The National Company Law Tribunal ( NCLT ) Amaravati special bench dismissed a petition filed by the State Bank of India under Section 95(1) of the Insolvency and Bankruptcy Code, 2016 as discrepancies were found in the addresses used for the demand notice served to the personal guarantor.
Dr Renuka Rani Mahanti (“Dr Renuka”) ,the personal guarantor for the repayment of financial assistance availed by M/s Seven Hills Health Care Private Limited (“Seven Hills/Corporate Debtor”), with a guarantee in favour of the State Bank of India (“SBI”). Dr Renuka also entered into a Supplemental Consortium Agreement with SBI and other creditors on 20.01.2010.
Another Deed of Guarantee was executed with SBI which,the Seven Hills was admitted. An order of moratorium was passed by the adjudicating authority due to Swan Hills’ failure to make the payment. Consequently, SBI filed an application before the NCLT to initiate the Insolvency Resolution Process against Dr Renuka under Section 95(1) of the IBC. SBI invoked the personal guarantee and issued a demand notice to Dr Renuka on 03.09.2021, which was delivered on 08.09.2021.
NCLT passed an order for the appointment of the Interim Resolution Professional (IRP) and directed the IRP to file his report. The IRP submitted his report dated 05.12.2023, recommending the admission of the application filed under Section 95 of IBC, 2016 since the application satisfied all the ingredients of Section 95 of IBC.
The IRP did not receive any evidence of repayment of the debt claimed in the Section 95 petition from Dr Renuka and found no document cancelling the Personal Guarantee agreement dated 20.01.2015. Furthermore, there was no court or forum order cancelling or setting aside the Personal Guarantee agreement. The IRP had communicated with Dr Renuka, who denied making any payments and refuted other claims made in the IRP’s email.
The NCLT was of view that SBI established a lawful financial debt due and unpaid by Swan Hills and Dr Renuka. The core issue was whether the service of a demand notice on Dr Renuka was mandatory for initiating the insolvency resolution process under Section 95 of the IBC.
The NCLT observed discrepancies in the addresses used for the demand notice and found that SBI failed to send the notice to the correct address as per the guarantee agreement. SBI’s claim that the demand notice was sent and delivered was unsupported by consistent documentation, leading to doubts about the notice’s authenticity. The NCLT agreed with Dr Renuka’s contention that the demand notice was improperly addressed and not genuinely served.
A two member bench of Dr Venkata Ramakrishna Badarinath Nandula (Judicial Member) determined that SBI failed to establish compliance with the necessary requirements under Section 95 of the IBC and rejected the application for initiating the insolvency resolution process.
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