Proper issuance and acknowledgment of demand notice under the Insolvency Code are crucial for proceeding against Personal Guarantors, ensuring compliance with limitation periods.

JUDGMENT

(Hybrid Mode)

[Per: Justice Sharad Kumar Sharma, Member (Judicial)]

These two company appeals, as they stand on a common pedestal, for the purposes of brevity, they are being taken up and decided together. The Appellants of the two company appeal, who are the Personal Guarantors, in their status in the said capacity, question the propriety of the impugned orders of 15.04.2024, as they was rendered in CP (IB) No. 213/95/HDB/2023 and CP (IB) No. 207/95/HDB/2023 respectively. By virtue of the impugned orders, which are under challenge, the proceedings that were held under Section 95 of the I & B Code, 2016, had been directed to be admitted, as against the present Appellants for being carried forward, in accordance with the provisions of law, applicable to it.

2. To be precise, certain dates become relevant to be noted, which are chronologically referred to hereunder: -

(i) On 06.10.2014, a Personal Guarantee bond was executed by the Appellant, ensuring the Advancement of a Loan to the Corporate Debtor.

(ii) On 13.10.2015, the Corporate Debtor, that is Respondent No. 3 herein, was declared as NPA (Non-Performing Asset).

(iii) On 01.11.2015, proceedings by issuance of a demand notice under Section 13 (2) of the SARFAESI Act , 2002, stood initiated as against the Corporate Debtor.

(iv) On 01.11.2015, as a consequence of, the issuance of a demand notice under Section 13 (2) of the SARFAESI Act , 2002, the Financial Creditor are said to have invoked the Personal Guarantee.

(v) On 09.07.2019, the Debt Recovery Certificate (DRC No. 176 of 2019) was issued by DRT-I, Hyderabad.

(vi) On 22.07.2020, a demand notice was issued by the Recovery Officer, DRT (Debt Recovery Tribunal), Hyderabad, for the recovery of the amount, as it was reflected in it, which was due to be paid by the Corporate Debtor.

(vii) On 29.12.2021, a demand notice as contemplated, under Rule 7 was issued, raising a demand with regard to the amount due to be paid by the Appellants, as against which the present Appellant stood as a Personal Guarantor.

(viii) On 05.07.2023, Respondent No. 1 filed an application under Section 95 of the I & B Code, 2016, against the Appellants before the Ld. NCLT, Hyderabad.

3. The said demand notice was issued as per the provisions contained under Rule 7 of the IBBI (Insolvency and Bankruptcy Board of India) Liquidation Process Regulations, 2016, “Insolvency and Bankruptcy (Application to Adjudicating Authority) etc. Rules, 2019”. Rule 7 in itself contemplates issuance of a demand notice under Clause B of Section 95 (4) of the I & B Code, 2016, which is mandatorily required to be served on the Guarantor, demanding payment of the amount of default, which has to be issued in the shape of Form - B. It is not in dispute that the demand notice in the shape of Form - B was issued on 29.12.2021.

4. It is based on the demand notice of 29.12.2021, the Respondent No. 1 filed application under Section 95 of I & B Code, 2016, for initiation of the IRP proceedings, as against the respective Appellant/Personal Guarantor, before the Ld. Adjudicating Authority on 23.05.2022, and the proceedings were numbered as CP (IB) No. 191/95/HDB/2022, in respect of Mr. V. Anjaiah and CP(IB) No. 199/95/HDB/2022 in respect of Mrs. K. Suneetha. After taking up the hearing, the Ld. Adjudicating Authority vide its order of 25.05.2023, dismissed the proceedings, simpliciter on the solitary ground that since service of notice of demand as per under Section 95 of the Insolvency and Bankruptcy Code (IBC), 2016, to be read with Rule 7 of the Insol