NCLAT Rules, Borrower Can't Plead Non-Service At Previous Address When Change Of New Address Is Not Communicated To Creditor
Pranav B Prem
The National Company Law Appellate Tribunal (NCLAT), Principal Bench, New Delhi, comprising Justice N. Seshasayee (Judicial Member) and Arun Baroka (Technical Member), has held that it is the bounden duty of a borrower or guarantor to inform the creditor about any change in address, and that a person cannot later plead non-service of notices when such communications were sent to the last known address available on record. The Tribunal observed that when the creditor has made reasonable efforts to serve demand notices and other documents at the registered address, and there is proof of delivery or attempt of delivery, the borrower cannot take advantage of his own omission to inform the creditor about a new address.
The appeal before the NCLAT was filed under Section 61 of the Insolvency and Bankruptcy Code, 2016 (IBC), challenging an order passed by the National Company Law Tribunal (NCLT), Chandigarh Bench, which had proceeded ex parte against the personal guarantor, Sh. Sumeet Juneja, and admitted a Section 95 application filed by Stressed Assets Stabilisation Fund (SASF). The appellant contended that no document was placed on record by the creditor to show that any demand notice had ever been served upon him. It was further submitted that the Resolution Professional (RP) had falsely stated in the service affidavit that the report under Section 99 of the IBC was served upon the appellant, whereas no such report had actually been received. The appellant also argued that the application under Section 95 was premature, as the creditor had not properly invoked the personal guarantee before initiating insolvency proceedings.
The respondent, on the other hand, submitted that the appellant was fully aware of the ongoing insolvency proceedings. It was pointed out that the appellant had acknowledged messages sent by the Resolution Professional as early as February 2024 and had deliberately chosen not to participate. It was argued that the appellant was playing a dishonest game of evasion and concealment by changing his address without informing the creditor, and therefore could not claim ignorance of the proceedings. The respondent also emphasized that Omkara Asset Reconstruction Company (ARC), which had subsequently taken over the debt from SASF, had every right to continue the proceedings as the lawful assignee under Section 5(3) of the SARFAESI Act, which provides that an assignee steps into the shoes of the assignor with all attendant rights.
The Appellate Tribunal, after examining the records, observed that it was evident that multiple attempts were made to serve the appellant. The demand notices were dispatched by registered post, served through email, and even published in newspapers including Financial Express and Punjab Jagran. The Resolution Professional also sent messages via WhatsApp, which the appellant had read and responded to. The Tribunal noted that in the affidavit filed before the Appellate Tribunal, the appellant himself had mentioned the same address to which the earlier communications were sent, thereby contradicting his own stand of non-service.
The NCLAT strongly remarked that the appellant had been “playing hide and seek” with the creditor and had deliberately avoided participation in the proceedings. It stated that in the absence of any intimation about a change in address, the borrower or guarantor cannot claim non-delivery of notices or letters sent to the previous registered address. The Bench observed that such conduct of withholding information and avoiding participation was clearly motivated by malice and intended to obstruct the insolvency resolution process. It held that a personal guarantor who acts in such a manner is not entitled to seek any equitable relief from the Tribunal.
The NCLAT also rejected the appellant’s contention that Omkara ARC could not have filed or continued the Section 95 proceedings. The Bench noted that the assignment of the debt took place after the NCLT had already reserved the matter for orders, and there was no indication that SASF had pursued the matter after such assignment. It reiterated that under Section 5(3) of the SARFAESI Act, the assignee acquires all rights and interests in respect of the debt and can lawfully continue proceedings initiated by the assignor.
Concluding the matter, the Appellate Tribunal observed that the appellant had deliberately evaded participation and falsely claimed to be unaware of the pending proceedings. It held that the appellant had even filed an application before the NCLT seeking recall of the same order that was under appeal, thereby approaching multiple forums simultaneously to delay the process. The Tribunal held that such conduct was an abuse of process and that the appellant did not deserve any relief.
In light of these findings, the NCLAT dismissed the appeal and upheld the order of the NCLT Chandigarh, reiterating that it is the responsibility of the borrower or guarantor to communicate any change in address to the creditor. The Tribunal emphasized that when communications are duly sent to the last known address and delivery is evidenced by record, the plea of non-service cannot be entertained. It also observed that deliberate non-cooperation and repeated attempts to frustrate the process of law disentitle a litigant from equitable consideration. The appeal was accordingly dismissed, affirming the ex parte admission of the Section 95 application against the personal guarantor.
Appearance
For Appellant: Mr. Pulkit Goyal, Advocate
For Respondent: Mr. Nitin Kant Setia, Advocate for R-1. Mr. Viren Sharma and Mr. Yash Srivastava, Advocates for R-2
Cause Title: Sh. Sumeet Juneja Versus Stressed Assets Stabilisation Fund (SASF) and Ors.
Case No: Company Appeal (AT) (Insolvency) No. 2169 of 2024
Coram: Justice N. Seshasayee (Judicial Member), Arun Baroka (Technical Member)
