RP along with additional affidavit dated

23.09.2024, bringing on record the relevant materials to prove the service

of notice, including the notice dated 01.09.2017 and proof of service,

which need to be accepted on record for deciding the Appeal.

8. We have considered the submissions of learned Counsel for the

parties and have perused the records.

9. Only issue which is sought to be raised by the Appellant in the

Appeal is that notice invoking the personal guarantee has not been served

and no proof of service of notice dated 10.10.2017 was brought on record

by the SBI along with Section 95 application, which submission has been

refuted by both, the SBI as well as RP stating that despite opportunity,

the Appellant did not file any reply, objecting to the service of notices

before the Adjudicating Authority and only two issues regarding limitation

and issuance of notice by Lenders had been raised, which were noticed by

the Adjudicating Authority. Notice invoking guarantee and demand notice

were duly served on the Personal Guarantor, proof of which have been

brought on record in this Appeal. The issue having been raised by the

Appellant for the first time in the Appeal, it is relevant to notice the orders

Company Appeal (AT) (Ins.) No.1466 of 2024 7 passed by Adjudicating Authority in Section 95 application, which have

been brought on record along with the reply of RP. The RP was appointed

by the Adjudicating Authority by order dated 07.09.2022. Notice was

issued to the Personal Guarantor by order dated 28.11.2023. On

21.12.2023, learned Counsel for the Personal Guarantor appeared, on

which date the Adjudicating Authority passed following order:

"IA No.437/2022

1. This application has been filed by the RP under Section 99 IBC recommending for admission.

2. The Ld. Counsel representing the personal guarantor seeks and is granted two weeks' time to file reply as a last opportunity.

3. Let the reply, if any, be filed within a period of two weeks as a last opportunity, failing which the right to file reply will be struck off. The advance copy of the reply also to be supplied to the Ld. Counsel representing the RP.

4. The matter is adjourned for further hearing on 16th January, 2024."

10. Again on 16.01.2024, Counsel for the Personal Guarantor prayed

for time. The Adjudicating Authority on 16.01.2024 passed the following

order:

"IA No.437/2022

1. This application has been filed on behalf of RP U/s 99 of the Code.

2. As per the previous order dated 21st December, 2023 vide its para no.3, the last opportunity was granted to the Respondent/Personal Guarantor to file the reply within a period of two weeks, failing which, the right to file reply will be struck off.

3. Today, however, there is a representation on behalf of the Respondent/Personal Guarantor, who seeks an indulgence for permitting him to file the reply within a period of one week.

4. As an indulgence we grant another opportunity to the Respondent/Personal Guarantor to file reply within a period of one

Company Appeal (AT) (Ins.) No.1466 of 2024 8 week, failing which, the right to file reply shall be deemed to be struck off and no further order would be required to be passed.

5. The matter is adjourned for further hearing on 16th February, 2024, before the regular Bench."

11. The matter was again taken up on 01.03.2024, where Court noticed

that inspite of several opportunities, no reply has been filed by the

Personal Guarantor. Learned Counsel for the Personal Guarantor made

further request for opportunity, which was allowed subject to payment of

costs of Rs.25,000/-. Paragraph 2, 3 and 4 of the order are as follows:

"2. We see from the previous order dated 21.12.2023 where vide para no.3, we have observed that the reply be filed within a period of two weeks as a last opportunity, failing which, the right to file reply will be struck off. Further, on 16.01.2024 vide para no.4, we have further observed that in view of the request made by the Ld. Counsel representing the Personal Guarantor as an indulgence, we granted another opportunity to file reply within a period of one week, failing which the right to file reply shall be deemed to be struck off and no further order would be required to be passed.

3. Today, again the Ld. Counsel representing the Personal Guarantor made a request for granting the last opportunity for filing reply within a period of one week.

4. As we have already observed as per our orders dated 21.12.2023 and 16.01.2024, that the opportunity was already granted and the right to file reply was deemed to be struck off, in case if no reply is filed. However, in view of the request still made by the Ld. Counsel representing the Personal Guarantor and in the interest of justice, we deem it appropriate that let the reply if any be filed within a period of one week positively subject to the payment of cost of Rs.25,000/- to be deposited in 'Prime Minister's National Relief Fund'. It is made clear that in case if the cost is not paid on or before one week, the reply shall not be taken on record by the Registry, and no further order would be required to be passed."

12. Again on 17.04.2024, Court noticed that no reply has been filed by

the Personal Guarantor and right to file reply was struck off. Order dated

17.04.2024 is as follows:

"IA NO.437/2022 1. As per the previous order dated 1st March, 2024 vide Para No.4, we have granted liberty to the Personal Guarantor to file reply

Company Appeal (AT) (Ins.) No.1466 of 2024 9 subject to the deposit of Rs.25,000/- in the Prime Minister's National Relief Fund. The said liberty was granted, in view of the fact that despite repeated opportunities granted in the past no reply was filed, however on 1st March, 2024 another request was made for seeking time to file reply, which was allowed subject to the payment of the cost as aforesaid.

2. It is pointed out by the Registry that no reply has so far been filed by the Personal Guarantor.

3. Ld. Counsel representing the RP also states that he is not in the receipt of any reply from the Personal Guarantor as well.

4. In view of the aforesaid situation, the right to file reply is struck off.

5. The matter is adjourned for further hearing on 8th May, 2024."

13. The most relevant proceeding of the Adjudicating Authority held on

08.05.2024, where parties appeared and Court noticed that right to file

reply has been struck off. However, Court granted opportunity to the

Personal Guarantor of hearing and to make oral submissions. Paragraph

6 of the order notices the submissions made by learned Counsel for the

Personal Guarantor opposing Section 95 application. Paragraphs 5 and 6

of the order dated 08.05.2024 are as follows:

"5. In view of this, we have permitted the Ld. Counsel representing the Personal Guarantor to make oral submissions.

6. The main contention raised by the Ld. Counsel representing the Personal Guarantor is that the present petition filed by the State Bank of India, is not maintainable in terms of the limitation, as it is grossly barred by limitation. It is also pointed out that as per Deed of Personal Guarantee dated 22.11.2013, upon occurrence of an Event of Default, the Security Trustee, which in the present case is SBI CAP Trustee Co. Ltd., may raise a notice of demand upon the personal guarantor. However, in the present case, notice of demand is issued by the State Bank of India i.e. the lender and not the Security Trustee."

Company Appeal (AT) (Ins.) No.1466 of 2024 10 14. When we look into the above arguments of the Personal Guarantor,

noticed by the Court, only two submissions were raised, i.e. limitation

and notice having been issued by SBI instead of Security Trustee. In the

Appeal as noted above, learned Counsel for the Appellant has confined his

submissions only to non-service of notice invoking the bank guarantee as

well as Demand Notice. Both, SBI and RP have brough on record the

relevant materials to prove service of notice on the Personal Guarantor.

Copy of the notice dated 01.9.2017 has been brought on the record in the

reply filed by the SBI at pages 271-280. The said notice is delivered on

the Appellant on 11.09.2017 vide Speed Post at Aligarh address and at

Gurgaon address. At page 283 of the reply of the SBI, Postal Tracking

Report has been brought on the record. Page 281 is the details of Speed

Post sent to the CD and Personal Guarantors, which indicate that vide

Postal Receipt No. ED450797725IN notice was sent to the Appellant at

Gurgaon address and by another Receipt No. ED450797711IN notice was

sent to the Appellant at Aligarh address. Tracking Report of both the

above receipts have been brough on the record, which indicate that at

Gurgaon address item was delivered on 08.09.2017, whereas at Aligarh

address, it was delivered on 11.09.2017. From pages 281 to 286 details

of the Postal Receipts and the Postal Tracking Reports have been brought

on the record, which clearly proves the service of notice.

15. Learned Counsel for the Appellant has submitted that in the

application, the SBI has claimed Demand Notice dated 10.10.2017 and

proof of service of which notice has not been brought on record. In the

Company Appeal (AT) (Ins.) No.1466 of 2024 11 reply, notice dated 10.10.2017 sent to the Appellant has also been brough

on record along with Postal Receipt, showing sending of notice to all.

16. As noted above, the RP along with the additional affidavit has

brough on the record relevant materials to prove service of notice,

invoking bank guarantee. Reply was also filed by the RP, pleading the

service of notice invoking bank guarantee. The Appellant, although took

time to file rejoinder affidavit on 18.02.2025 and 20.03.2025, however on

08.04.2025, following statement was made by the Appellant:

"08.04.2025 Learned Counsel for the Appellant submits that he does not propose to file a Rejoinder Affidavit.

Let the Appeal be listed again on 22.04.2025.

Interim Order to continue."

17. The fact remains that materials brough on the record by replies of

the SBI as well as the RP bringing on the record materials to prove service

of notice invoking bank guarantee on the Appellant, remain un-rebutted.

From the materials on record in the replies and additional affidavit, we

are satisfied that Appellant was duly served with the notice invoking the

bank guarantee as well as legal Demand Notice dated 10.10.2017, which

were sent by the Speed Posts. The fact that before the Adjudicating

Authority, the Appellant, despite repeated opportunities did not file any

reply, speaks for itself. In the oral submissions advanced on behalf of the

Personal Guarantor, which has been noticed in detail by the Adjudicating

Authority, as extracted above, the submission that notice, invoking the

guarantee, has not been served, was not even raised. We, thus, are fully

satisfied that notice invoking the bank guarantee was duly served.

Company Appeal (AT) (Ins.) No.1466 of 2024 12

18. We, thus, do not find any merits in the submissions made by the

Appellant that he was not served with notice invoking bank guarantee.

There is no merit in the Appeal. The Appeal is dismissed. Interim order

stands vacated. Pending IAs, if any, are also disposed of. There shall be

no order as to costs.

[Justice Ashok Bhushan] Chairperson

[Arun Baroka] Member (Technical)

NEW DELHI

30th June, 2025

Ashwani

Company Appeal (AT) (Ins.) No.1466 of 2024 13