Aastha Thakur
Published on August 01, 2022 at 17:55 IST
The National Company Law Appellate Tribunal (“NCLAT”) of Delhi Branch while overseeing the adjudication proceedings in an appeal matter held that the liability of a Personal Guarantor does not get extinguished upon subsequent acquisition of citizenship of a foreign country. It was further held that provisions of Section 234 and 235 of IBC would not apply if the assets of the Personal Guarantor are situated within India.
The Tribunal’s Chairperson is Justice Ashok Bhushan (Chairperson), Justice M. Satyanarayana Murthy (Judicial Member) and Shri Barun Mitra (Technical Member) heard the petition filed by State Bank of India (SBI) under the Section 95 of the Insolvency and Bankruptcy Code, 2016 (IBC) against one, Sudip Dutta, Personal Guarantor in the credit facilities extended to the Corporate Debtor.
The appeal was filed against the order to initiate insolvency resolution process passed by NCLT Kolkata. The process was initiated against the Appellant as recommended by appointed Resolution Professional. Hence, the matter came before the NCLAT challenging the orders dated 03.08.2021 and 16.06.2022.
The Appellant argued that he obtained citizenship of Singapore subsequently to signing of the Deed of Guarantee and therefore the IBC provisions do not apply on him. He does not come within the ambit if Personal Guarantors.
The Respondent submitted that the Appellant is under the obligation by the signed Deed of Guarantee, therefore the subsequent acquiring of citizenship of Singapore was inconsequential.
Further, it was submitted that as the properties and non-movable assets are situated in India, Section 234 & 235 of IBC do not apply on the Appellant. Bounding him to fulfill his role of a Personal Guarantor of the Corporate Debtor, as capacity of which he agreed to pay Principal Amount, not exceeding Rs.50 Crore together with interest, cost and expenses under the Guarantee.
The Tribunal examined the main issue arising out of the present case, i.e. whether a Personal Guarantee given by the Appellant by Guarantee Deed dated 19.10.2015 shall extinguish, after the Appellant, as Personal Guarantor acquires citizenship of Singapore w.e.f. 18.06.2018 & whether the proceedings initiated by SBI is beyond the jurisdiction of the Adjudicating Authority due to his nationality is under question.
The Bench observed that the Appellant in its Reply had admitted guarantee of liability of Rs.50 Crores and the residence of Personal Guarantors are not taken into consideration while initiating the proceedings as per Section 60(1) of the IBC.
The Court said that, “the Personal Guarantor, who is whether residing in India or residing outside India, when an application is filed against it then the jurisdiction shall be before the Adjudicating Authority in whose territorial jurisdiction the registered office of the Corporate Person is located. The mere fact that the Appellant now claims to be citizen of Singapore and has given an address of Singapore is wholly irrelevant for initiating proceedings against the Appellant.”
Further they reiterated that the nationality is not the fact to be consider while appointing someone as Personal Guarantors, the moment he accept to be one he is bound by such personal guarantee.
The Bench held that the statutory scheme does not provide an escape route to the Personal Guarantor from his liability of Personal Guarantee, just because he has obtained citizenship of a foreign country after execution of the Guarantee Deed.
Hence, the Tribunal held the decision taken by Kolkata Branch of Tribunal stands correct and held the the Deed of Guarantee was binding upon the Appellant and accordingly upheld the order of the Adjudicating Authority and dismissed the appeals.