NCLAT (2026.03.20) in Jagi Mangat Panda Vs SREI Equipment Finance Limited & Anr. [Company Appeal (AT) (Insolvency) No. 1530 of 2024] held that;-
The Notice, thus, contemplate demanding payment of the amount of default. The above Rule clearly indicate that Demand Notice has to be issued, demanding payment of the amount in default. Thus, the default by Guarantor has to exist on the date when Notice in Form-B is being issued.
Thus, for a default, debt has to be due and Debtor shall be only that person, to whom debt is due. A Personal Guarantor becomes a Debtor only when guarantee is invoked, making him liable to make the payment to the Lender
In view of the foregoing discussions, we are of the view that the Financial Creditors having not invoked the guarantee prior to issuing demand notice in Form B, the application under Section 95 could not have been filed by Financial Creditor before invoking the guarantee.
Rule 3 (e) of the Personal Guarantor Rules defines “guarantor” as “a debtor who is a personal guarantor to a corporate debtor and in respect of whom guarantee has been invoked by the creditor and remains unpaid in full or part”.
The judgment of this Tribunal in State Bank of India vs. Deepak Kumar Singhania is a judgment declaring law and it shall be treated that law as declared by this Tribunal in the above judgment was law on the all times on Rule 7(1) of 2019 Rules. We, thus, do not find any substance in this submission of the Respondent.
Excerpts of the Order;
This appeal by a Personal Guarantor has been filed challenging the order dated 22.07.2024 passed by the Adjudicating Authority (National Company Law Tribunal) New Delhi, Court – III admitting Section 95 application filed by the Financial Creditor – SREI Equipment Finance Ltd. Brief facts of the case necessary to be noticed for deciding this appeal are:
(i) Various loan agreements were executed between M/ s. Ortel Communications Ltd. and M/s SREI Equipment Finance Ltd. – Respondent No.1 herein on 01.07.2018. Deed of Guarantee was executed by the Appellant on 01.07.2018 giving guarantee for repayment of money received by the Corporate Debtor from the Financial Creditor. Default was committed by the Corporate Debtor and CIRP against the Corporate Debtor commenced on 27.11.2018.
(ii) On 15.02.2022, the Financial Creditor issued a demand notice in Form B under Rule 7(1) of the Insolvency and Bankruptcy (Application to Adjudicating Authority for Insolvency Resolution Process for Personal Guarantors to Corporate Debtors) Rules, 2019 demanding an amount of Rs.113,38,41,436/-.
(iii) The Personal Guarantor issued a response by letter dated 05.04.2022 to the notice.
(iv) The Financial Creditor filed an application under Section 95 in May, 2022 in which the Resolution Professional was appointed by the Adjudicating Authority. The Resolution Professional submitted a report under Section 99 recommending for admission of Section 95 application. The Personal Guarantor filed an objection pleading that guarantee has not been invoked in terms of Clause 3(a) of the guarantee. There being non-compliance of Rule 3(e) of 2019 Rules, the issuance of notice dated 15.02.2022 in Form B does not substantively amount to invocation.
(v) Before the Adjudicating Authority an application was filed by the Financial Creditor being I.A. No.816 of 2024 seeking to bring the alleged loan recall notice dated 11.06.2019 on record. The application came to be heard by the Adjudicating Authority on 03.05.2024, on which date both learned counsel for the Resolution Professional and Financial Creditor submitted that they will not rely on the notice dated 11.06.2019. After noticing the said statement, the Adjudicating Authority directed the parties to file written submissions and by order dated 22.07.2024 has admitted Section 95 application. Aggrieved by which order this appeal has been filed.
(vi) In this appeal, the Respondent No.1 has filed an I.A. No.910 of 2026 praying to take on record notice dated 11.06.2019 invoking the personal guarantee and the affidavit dated 09.04.2024 filed by the Resolution Professional, which application has been objected by the Appellant by filing a reply.
# 2. We have heard Mr. Anuj Shah, learned counsel for the Appellant, Mr. Sanjiv Sen, learned senior counsel appearing for Respondent No.1 and Mr. Sajjan Kumar Dokania, Resolution Professional – Respondent No.2.
# 3. Learned counsel for the Appellant challenging the order submits that the Financial Creditor having never invoked the personal guarantee given by the Appellant, the application filed under Section 95 was not maintainable. It is submitted that notice under Rule 7(1) in Form B can only be issued when guarantee has been invoked. The notice received by the Appellant under Rule 7(1) dated 15.02.2022 cannot be accepted as notice for invocation of guarantee. Law is well settled by this Tribunal in “State Bank of India vs. Deepak Kumar Singhania [(2025) ibclaw.in 153 NCLAT], Company Appeal (AT) (Ins.) No.191 of 2025” where it was held that notice under Rule 7(1) is not notice for invocation of bank guarantee and without invocation of bank guarantee Section 95 application is not maintainable. Learned counsel for the Appellant submits that the notice dated 11.06.2019, which is sought to be introduced by IA No.910 of 2026 cannot be accepted. It is submitted that attempt was made by the Respondent No.1 before the Adjudicating Authority for placing the notice dated 11.06.2019, which notice was not permitted to be taken on record and both the Financial Creditor and the Resolution Professional has made statement that they will not rely on the said document i.e. notice dated 11.06.2019. When the Respondents clearly stated that they are not relying on the notice dated 11.06.2019, they cannot be permitted to rely on said notice in this appeal.
# 4. Shri Sanjiv Sen, learned counsel for the Respondent submits that by notice dated 11.06.2019, the personal guarantee was invoked which is filed along with I.A. No.910 of 2026. It is submitted that by said notice the Bank had already invoked the personal guarantee, hence, bank was fully entitled to issue notice under Rule 7(1) of 2019 Rules and the application has rightly been admitted by the Adjudicating Authority under Section 95. It is submitted that law which is laid down by this Tribunal in State Bank of India vs. Deepak Kumar Singhania dated 28.05.2025 was not law on the date when order was passed by the Adjudicating Authority on 22.07.2024, hence, application was filed by the Financial Creditor relying on the existing law which did not require separate invocation of guarantee apart from issuance of notice under Rule 7.
# 5. We have considered the submissions of learned counsel for the parties and perused the record.
# 6. We need to first notice the copy of the application filed by the Financial Creditor under Section 95(1) under Rule 7(2) of the Insolvency and Bankruptcy (Application to Adjudicating Authority for Insolvency Resolution Process for Personal Guarantors to Corporate Debtors) Rules, 2019. Copy of the said application is brought on the record as Annexure 2 to the appeal. Application is based on Deed of Guarantee dated 01.07.2018 and in the application the Financial Creditor has relied on demand notice dated 15.02.2022, which was annexed as Annexure 5 to the application. In Paras 10 and 11 of the synopsis of the application following was pleaded:
“10. That having failed to yet recover its dues under the loan facilities availed by the Corporate Debtor, the Applicant/Financial Creditor issued a Demand Notice dated 15.02.2022 to the Respondent/Personal Guarantor in Form-B as provided under Rule 7 ( 1) of the Insolvency and Bankruptcy Board of India (Application to Adjudicating Authority for Insolvency Resolution Process for Personal Guarantors to Corporate Debtors) Rules, 2019 for the outstanding dues of Rs, 1,13,38,41,436/- (Rupees One Hundred Thirteen Crores Thirty Eight Lakhs Forty One Thousand Four Hundred and Thirty Six Only) due to be payable to the Applicant/Financial Creditor by the Corporate Debtor, A copy of the Demand Notice dated 15,02.2022 issued in Form-B as provided under Rule 7 (1) of the by the Applicant/Financial Creditor Insolvency and Bankruptcy Board of India (Application to Adjudicating Authority for Insolvency Resolution Process for Personal Guarantors to Corporate Debtors) Rules, 2019 is annexed herewith and marked as Annexure – 4.
11. That vide letter dated 05.04.2022, the Respondent/Personal Guarantor issued her response to the Form- B Demand Notice dated 15.02.2022 stating therein that in the Resolution Plan for Ortel Communications Ltd., it had been stated that the rights of the Financial Creditor to proceed against any third party shall be deemed to be assigned. The Respondent/Personal Guarantor further stated that the claim of the Applicant/Financial Creditor had not been accepted in totality in the Resolution Plan and that the Demand Notice was premature, unsustainable and illegal and thus, requested the Applicant/Personal Guarantor to withdraw the Demand Notice dated 15.02.2022.
A copy of the reply of the Respondent/Personal Guarantor dated 05.04.2022 in response to the Form – B Demand Notice dated 15.02.2022 is annexed herewith and marked as Annexure – 5.”
# 7. When we look into the Part-III of the application, according to the Financial Creditor the date on which default occurred was 27.11.2018 and on 15.02.2022 when notice under Rule 7 was issued. 27.11.2018 is the date when default was committed by the Principal Borrower. In the list of documents referred to in the Part-III apart from loan agreement, personal guarantees only notice annexed was notice under Rule 7 in Form B dated 15.02.2022. Column 15 of Part-III of the Section 95 application is as follows:
# 8. The Adjudicating Authority while admitting the Section 95 application has held that the notice under Rule 7 issued in Form B is notice invoking guarantee and it would be unreasonable to interpret the Personal Guarantor Rules as requiring a separate invocation notice in addition to the mandatory demand notice issued per Form-B. In Para 17 of the order following was held:
“17. A reading of the clause of the Deed of Guarantee and the above definition makes it clear that, notwithstanding the fact that the deed of guarantee contains an invocation clause or not, the Rules have made the invocation of personal guarantee mandatory in all cases. We are of considered view that it would be unreasonable to interpret the Personal Guarantor Rules as requiring a separate invocation notice in addition to the mandatory demand notice issued per Form-B. Both notices serve the same purpose: enforcing the Personal Guarantor’s obligations under the Personal Guarantee by demanding payment of the Corporate Debtor’s unpaid debt. Therefore, issuing a Demand Notice dated 15.02.2022 as per Form-B effectively constitutes the ‘invocation’ of a personal guarantee.”
# 9. The Adjudicating Authority then proceeded on premise that notice under Rule 7 in Form B is itself invocation of guarantee. The law on the subject is laid down by this Tribunal in “State Bank of India vs. Deepak Kumar Singhania [(2025) ibclaw.in 153 NCLAT], Company Appeal (AT) (Ins.) No.191 of 2025” where this Tribunal after considering the Rule 7 of the 2019 Rules has laid down that before issuance of demand notice under Rule 7(1) in Form B there has to be invocation of guarantee. The argument raised in the above case was that notice under Rule 7(1) in Form B is itself invocation of guarantee, which was specifically dealt with and rejected. In Para 14 to 17 following was laid down:
“14. Sub-section (4) of Section 95 provides that an application under sub-section (1) shall be accompanied with details and documents as referred to therein. Sub-section (7) provides that details and documents required to be submitted under sub-section (4) shall be such as may be specified. Rule 2 of 2019 Rules provides that these rules shall apply to insolvency resolution process for personal guarantors to Corporate Debtors. The application under Section 95 has been filed against the Respondent – Personal Guarantor of the Corporate Debtor – LML Ltd. Hence, the application under Section 95 has to be as per 2019 Rules. Rule 3, sub-section (1) (e) defines ‘guarantor’, which is as follows:
“3(e) “guarantor” means a debtor who is a personal guarantor to a corporate debtor and in respect of whom guarantee has been invoked by the creditor and remains unpaid in full or part;”
15. The ‘Guarantor’ within the meaning of 2019 Rules, means a Debtor who is a Personal Guarantor to a Corporate Debtor and in respect of whom guarantee has been invoked by the Creditor and remains unpaid in full or part. Learned Counsel for the Appellant has relied on definition of ‘Personal Guarantor’ as contained in Section 5, sub-section (22) of the IBC. Section 5, sub-section (22) of the IBC is in Part-II, whereas Section 95 of the IBC is in Part-III. Hence, the definition of ‘Personal Guarantor’ under Rule 5(22) may not be applicable with regard to initiation of insolvency resolution process against the Personal Guarantor and the definition given in Rule 3, sub-rule (1) (e) of 2019 Rules has to be looked into for the purpose of initiating insolvency resolution process against the Personal Guarantor. Rule 7, deals with ‘Application by creditor’. Rule 7 of 2019 Rules is as follows:
“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.”
16. Rule 7, sub-rule (1) provides that 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. Sub-section (4) of Section 95 refers to documents relating to debts owed by the Debtor to the Creditor. Rule 7, sub-rule (1) contemplate service of Demand Notice under Clause (b) of sub-section (4) on the Guarantor, demanding payment of the amount of default in Form B.
17. The Notice, thus, contemplate demanding payment of the amount of default. The above Rule clearly indicate that Demand Notice has to be issued, demanding payment of the amount in default. Thus, the default by Guarantor has to exist on the date when Notice in Form-B is being issued. When we read Section 95, sub-section (4) and Rule 7 of 2019 Rules, the above is the only intendment of the legislative scheme, i.e. default on the part of Guarantor should exist on the date when Notice in Form-B has to be issued. We have noticed the definitions of ‘debt’ and ‘default’ in Section 3 (11) and (12) of the IBC. Default shall arise on account of non-payment of debt, when whole or part of it become due. ‘Debt’ means a liability or obligation in respect of a claim which is due from any person. Thus, for a default, debt has to be due and Debtor shall be only that person, to whom debt is due. A Personal Guarantor becomes a Debtor only when guarantee is invoked, making him liable to make the payment to the Lender. We have noticed Clause 2 and Clause 21 of the Deed of Guarantee in the foregoing paragraphs of this judgment, which clearly contemplate that liability on Guarantor shall arise only when demand is made by the Lender, in event Principal Borrower fails to repay the amount. In the present case, there is no case setup by the Appellant that at any point of time guarantee was invoked, except issuance of Notice in Form-B, which is claimed by the Appellant to be treated as Notice for invocation of guarantee. Further, we have noticed the definition of ‘Guarantor’ under Rule 3(1)(e), which while defining a ‘Guarantor’ contain two conditions, i.e. (i) who is a Personal Guarantor to a Corporate Debtor; and (ii) in respect of whom, guarantee has been invoked by the Creditor and remains unpaid in full or part. Learned Counsel for the Appellant has contended that expression ‘and’ used in Rule 3 (1)(e) needs to be read as ‘or’ to make the provision workable and to avoid producing an unintelligible and absurd result. Learned Counsel for the Appellant has relied on two judgments of the Hon’ble Supreme Court in support of the above submission, i.e. AIR 1968 SC 1450 – Ishwar Singh Bindra and Ors. vs. State of U.P. The Hon’ble Supreme Court in the above case had occasion to consider the definition of ‘drug’ contained in Section 3(b)(i) of Drugs Act 1940. Expression ‘and’ used in Section 3(b)(1) of the Drugs Act was considered in the said case and in paragraph 11 of the judgment, following was laid down:
“11. Now if the expression “substances” is to be taken to mean something other than “medicine” as has been held in our previous decision it becomes difficult to understand how the word “and” as used in the definition of drug in Section 3(b)(i) between “medicines” and “substances” could have been intended to have been used conjunctively. It would be much more appropriate in the context to read it disconjunctively. In Stroud’s Judicial Dictionary, 3rd Edn. it is stated at p. 135 that “and” has generally a cumulative sense, requiring the fulfilment of all the conditions that it joins together, and herein it is the antithesis of or. Sometimes, however, even in such a connection, it is, by force of a contexts, read as “or”. Similarly in Maxwell on Interpretation of Statutes, 11th Edn., it has been accepted that “to carry out the intention of the legislature it is occasionally found necessary to read the conjunctions ‘or’ and ‘and’ one for the other”.”
# 10. This Tribunal in recent judgment of this Tribunal in “Mukul Somany vs. DBS Bank Ltd. & Anr. [(2026) ibclaw.in 91 NCLAT], Company Appeal (AT) (Insolvency) No.999 of 2024 and other appeals”, decided on 04.02.2026 has again reiterated the proposition laid down by this Tribunal in State Bank of India vs. Deepak Kumar Singhania. In Para 17 and 18 of the judgment following was held:
“17. In view of the foregoing discussions, we are of the view that the Financial Creditors having not invoked the guarantee prior to issuing demand notice in Form B, the application under Section 95 could not have been filed by Financial Creditor before invoking the guarantee.
18. In result, both the Appeals are allowed and order impugned dated 03.05.2024 admitting Section 95 application is set aside. Dismissal of Section 95 application shall not preclude the Financial Creditor to take such proceeding as permissible in law.”
# 11. In view of the law laid down by this Tribunal, as noted above, view taken by the Adjudicating Authority in Para 17 that notice under Rule 7 is the notice invoking the guarantee cannot be said to be in accordance with correct proposition of law.
# 12. A copy of the Deed of Guarantee is on record. In Para 16 of the order, Col. 3(a) of the Deed of Guarantee has been extracted, which is to the following effect:
“16. Clause 3 (a) of the Deed of Guarantee provides as under:
“In the event of any default on the part of the Customer in payment/ repayment of any of the moneys referred to in Clause 2 above, or in the event of any default on the part of the Customer to comply with or perform any of the terms, conditions and covenants contained in the Facility Documents, the Guarantor (s) shall, upon demand, forthwith pay to SEFL without demur all the amounts payable by the Customer under the Facility Documents. Any such demand made by SEFL on the Guarantor(s) shall be final, conclusive and binding notwithstanding any difference or any dispute between SEFL and the Customer/ arbitration or any other legal proceedings, pending before any court, tribunal, arbitrator or any other authority.
Rule 3 (e) of the Personal Guarantor Rules defines “guarantor” as “a debtor who is a personal guarantor to a corporate debtor and in respect of whom guarantee has been invoked by the creditor and remains unpaid in full or part”.”
# 13. The Deed of Guarantee required issuance of notice of payment of default. Thus, the guarantee clearly contemplated demand from the Financial Creditor and invocation of guarantee was mandatory.
# 14. Now we look into the submission of the Respondent – Financial Creditor relying on notice dated 11.06.2019 which according to the Respondent can be treated to be notice demanding from personal guarantor. There are two reasons due to which the above submission cannot be accepted. Firstly, in the application which was filed under Section 95, the Financial Creditor has not come with any case that apart from notice under Form B dated 15.02.2022 there is any other notice invoking guarantee. As noticed above, in Part-III of the application only document referred to is notice in Form B dated 15.02.2022. Financial Creditor has not come up with any case that prior to notice under Form B dated 15.02.2022, any earlier notice was issued. Secondly, the Financial Creditor sought to bring on record notice dated 11.06.2018 by filing I.A. No.816 of 2024 before the Adjudicating Authority. The Resolution Professional has also filed an affidavit bringing on record recall notice dated 11.06.2019. When the IA No.816 of 2024 along with IB-337(ND)/2022 came for consideration, both learned counsel for the Financial Creditor and Resolution Professional submitted that they will not rely on notice dated 11.06.2019. The order passed by the Adjudicating Authority dated 03.05.2024 is as follows:
“HYBRID HEARING (PHYSICAL & VC)
ORDERΙΑ-816/2024:-
The Resolution Professional had filed an affidavit on 09.04.2024 seeking to bring on record a document alleged to be a loan recall notice issued on 11.06.2019 Mr. Gaurav Mitra, Learned Counsel appearing for the Personal Quarantor strongly objected to take the said document on record. Mr. Bhattacharya, Learned Counsel appearing for the Applicant/Financial Creditor has submitted that he will be advancing his arguments without relying upon the said document. Mr. Vinod Chaursia, Learned Counsel appearing for the Resolution Professional has also submitted that he will not be relying upon on the said affidavit filed on 09.04.2024 and the document in question.
We have heard the submissions made by Mr. Anirban Bhattacharya, Learned Counsel appearing for the Applicant.
Arguments heard. The parties are at liberty to file written submissions along with case laws, if any, within one week.
List the matter on 17.05.2024 for compliance.”
# 15. We, thus, are unable to accept the prayer of the Respondent No.1 by I.A. No.910 of 2026 taking notice dated 11.06.2019 on record. When the Respondent – Financial Creditor and Resolution Professional both made submission before the Adjudicating Authority that they will not rely on the notice dated 11.06.2019, they cannot be allowed to rely on said notice in this appeal.
# 16. One more submission made by the Respondent needs to be noticed. It is submitted by the Respondent that at the time when order was passed by the Adjudicating Authority, the judgment of this Tribunal in State Bank of India vs. Deepak Kumar Singhania was not delivered, which was only delivered on 28.02.2025, hence, there was no requirement of bringing notice dated 11.06.2019 on record.
# 17. When the application is filed under Section 95 by a Financial Creditor, all relevant materials including the demand notice and notice for invocation of the bank guarantee are required to be pleaded. When there is no pleading of the notice dated 11.06.2019 in Section 95 application, it is not open for the Respondent to contend that the judgment of this Tribunal in State Bank of India vs. Deepak Kumar Singhania was not delivered at that relevant time hence there was no requirement. The judgment of this Tribunal in State Bank of India vs. Deepak Kumar Singhania is a judgment declaring law and it shall be treated that law as declared by this Tribunal in the above judgment was law on the all times on Rule 7(1) of 2019 Rules. We, thus, do not find any substance in this submission of the Respondent.
# 18. Learned counsel for the Respondent has also relied on judgment of this Tribunal in “Paresh Rastogi vs. Omkara Assets Reconstruction Private Limited [(2025) ibclaw.in 194 NCLAT], (Company Appeal (AT) (Insolvency) No. 2053 of 2024” decided on 18.03.2025. The question which has come up for consideration in the present case was not considered and answered in the above judgment, hence, this judgment cannot help the Respondent in the present case.
# 19. In result of the foregoing discussion and our conclusions, order passed by the Adjudicating Authority dated 22.07.2024 cannot be sustained. Appeal is allowed. Order dated 22.07.2024 is set aside. Company Petition IB-337(ND)/2022 is dismissed. We make it clear that dismissal of Company Petition IB-337(ND)/2022 shall not preclude the Financial Creditor to take such other measures as permissible in law.
”
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