NCLAT Upholds Presumption of Notice Service Under Section 27 and Allows Personal Insolvency Proceedings Alongside CIRP
- REEDLAW
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REEDLAW Legal News Network reports: In a significant ruling, the National Company Law Appellate Tribunal (NCLAT) upheld the legal presumption of valid service of statutory notices under Section 27 of the General Clauses Act when sent to the last known address stated in the guarantee deed, even if the recipient denies receipt. The Tribunal further reiterated that insolvency proceedings can proceed simultaneously against the corporate debtor and its personal guarantor under the Insolvency and Bankruptcy Code (IBC).
The National Company Law Appellate Tribunal (NCLAT), Principal Bench, comprising Justice Ashok Bhushan (Chairperson) and Technical Members Mr. Barun Mitra and Mr. Arun Baroka, while adjudicating a batch of three Company Appeals, held that statutory notices under Section 95 of the IBC, when dispatched to the last known address recorded in the guarantee deed, are presumed to be duly served in accordance with Section 27 of the General Clauses Act, regardless of the recipient’s claim of non-receipt. The Tribunal also reaffirmed that parallel insolvency proceedings against the corporate debtor and its personal guarantor are permissible under law, aligning with established judicial precedents.
The Appellant filed an appeal against the order passed by the Adjudicating Authority initiating the Personal Insolvency Resolution Process (PIRP) under Section 95 of the Insolvency and Bankruptcy Code, 2016. The proceedings arose from a credit facility of ₹90 crores sanctioned in 2014 to certain companies, backed by personal guarantees executed by the Appellant and other guarantors in favour of the Financial Creditor. The Appellant challenged the initiation of PIRP on the grounds that statutory notices, including the recall, invocation, and demand notices under Section 95, were never served upon him. He further contended that the Resolution Professional’s report under Section 99 was based on defective notice service and argued that the ongoing CIRP against the Corporate Debtor precluded separate proceedings against him.
The Respondents submitted that all statutory notices were duly dispatched to the Appellant’s last known address as recorded in the Guarantee Deed and deemed valid under its terms. They argued that the presumption of service under Section 27 of the General Clauses Act, 1897, applied, as the notices were sent by registered post to the correct address. The Tribunal examined whether there was valid service of notices, compliance with Sections 95 and 99 of the Code, and proper invocation of the personal guarantee before initiating PIRP.
The NCLAT held that the statutory notices were validly served as they were dispatched to the address provided in the Guarantee Deed, which the Appellant never disputed in earlier proceedings or official records. The Tribunal observed that under settled law, including C.C. Alavi Haji v. Palapetty Muhammed and Greater Mohali Area Development Authority v. Manju Jain, mere non-receipt of notices does not negate service if sent correctly by the prescribed mode. It found that the Resolution Professional had complied with statutory requirements by issuing notices and providing the Appellant an opportunity to respond, which he failed to utilise.
The Tribunal further held that the invocation of the guarantee was valid and reaffirmed that simultaneous proceedings against a corporate debtor and its personal guarantor are permissible, relying on the Supreme Court’s ruling in Lalit Kumar Jain v. Union of India and Others, REEDLAW 2021 SC 05510. Concluding that there was no illegality or procedural lapse, and noting the Appellant’s non-cooperative approach, the NCLAT dismissed the appeals and upheld the initiation of PIRP against the personal guarantor.
Mr. Sumesh Dhawan, Ms. Swastika Kumari and Mr. Sagar Thhakar, Advocates, represented the Appellant.
For the Respondent/ Defendant: Mr. Satendra Rai and Mr. Pareesh Virmani, Advocates, appeared for the Respondent No. 1.
Mr. Vishal Ganda, Ms. Charmi Khurana, Mr. Anshit Aggarwal and Mr. Umesh Gupta, Advocates, appeared for the Resolution Professional (RP).
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