National Company Law Appellate Tribunal
Dheeraj Wadhawan vs Union Bank Of India on 16 March, 2022
Author: Ashok Bhushan
Bench: Ashok Bhushan
NATIONAL COMPANY LAW APPELLATE TRIBUNAL,
PRINCIPAL BENCH, NEW DELHI
Company Appeal (AT) (Insolvency) No. 214 of 2022
(Arising out of Order dated 01.02.2022 passed by the Adjudicating
Authority (National Company Law Tribunal), Mumbai Bench in CP (IB) No.
4/2021)
IN THE MATTER OF:
Dheeraj Wadhawan
Presently in judicial custody
Maharashtra.
Email: [email protected] .... Appellant
Vs
Union Bank of India
Industrial Finance Branch
Union Bank Bhavan, 1st Floor
239, Vidhan Bhavan Marg,
Nariman Point
Mumbai - 400 021
Through its Chief Manager ... Respondent
Present:
For Appellant: Mr. J. P. Sen, Senior Advocate with Mr.
Rohan Dakshini, Mr. Ankur Saigal, Mr.
Prakhar Parekh, Mr. Mahesh Agarwal, Mr.
Shivam Shukla, Mr. Vishesh Malviya, Ms.
Pooja Vasandani, Advocates.
For Respondent: Mr. Raunak Dhillon, Ms. Saloni Kapadia,
Mr. Animesh Bisht, Ms. Madhavi Khanna,
Mr. Shubhankar Jain, Advocates.
JUDGMENT
ASHOK BHUSHAN, J.
This Appeal has been filed against the judgment and order dated 01.02.2022 passed by the Adjudicating Authority (National Company Law Tribunal), Court No.5, Mumbai Bench by which order the Adjudicating Cont'd.../ -2- Authority on Application under Section 95 Sub-section (1) of the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as 'Code') filed by the Union Bank of India directed the Resolution Professional (RP) to submit report under Section 99 of the Code for acceptance for rejection of the Application. The Appellant aggrieved by said order has come up in this Appeal.
2. Few facts in the case need to be noted for deciding this Appeal are:
(i) Dewan Housing Finance Corporation Ltd. availed financial facilities from consortium of lenders lead by Union Bank of India.
(ii) The credit facilities were secured by the personal guarantee by the Appellant and Mr. Kapil Wadhawan furnished vide Joint Deed of Guarantee dated 22.06.2020. Under the Deed of Guarantee the address of the Appellant was mentioned as Plot No. 32/A, Union Park, Road No. 5, Bandra (W), Mumbai.
(iii) Union Bank of India sent letter dated 10.09.2020 at the residential address of the Appellant invoking the guarantee and calling upon the Appellant and Mr. Kapil Wadhawan to pay outstanding amount. The Invocation Notice was sent and accepted on the residential address of the Appellant.
(iv) A Demand Notice dated 07.10.2020 was sent by the Union Bank of India at the residential address of the Appellant by India Post which was received by the nephew of the Appellant Mr. Karthik Wadhawan on 13.10.2020.
Company Appeal (AT) (Insolvency) No. 214 of 2022 -3-
(v) After service of the notice, Application under Section 95 Sub-
section (1) was filed by the Union Bank of India against the Appellant on 01.12.2020 for total debt of INR Rs.3,958,30,48,96.71/- as on 31.08.2020.
(vi) In the application notice was issued by the Adjudicating Authority which was served on the Appellant through his Advocate on 19.01.2021.
(vi) When the Application under Section 95 came for consideration before the Adjudicating Authority on 07.12.2021, a submission was raised before the Adjudicating Authority that Demand Notice issued by the Bank having not been served on the Appellant Application need not be entertained.
(vii) The Applicant Bank, who is Respondent before us, contended that Demand Notice under Rule 7 of the Insolvency and Bankruptcy (Application to Adjudicating Authority for Insolvency Resolution Process for Personal Guarantors to Corporate Debtors) Rules, 2019 (hereinafter referred to as '2019 Rules') has been duly served by post at the residential address of the Appellant which was received by adult member of the family of the Appellant i.e. his nephew Mr. Karthik Wadhawan, therefore service is complete and Application filed under Section 95 be entertained.
(viii) The Adjudicating Authority after hearing the parties held that the Demand Notice was served on the Appellant and Company Appeal (AT) (Insolvency) No. 214 of 2022 -4- Application filed by the Bank was entertained. Resolution Professional was directed to submit a report as required by Section 99 of the Code.
(ix) Aggrieved by this order, this Appeal has been filed.
3. Shri J. P. Sen, learned senior counsel for the Appellant challenging the order passed by the Adjudicating Authority contends that the Respondent Bank has failed to serve mandatory notice on the Appellant prior to filing of Company Petition. It is submitted that at the time when notice is claimed to be served, the Appellant was in judicial custody. Hence, it was incumbent on the Bank to serve notice at Taloja, Navi Mumbai. It is submitted that statutory rules require personal service and personal service having not been effected on Appellant the Company Petition is not maintainable. It is submitted that the notice dated 07.10.2020 which was delivered on the residential address of the Appellant and received by nephew of the Appellant - Mr. Karthik Wadhawan, who by letter dated 10.11.2020 returned the envelop to the Bank stating that Appellant is in judicial custody at Taloja, Navi Mumbai pending investigation. It is submitted that personal service of the notice is mandatory and without personal service of notice Company Petition cannot be entertained and the Adjudicating Authority committed error in entertaining the Application under Section 95 by directing the Resolution Professional to submit report under Section 99. Learned counsel for the Appellant contends that notice on the Appellant was required to be served as per provisions of Order 5 Rule 24 of the Civil Procedure Code. Company Appeal (AT) (Insolvency) No. 214 of 2022 -5-
4. Counsel for the Respondent, Shri Raunak Dhillon, refuting the submissions of the Appellant contends that Demand Notice was served on the Appellant as per requirement of the 2019 Rules. Notice was sent by India Post on the last known address of the Appellant which was duly received by the nephew of the Appellant. Hence, service is complete. It is submitted that 2019 Rules does not require any personal service on the Appellant. Learned counsel for the Respondent submits that provisions of Order 5 Rule 24 of the Civil Procedure Code are not attracted since it is for service of summons and 2019 Rules provides for mode of service which was duly followed by the Bank in serving the Demand Notice. It is submitted that when statute provides for particular mode of service of notice general rule regarding service are not to be adhered to.
5. We have considered submissions of learned counsel for the parties and perused the record.
6. The Company Petition filed by the Bank against the Appellant - Personal Guarantor is under Section 95 of the Code Rule has been framed namely, The Insolvency and Bankruptcy (Application to Adjudicating Authority for Insolvency Resolution Process for Personal Guarantors to Corporate Debtors) Rules, 2019. Rule 3 (g) defines service in following manner:
"(g) "serve" means sending any communication by any means, including registered post, speed post, courier or electronic form, which is capable of Company Appeal (AT) (Insolvency) No. 214 of 2022 -6- producing or generating an acknowledgement of receipt of such communication:
Provided that where a document cannot be served in any of the modes, it shall be affixed at the outer door or some other conspicuous part of the house or building in which the addressee ordinarily resides or carries on business or personally works for gain;"
7. Rule 7 of 2019 Rules is with regard to application by Creditor. Rule 7 is to the following effect:
"7. Application by creditor.― (1) A demand notice under clause (b) of sub-section (4) of section 95 shall be served on the guarantor demanding payment of the amount of default, in Form B. (2) The application under sub-section (1) of section 95 shall be submitted in Form C, along with a fee of two thousand rupees.
(3) The creditor shall serve forthwith a copy of the application referred to in sub-rule (2) to the guarantor and the corporate debtor for whom the guarantor is a personal guarantor. (4) In case of a joint application, the creditors may nominate one amongst themselves to act on behalf of all the creditors."
8. Rule 7 Sub-rule (1) provides that Demand Notice under Section 95 (4) be served on the Guarantor regarding payment of amount of default, in Form B. Company Appeal (AT) (Insolvency) No. 214 of 2022 -7-
9. In the present case, Demand Notice as contemplated under Rule 7 sub-rule (1) of the 2019 Rules was sent by India Post on the address of the Appellant as mentioned in the Deed of Guarantee. The Demand Notice dated 07.10.2020 was duly delivered on the said address on 13.10.2020 and accepted by Mr. Karthik Wadhawan, an adult member of the Appellant's family. In the Company Petition filed under Section 95 an Affidavit of Service of the Demand Notice was filed by the Bank wherein in Para 1 and 2 following has been stated:
"1. I say that pursuant to the instructions from the Petitioner, on 9th October 2020, I visited the office of India Post for service of demand notice dated 9 th October 2020 ("Notice") issued by the Petitioner, on the Respondent at Wadhawan House, Plot No. 32/A, Union Park Road No.5, Petit Girls School, Bandra (W), Mumbai 400050. The copy of the postal receipt bearing number CM080850026IN is annexed as "Exhibit A".
2. The said Notice was delivered to Respondent at Wadhawan House, Plot No. 32/A, Union Park Road No.5, Petit Girls School, Bandra (W), Mumbai 400050 on 13th October, 2020. The screenshot of the delivery status made available on the website of India Post confirming delivery of the Notice on 13th October, 2020 is annexed as "Exhibit B"."
10. Fourteen days after service of Demand Notice, Application under Section 95 was filed on 01.12.2021. Rule 3(g) of the 2019 Rules provides Company Appeal (AT) (Insolvency) No. 214 of 2022 -8- mode and manner of sending any communication. As per Rule 3(g) "serve" means sending any communication by any means, including registered post, speed post, courier or electronic form. The proviso of 3(g) contemplate the situation where a document cannot be served in any of the modes, it shall be affixed at the outer door or some other conspicuous part of the house or building in which the addressee ordinarily resides or carries on business or personally works for gain. The statute provides a particular manner of service of notice. Demand Notice is to be served at house or building in which the addressee ordinarily resides. In the present case, proviso to Rule 3(g) was not resorted to since the Notice dated 07.10.2020 was sent and received on 13.10.2020. The Adjudicating Authority in impugned judgment after considering the submissions has come to the conclusion that notice served in Form B at the address of the Appellant is valid service. The Adjudicating Authority also came to the conclusion that service of Demand Notice is not requirement of personal service. Learned counsel for the Appellant has relied on Order 5 Rule 24 of the Civil Procedure Code, which is to the following effect:
"24. "Service on defendant in prison.- Where the defendant is confined in a prison, the summons shall be delivered or sent [or by post or by such courier service as may be approved by the High Court, by fax message or by Electronic Mail service or by any other means as may be provided by the Company Appeal (AT) (Insolvency) No. 214 of 2022 -9- rules made by the High Court] to the officer in charge of the prison for service on the defendant."
11. Order 5 Rule 24 of the Civil Procedure Code is provision for issuance and service of summons. Said provision is not relevant in so far as service of Demand Notice is contemplated as per 2019 Rule 3(g) read with Rule 7.
12. It is also on the record that after service of the demand notice when Company Petition was filed under Section 95, notices were issued by the Adjudicating Authority which were also duly served on the Appellant through his counsel on 19.01.2021. Company Petition under Section 95(1) was taken up by the Adjudicating Authority on 07.12.2021 before which date the Appellant was served and represented before the Adjudicating Authority.
13. In view of the facts as noted above, we are of the opinion that Demand Notice which was dated 07.10.2020 was duly served on the Appellant as per Rule 3(g) read with Rule 7 of 2019 Rules. Service of Notice of Demand has been effected in accordance of procedure prescribed in 2019 Rules. We do not find any infirmity in the order of the Adjudicating Authority by which the Adjudicating Authority has held that the Demand Notice has been duly served and report under Section 99 of the Code by the Resolution Professional has been called for. The Application filed under Section 95(1) is yet to be admitted or rejected under Section 100 of the Code. After receipt of the report by the Resolution Professional as contemplated under Section 99, it is open for the Appellant to raise all his pleas and objections at the Company Appeal (AT) (Insolvency) No. 214 of 2022 -10- time of admission or rejection of Application under Section 95. We do not find any infirmity in the order of the Adjudicating Authority dated 01.02.2022 warranting any interference in exercise of our Appellate Jurisdiction of this Tribunal. The Appeal is dismissed.
[Justice Ashok Bhushan] Chairperson [Dr. Alok Srivastava] Member (Technical) NEW DELHI 16th March, 2022 Archana Company Appeal (AT) (Insolvency) No. 214 of 2022