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TMI Blog2022 (8) TMI 69X X X X Extracts X X X X X X X X Extracts X X X X ..... ate Debtor - M/s Ess Dee Aluminum Limited. 2. Company Appeal (AT) (Insolvency) No. 807 of 2021 has been filed against the order dated 03.08.2021 passed by the Adjudicating Authority (National Company Law Tribunal), Kolkata Bench, Kolkata in C.P. (IB) No. 54/KB/2020 by which order on an application filed under Section 95 Sub- section (1) of the I&B Code by the State Bank of India, the Adjudicating Authority appointed Mr. Prashant Jain as Resolution Professional and directed him to make recommendations in writing for acceptance or rejection of the application filed under Section 95(1). The Appellant aggrieved by the order dated 03.08.2021 has filed Company Appeal (AT) (Insolvency) No. 807 of 2021. In the appeal, notices were issued on 25.10.2021 but this Tribunal did not grant any kind of interim order. 3. Company Appeal (AT) (Insolvency) No. 740 of 2022 has been filed by the Appellant challenging the order dated 16.06.2022 passed in same company petition being C.P. (IB) No. 54/KB/2020 by which order the Adjudicating Authority admitted the application filed under Section 95(1) and insolvency resolution process was initiated against the Appellant - Personal Guarantor. Aggrieved by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sh but the said liability cannot be enforced by way of proceedings under I&B Code. 7. Shri Ashwini Kumar Singh, learned counsel appearing for State Bank of India submits that the Company Appeal (AT) (Insolvency) No. 807 of 2021 has become infructuous in view of the subsequent order passed by the Adjudicating Authority dated 16.06.2022. It is submitted that the Appellant was given due opportunity by the Adjudicating Authority and notice was issued to the Appellant by the Adjudicating Authority before passing the impugned order dated 03.08.2021. He submitted that Application under Section 7 has already been admitted by the Adjudicating Authority i.e. National Company Law Tribunal, Kolkata Bench against the Corporate Debtor - 'M/s Ess Dee Aluminum Limited' by order dated 14.02.2020. Refuting the submission of Shri Mukherjee, learned counsel for the Respondent submits that the Adjudicating Authority has rightly admitted the application under Section 95(1) filed by the State Bank of India. It is submitted that Appellant is fully bound by the Deed of Guarantee dated 19.10.2015 given by him. The fact that subsequently the Appellant has obtained citizenship of Singapore is inconsequential ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d default in making the payment of the cash credit facility. The said para cannot be read as recording any finding by the Tribunal regarding default. When the Adjudicating Authority has appointed Resolution Professional who has to make recommendations, no finding can be recorded regarding default before appointing Resolution Professional since it is the Resolution Professional who after examining the relevant material shall make recommendations. Para 7 of the impugned judgment thus has to be read only to the effect that said para contains the averments of the applicant so as to proceed further in the matter in accordance with the provisions of the Code. 12. In Company Appeal (AT) (Insolvency) No. 807 of 2021 reply has been filed by the Bank, where it has been stated that application under Section 95(1) against the Appellant was filed on 01.12.2020. Copy of the application was also served on the Appellant by email dated 01.12.2020. Adjudicating Authority vide order dated 25.02.2021 has issued notice to the Appellant fixing 14.04.2021 as next date before the Adjudicating Authority. We, thus, are satisfied that procedure as laid down in the judgment of this Tribunal in 'Ravi Ajit Kul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sions of learned counsel for the parties following issues arise in the present Appeal: (i) Whether a Personal Guarantee given by the Appellant by Guarantee Deed dated 19.10.2015 shall extinguish, on Appellant, the Personal Guarantor acquiring citizenship of Singapore w.e.f. 18.06.2018? (ii) 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 by filing C.P. (IB) No. 54/KB/2021 due to the reason that Appellant has obtained citizenship of Singapore w.e.f. 18.06.2018 and has gone beyond jurisdiction of the Adjudicating Authority to proceed against him under Section 95(1)? (iii) 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) where the Appellant has executed Guarantee Deed dated 19.10.2015? 16. Issues No. 1, 2 and 3 are all interrelated, hence, are being taken together. 17. The Appellant, Director/ Managing Director of the Corporate Debtor has executed the Guarantee Deed dat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lution and liquidation for corporate persons including corporate debtors and personal guarantors thereof shall be the National Company Law Tribunal having territorial jurisdiction over the place where the registered office of the corporate persons located. (2) Without prejudice to sub-section (1) and notwithstanding anything to the contrary contained in this Code, where a corporate insolvency resolution process or liquidation proceeding of a corporate debtor is pending before a National Company Law Tribunal, an application relating to the insolvency resolution or 1[liquidation or bankruptcy of a corporate guarantor or personal guarantor, as the case may be, of such corporate debtor] shall be filed before such National Company Law Tribunal. (3) An insolvency resolution process or 2[liquidation or bankruptcy proceeding of a corporate guarantor or personal guarantor, as the case may be, of the corporate debtor] pending in any court or tribunal shall stand transferred to the Adjudicating Authority dealing with insolvency resolution process or liquidation proceeding of such corporate debtor." 23. Section 60(1) categorically provides that the Adjudicating Authority, in relation t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ountry and say that now I am not liable to perform my obligation under the Deed of Guarantee since I am no more Indian citizen. The Adjudicating Authority in the impugned order has very rightly made following observations in above regard:- "ex-facie sans rationale, provisions and legislative intent of the Code. If this plea of respondent is accepted, it shall mean allowing a subterfuge to get away without discharge of financial obligations incurred in India. Give a Bank Guarantee for obtaining loan in India, renounce Indian citizen ship and upon being asked to discharge obligation of repayment/face CIRP, simply state 'Catch me if you can' after becoming Citizen of any other Country. No law or policy can be interpreted to give it such an absurd interpretation. In considering and taking a decision to the plea of respondent, reliance is also placed on judgment of Hon'ble Super Court, 1994 SCC (3) 440, where it has been held: "It is permissible for courts to have functional approaches and look into the legislative intention and sometimes it may be even necessary to go behind the words and enactment and take other factors into consideration to give effect to the legislative inte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 96. The amendment of 2018 also altered Section 60 in that insolvency and bankruptcy processes relating to liquidation and bankruptcy in respect of three categories i.e. corporate debtors, corporate guarantors of corporate debtors and personal guarantors to corporate debtors were to be considered by the same forum i.e. NCLT." 26. At this juncture, we may also notice provisions of Section 234 and 235 of the I&B Code, which are to the following effect:- "234. Agreements with foreign countries. - (1) The Central Government may enter into an agreement with the Government of any country outside India for enforcing the provisions of this Code. (2) The Central Government may, by notification in the Official Gazette, direct that the application of provisions of this Code in relation to assets or property of corporate debtor or debtor, including a personal guarantor of a corporate debtor, as the case may be, situated at any place in a country outside India with which reciprocal arrangements have been made, shall be subject to such conditions as may be specified. 235. Letter of request to a country outside India in certain cases. - (1) Notwithstanding anything contained in this Code ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assets of a corporate debtor or its personal guarantor could be dealt with in an identical manner during insolvency proceedings, including by issuing letters of request to courts or authorities in other countries for the purpose of dealing with such assets located within their jurisdiction" 28. The net result of above discussion is that the Deed of Guarantee of the Appellant executed on 19.10.2015 still continues and bind him and he cannot escape his obligation under the Personal Guarantee given by him on mere fact that he has obtained citizenship of Singapore w.e.f. 18.06.2018. 29. Shri Mukherjee, learned senior counsel for the Appellant has submitted that he does not dispute the liability arising from the Deed of Guarantee which does not extinguish but the said liability cannot be enforced by proceedings under I&B Code. He submits that for enforcing the said liability the Bank is at liberty to initiate necessary proceedings for specific performance of the contract or initiate arbitration and raise their claims accordingly. The above submission of Shri Mukherjee is without any substance. The right given to the Financial Creditor under the I&B Code to initiate proceedings under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erpretation of a statute should be adopted which makes the statute functional and does not make a statute non-functional. Accepting the submission of Shri Mukherjee shall lead to interpretation which shall defeat the object and purpose of the Code. 31. The submission of Shri Mukherjee that the Adjudicating Authority has acted beyond the scope of the Code and its action is ultra vires cannot be accepted. The Adjudicating Authority is well within its jurisdictions to initiate insolvency resolution process against the Appellant, the Personal Guarantor of the Corporate Debtor, in accordance with the scheme of Section 95(1) r/w Section 60 of the Code. The Adjudicating Authority in its order dated 16.06.2022 has taken note of the facts and submissions of the Appellant and after considering submissions of the parties has rightly rejected the submission raised on behalf of the Appellant while admitting the application under Section 95(1). The direction issued in Para 29 of the order are consequential to admission of application under Section 95(1). We, thus, are of the view that no grounds have been made out by the Appellant to hold that Adjudicating Authority by the impugned order acted ..... X X X X Extracts X X X X X X X X Extracts X X X X
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