Tribunal holds that Section 95 petition against personal guarantor cannot proceed where the principal borrowers are foreign entities with no registered office in India.
The National Company Law Tribunal (NCLT), Chennai Bench, has dismissed a petition filed by Punjab National Bank (PNB) under Section 95 of the Insolvency and Bankruptcy Code, 2016 (IBC) against businessman Reji Abraham, ruling that it lacked territorial jurisdiction to entertain the case.
The bank had sought to initiate insolvency resolution proceedings against Abraham, who had stood as personal guarantor for substantial foreign currency loan and SBLC facilities extended to several offshore entities of the Aban Group, including Aban Holdings Pte. Ltd., Aban Abraham Pte. Ltd. and Aban International Norway AS. The bank claimed that the dues had defaulted and that Abraham’s personal guarantee remained enforceable.
However, the tribunal found that all the principal borrowers were foreign companies incorporated and registered outside India, with no registered office in India. It held that under Section 60(1) of the IBC, the Adjudicating Authority for proceedings against a personal guarantor is the NCLT having territorial jurisdiction over the place where the registered office of the corporate debtor is located. Since none of the borrower entities had a registered office in India, the Chennai Bench could not assume jurisdiction merely because the guarantor resided in Chennai or because parts of the transaction occurred in India.
The tribunal also rejected the argument that Section 95 proceedings could be maintained on the basis of the guarantor’s residence, execution of guarantee in India, or the governing law clause. It observed that where the IBC contains a specific jurisdictional provision, general principles such as those under Section 20 of the Civil Procedure Code cannot override it.
In its analysis, the tribunal relied on prior rulings including State Bank of India v. Mahendra Kumar Jajodia, UCO Bank v. Subrata Das, and Mahendra Kumar Agarwal v. PTC India Financial Services Ltd., while also referring to the Supreme Court’s judgment in GVK Industries Ltd. v. ITO on the limits of Parliament’s extraterritorial legislative power.
The tribunal concluded that the IBC is a domestic legislation with limited territorial reach and cannot be used to initiate insolvency proceedings against a personal guarantor where the underlying corporate debtors are foreign entities outside India’s statutory framework. Accordingly, the petition was dismissed with no order as to costs.
Bottom Line :
Insolvency and Bankruptcy Code, 2016 - Petition under Section 95 against personal guarantor is not maintainable before NCLT Chennai where principal borrowers/corporate debtors are foreign entities incorporated outside India and have no registered office in India - Territorial jurisdiction under Section 60(1) is anchored to registered office of corporate debtor, not residence of personal guarantor.
Statutory provision(s): Section 95, Section 60(1), Section 60(2), Section 60(3), Section 60(4), Section 3(7), Section 3(8), Section 5(22), Section 238 of IBC, 2016, Section 2(20) of Companies Act, 2013, Section 20 of CPC, Rule 3(e) of Insolvency and Bankruptcy (Application to Adjudicating Authority for Insolvency Resolution Process for Personal Guarantors to Corporate Debtors) Rules, 2019, Section 179 of IBC, 2016
Punjab National Bank v. Mr. Reji Abraham, (NCLT)(Chennai) : Law Finder Doc id # 2987191
