Authority: National Company Law Tribunal, Kolkata Bench (Court No. I)

Order Date: 19 June 2025

Case Overview

The State Bank of India (SBI) filed an application under Section 95 of the Insolvency and Bankruptcy Code, 2016, read with relevant rules, seeking initiation of insolvency resolution process against Mr. Kapil Shroff as personal guarantor to corporate debtor Space Matrix Limited. SBI claimed an outstanding debt of ₹1,17,50,00,000 (One Hundred Seventeen Crore Fifty Lakh) as of 28 February 2022, arising from personal guarantee agreements dated 06 July 2010 and 18 June 2011, and sanction letters dated 15 March 2010, 26 May 2011, and 18 June 2011.

The corporate debtor, Space Matrix Limited, had undergone Corporate Insolvency Resolution Process (CIRP) initiated by the NCLT on 28 August 2019. SBI had issued a recall notice on 26 March 2018 and invoked the personal guarantee under Section 95 of IBC on 05 July 2021. The tribunal had appointed Mr. Neeraj Kumar Surekha (IBBI Registration No. IBBI/IPA-001/IP-P01539/2019-2020/12517) as Resolution Professional on 09 May 2024, who submitted his report recommending admission of the application under Section 100(1) of the Code.

The personal guarantor raised objections regarding maintainability, contending that: (1) he did not receive Form B initially, though it was later served with the application; (2) the corporate debtor's account turned NPA on 22 September 2017; (3) the demand notice was issued on 26 March 2018; and (4) the present application filed on 31 May 2022 was time-barred as it was filed four years after the demand notice.

Finding and Analysis

The tribunal examined two key issues:

1. Whether demand notice dated 26.03.2018 invoking guarantee was served on the applicant? The tribunal found that SBI had attached only postal receipts but no proof of service such as tracking reports. Even assuming service on 26 March 2018, the application filed on 31 May 2022 was beyond the three-year limitation period, making it time-barred.

2. Whether Form B demand notice dated 05.07.2021 was served on the personal guarantor? The tribunal found no proof of service of the mandatory Form B notice under Rule 7(1) of the Insolvency and Bankruptcy (Application to Adjudicating Authority for Insolvency Resolution Process of Personal Guarantors to Corporate Debtors) Rules, 2019. The court emphasized that service of Form B notice is sine qua non (essential requirement) for initiating proceedings under Section 95(1) of IBC, and valid invocation of guarantee is necessary for maintainability of the application under the definition of 'guarantor' in Rule 3(1)(e).

Final Outcome

The NCLT dismissed I.A (IBC) 1676/KB/2024 along with C.P. (IB)/231(KB)2022 with no costs, citing fatal procedural defects including lack of proof of service of mandatory notices and the application being barred by limitation. The registry was directed to send email copies of the order to all parties and their counsel.

Topics: Insolvency Proceedings, Banking Debt Recovery, Limitation Law