Tribunal upholds order on Personal Guarantor's citizenship change affecting Guarantee Deed enforceability

The Tribunal dismissed both appeals, affirming the orders of the Adjudicating Authority. It held that the Guarantee Deed remains enforceable despite the Appellant acquiring citizenship of Singapore. The Tribunal clarified that NCLT has jurisdiction over the Appellant as a Personal Guarantor, regardless of foreign citizenship, and that Sections 234-235 do not apply as the assets are within India. The decision emphasized the legislative intent of the Insolvency and Bankruptcy Code to prevent Personal Guarantors from evading obligations through citizenship changes.

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Issues Involved:
1. Whether a Personal Guarantee given by the Appellant by Guarantee Deed dated 19.10.2015 shall extinguish on the Appellant acquiring citizenship of Singapore.
2. Whether proceedings under Section 95(1) against the Appellant as a Personal Guarantor could not have been initiated by State Bank of India before the NCLT, Kolkata Bench due to the Appellant obtaining citizenship of Singapore.
3. Whether it was necessary for the Central Government to enter into an agreement as required under Section 234-235 of the Code to enable the Adjudicating Authority to proceed against the Appellant, a Singapore citizen, under Section 95(1).

Issue-wise Detailed Analysis:

1. Personal Guarantee and Citizenship Change:
The Appellant, who was the Director/Managing Director of the Corporate Debtor, executed a Guarantee Deed dated 19.10.2015. The Adjudicating Authority confirmed the execution of this deed. The Appellant's claim that acquiring Singapore citizenship extinguishes the guarantee was dismissed. The Tribunal held that the Deed of Guarantee continues to bind the Appellant despite the change in citizenship. The Tribunal emphasized that allowing a Personal Guarantor to evade obligations by acquiring foreign citizenship would undermine the legislative intent of the Code.

2. Jurisdiction of NCLT over Foreign Citizens:
The Tribunal clarified that the jurisdiction of the NCLT is determined by the registered office of the Corporate Debtor, not the residence or citizenship of the Personal Guarantor. Section 60(1) of the I&B Code specifies that the NCLT having territorial jurisdiction over the Corporate Debtor's registered office is the appropriate forum for insolvency proceedings. The Tribunal rejected the argument that the Appellant's foreign citizenship exempts him from the jurisdiction of the NCLT, emphasizing that the Code applies to Personal Guarantors irrespective of their citizenship.

3. Necessity of Agreement under Sections 234-235:
Sections 234 and 235 of the I&B Code pertain to the enforcement of the Code in relation to assets or property situated outside India. The Tribunal noted that these provisions are relevant only when the assets of the Personal Guarantor are located outside India. In this case, the assets of the Personal Guarantor were within India, making Sections 234 and 235 inapplicable. The Tribunal concluded that the absence of an agreement between the Central Government and the Government of Singapore does not preclude the initiation of insolvency proceedings against the Appellant under the I&B Code.

Conclusion:
The Tribunal dismissed both appeals, affirming the orders of the Adjudicating Authority. The Tribunal held that the Deed of Guarantee remains enforceable despite the Appellant's change in citizenship. It also confirmed that the NCLT has jurisdiction over the Appellant as a Personal Guarantor, irrespective of his foreign citizenship, and that Sections 234-235 do not apply in this case as the assets are within India. The Tribunal emphasized the statutory scheme of the I&B Code, which allows Financial Creditors to initiate insolvency proceedings under Section 95(1) despite the availability of other legal remedies.

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