NCLAT: Application Against Personal Guarantor Must Be Filed Before Adjudicating Authority under whose Jurisdiction Corporate Debtor’s Registered Office is Situated

NCLAT: Application Against Personal Guarantor Must Be Filed Before Adjudicating Authority under whose Jurisdiction Corporate Debtor’s Registered Office is Situated

The National Company Law Appellate Tribunal (NCLAT), Delhi by its division member bench comprising of Justice Ashok Bhushan (Chairperson) and Barun Mitra (Technical Member) has ruled that application against the personal guarantor by virtue of Section 60(1) of the Insolvency and Bankruptcy Code, 2016 (IBC) has to be filed before the Adjudicating Authority under whose jurisdiction, registered office of the Corporate Debtor is situated.

In the present case, the Appellant- a personal guarantor of Corporate Debtor, M/s. – Uttam Galva Metallics Limited had approached the Appellate Tribunal challenging order passed by Mumbai Bench of the National Company Law Tribunal (NCLT) by which an Application was filed under Section 95 (1) of the Insolvency and Bankruptcy Code, 2016 by the Respondent- State bank of India. The Adjudicating Authority had declared commencement of moratorium under Section 96(1)(a) and had appointed a Resolution Professional (RP).

It was the Appellant’s case that the Registered Office of the Corporate Debtor is situated in State of Haryana, hence, the Application under Section 95(1) filed by the SBI before the NCLT, Mumbai Bench was not maintainable and lacked territorial jurisdiction.

It was submitted that the Mumbai bench ought to have dismissed the Company Petition instead of usurping the territorial jurisdiction in entertaining the Application.

Per contra, the Respondent- State Bank of India contended that the NCLT Mumbai Bench had jurisdiction to entertain the Application filed under Section 95(1). In the present case, the NCLT Mumbai had adjudicated on the CIRP of the Corporate Debtor, hence, Adjudicating Authority had jurisdiction to oversee the personal insolvency resolution of the personal guarantor on account of the dynamics and the interwoven connection between the Corporate Debtor and a guarantor.

The NCLAT on perusal of the Scheme as per Section 60 of IBC observed that, “the Adjudicating Authority, in relation to insolvency resolution and liquidation for corporate persons including corporate debtors and personal guarantors in the NCLT having territorial jurisdiction over the place where the registered office of a corporate person is located.”

The NCLAT noted from the facts brought on record, it appeared that earlier Corporate Insolvency Resolution Process (CIRP), which was initiated against the Corporate Debtor in NCLT Chandigarh Bench was transferred by order of the Principal Bench to NCLT Mumbai Bench, which CIRP was heard along with another CIRP of an associate Company pending before the NCLT Mumbai Bench, namely - Uttam Value Steels Limited.

Both proceedings were completed by approving the Resolution Plan dated 6 May, 2020 and as on date when Application under Section 95 was filed against the Appellant, no CIRP was pending against the Corporate Debtor at NCLT Mumbai Bench.

The bench asserted that, “under Section 60 sub-section (2), insolvency resolution process against the personal guarantor can be filed before the NCLT where CIRP is pending. When at present no CIRP was pending in the NCLT Mumbai Bench, Section 60, subsection (2) had no application in the present case.”

Further from the facts on record forwarded by the Respondent, the NCLAT was satisfied that on the date when Section 95 Application was filed before the Adjudicating Authority, i.e., 23 June, 2021, no insolvency resolution was pending against the Corporate Debtor before NCLT Mumbai. Hence, the bench discerned that Section 60 sub-section (2) could not have been invoked.

Thus, stating that NCLT Mumbai Bench had no territorial jurisdiction to entertain Section 95 Application filed by the State Bank of India against the Appellant, the bench allowed the appeal and dismissed the Section 95 (1) Application due to lack of territorial jurisdiction.