Case Note & Summary
The National Company Law Appellate Tribunal (NCLAT) at Chennai dismissed two appeals filed by Iqbal Jumabhoy and Hussain Somjee, personal guarantors of a corporate debtor, challenging the order of the Adjudicating Authority (National Company Law Tribunal) admitting applications under Section 95 of the Insolvency and Bankruptcy Code, 2016 (IBC) against them. The appellants, residents of Singapore, had given personal guarantees for loans availed by a corporate debtor in India. The financial creditor, Assets Care and Reconstruction Enterprise Limited, initiated insolvency proceedings against the personal guarantors under Part III of the IBC. The appellants contended that the Adjudicating Authority lacked territorial jurisdiction as they were foreign residents and that the moratorium under Section 96 of the IBC could not apply to their assets abroad. The NCLAT, after hearing arguments from both sides, held that the Adjudicating Authority has jurisdiction to entertain applications under Section 95 of the IBC against personal guarantors residing abroad, as the debt arises from a guarantee given in respect of a corporate debtor within India. The Tribunal further held that the moratorium under Section 96 applies to all assets of the personal guarantor, including those located outside India. The appeals were dismissed, and the interim orders were vacated.
Headnote
A) Insolvency and Bankruptcy Code - Personal Guarantor - Jurisdiction - Section 95, 96 IBC - The Adjudicating Authority has jurisdiction to entertain an application under Section 95 of the IBC against a personal guarantor who resides abroad, as the debt arises from a guarantee given in respect of a corporate debtor within India. The moratorium under Section 96 applies to all assets of the personal guarantor, including those located outside India. (Paras 1-23) B) Insolvency and Bankruptcy Code - Personal Guarantor - Territorial Jurisdiction - Section 95 IBC - The territorial jurisdiction of the Adjudicating Authority is determined by the location of the corporate debtor's registered office, not the residence of the personal guarantor. The application under Section 95 is maintainable even if the personal guarantor is a foreign resident. (Paras 1-23) C) Insolvency and Bankruptcy Code - Moratorium - Section 96 IBC - The moratorium under Section 96 of the IBC applies to all assets of the personal guarantor, including those located abroad, and prohibits any legal proceedings against the guarantor in respect of the debt. (Paras 1-23)
Issue of Consideration
Whether the Adjudicating Authority (National Company Law Tribunal) has jurisdiction to entertain an application under Section 95 of the Insolvency and Bankruptcy Code, 2016 against personal guarantors who are residents of Singapore, and whether the moratorium under Section 96 of the IBC applies to all assets of the personal guarantor including those located abroad.
Final Decision
The appeals were dismissed. The order of the Adjudicating Authority admitting applications under Section 95 of the IBC was upheld. The interim orders were vacated.
Law Points
- Jurisdiction of Adjudicating Authority under Section 95 IBC
- Moratorium under Section 96 IBC
- Territorial jurisdiction over personal guarantors residing abroad
- Applicability of IBC to personal guarantors of corporate debtors
- Maintainability of application under Section 95 IBC
