The National Company Law Tribunal, New Delhi recently admitted Mr. Mohit Singh (Personal Guarantor of Shipra Leasing Private Limited) into insolvency in a highly contested company petition filed by Indiabulls Housing Finance Limited amidst a long-standing dispute between the parties.
This judgement decided 4 key legal objections raised by the personal guarantor – (i) whether the date of default can change from the Demand Notice under Section 8 to the application under Section 9; (ii) no proof of delivery of demand notice under Rule 7(1) of the Personal Guarantor Rules; (iii) applicability of Section 10A in petitions under Section 95 of the Code; and (iv) whether a company petition under Section 95 is maintainable when there are pending disputes between the parties regarding the “debt”. The Tribunal also decided whether factors like other pending litigations between the parties, and the stay of admission of CIRP against the Corporate Debtor would be relevant factors.
Re: Change of Date of Default from Section 8 Demand Notice to Section 9 Application
Based on our submissions, the Tribunal decided that the difference in the dates of default has no bearing on the maintainability of the company petition under Section 95 of the Code as opposed to what it may have to an Application under Section 7, or Section 9 of the Code. Article 137 of the Limitation Act, 1963, read with Section 238-A of the Code, mandates a three-year limitation period for filing Section 95 petitions, calculated from the date of default specified in the petition. In the present case, since the present Company Petition was filed under Section 95 of the Code on January 5, 2021, both the dates identified as the dates of default fall well within the three-year limitation period. Hence, either/both “dates of default” will not render the present petition non-maintainable.
Re: No proof of delivery of demand notice under Rule 7(1) of the Personal Guarantor Rules
We argued that Section 27 of the General Clauses Act, 1897 gives rise to a presumption that when a notice is sent to the correct address by registered post, the service of notice has been affected. The Tribunal agreed with this submission and held that since the Demand Notice was sent to the correct address of the Personal Guarantor, there is a presumption that service of notice has been affected when it is sent to the correct address by registered post. Hence, this objection is devoid of merit and is an afterthought in an attempt to avoid liability since the Personal Guarantor has neither pleaded this objection it its reply to the RP’s report filed in the present proceedings before this Hon’ble Tribunal.
Re: Date of Default falling during the period of Section 10A of the Code
Based on the clear and unambiguous language of Section 10A, read with the position clarified by the Hon’ble NCLAT in the case of Amit Jain v Siemens Financial Services Pvt. Ltd., 2022 SCC OnLine NCLAT 347, it is settled position that Section 10-A of the Code is not applicable to proceedings against the personal guarantors under Section 95 of the Code.
Re: Pending disputes regarding the “debt” between the parties
We argued that when the Adjudicating Authority admitted the company petition against the Corporate Debtor, it had already admitted the Corporate Debtor into CIRP in respect of the same “Debt”. This serves as a judicial imprimatur on the validity of the “debt” and precludes the Respondent from relitigating the issue in this present proceeding. Accordingly, the Adjudicating Authority rejected this objection.
Based on the above, the Tribunal declared that the present petition meets the requisite ingredients for admission of an Application under Section 95 of the Code.
Deal value: INR 14 Crores
Our Disputes Team Comprised Lead Partners – Dheeraj Nair and Manish Jha, and Principal Associate – Vishrutyi Sahni.
Dheeraj is a Partner with JSA since 2009. Dheeraj has over two decades of experience advising and representing clients on complex arbitrations, litigations and regulatory proceedings.