NCLT Holds Foreign Residence and Citizenship Do Not Bar Personal Guarantor Insolvency Under Section 95 of the IBC
Background and Facts
A guarantor who has moved abroad, taken foreign citizenship and holds no assets in India is still within the reach of the Insolvency and Bankruptcy Code. The Chennai bench of the National Company Law Tribunal has now said so twice in 2026, most recently in M. Gagan Bothra v. Senthil Kumar [CP(IB)/96(CHE)/2025], by an order dated September 7, 2026 admitting a personal guarantor insolvency petition against a permanent resident of New Jersey in the United States.
The corporate debtor, PRC International Hotels Private Limited, had borrowed Rs 15 crore. The respondent executed a personal guarantee. The corporate debtor went through a resolution process and a resolution plan was approved, under which Rs 4.12 crore was paid, leaving Rs 14.92 crore outstanding including interest. A demand notice was issued on September 6, 2020. Nothing was paid, and the creditor moved the Tribunal.
The guarantor resisted on the footing that he lives permanently in the United States. The Tribunal admitted the petition and appointed S.R. Shriram Shekhar as Resolution Professional.
Key Legal Issue
Whether Section 95 of the Insolvency and Bankruptcy Code, 2016 reaches a personal guarantor who resides outside India, and whether the absence of a notified cross-border arrangement is an answer to such a petition.
The Tribunal's Ruling
The bench of Judicial Member Sanjiv Jain and Technical Member Venkataraman Subramaniam held that the Code applies to a personal guarantor irrespective of residence or nationality. The guarantor, in the Tribunal's words,
"despite being the permanent resident of USA is bound by the statutory obligation as any other party with respect to liability under IBC".
Section 95 Contains No Residence or Nationality Filter
Section 95(1) provides that a creditor may apply, by himself, jointly with other creditors or through a resolution professional, to the Adjudicating Authority for initiating an insolvency resolution process. Section 95(4) requires the application to set out the debt, the failure to pay within fourteen days of service of the demand notice, and evidence of default. Section 95(5) requires a copy to be served on the debtor.
Nothing in that scheme conditions the remedy on where the guarantor lives or what passport he holds. The obligation the creditor enforces is contractual, and Section 128 of the Indian Contract Act, 1872 fixes its extent:
"The liability of the surety is co-extensive with that of the principal debtor, unless it is otherwise provided by the contract". A guarantee given in India in respect of an Indian borrowing does not change character because the surety later relocates.
The Cross-Border Objection
The reciprocity argument runs through Sections 234 and 235 of the Code. Section 234 empowers the Central Government to enter into agreements with governments of countries outside India for enforcing the Code, and to notify that its provisions relating to assets situated abroad shall apply subject to conditions in countries with reciprocal arrangements. Section 235 allows the resolution professional, liquidator or bankruptcy trustee to apply to the Adjudicating Authority where assets are situated in such a country, on which the Authority may issue a letter of request to a competent court or authority there.
Those provisions govern the reach of Indian process over foreign assets. They do not govern whether a person is amenable to the Code at all. Treating an unimplemented cross-border mechanism as a jurisdictional bar would mean that a guarantor improves his position by leaving the country, which is the opposite of what the scheme contemplates.
The Same Bench, Earlier in the Year
The position was taken by the same bench in Central Bank of India v. A Dominic Savio [CP(IB)/217(CHE)/2021], decided on January 5, 2026. There the guarantor was a United States citizen who argued that the Code operates only within Indian territory, that the Tribunal lacked jurisdiction in the absence of assets or business in India, and that reciprocal arrangements were a precondition. The bench held that
"The mere fact that the Respondent does not possess any property within the territory of India does not in any manner exclude the applicability of the provisions of the Code to him". Two orders on the same point, eight months apart, make this a settled position of that bench rather than a one-off.
The Guarantee Survives the Resolution Plan
The second strand of the recent order matters just as much. The corporate debtor's resolution plan had been approved and a part payment made, and the guarantor's liability was pressed for the balance. The Tribunal held the guarantee obligation persisted. That follows the Supreme Court's decision in Lalit Kumar Jain v. Union of India, decided on May 21, 2021, which held that approval of a resolution plan does not by itself discharge a personal guarantor of a corporate debtor from liability under the contract of guarantee.
Practice Notes
In practice, the order has consequences on both sides of a guarantee:
For creditors: Emigration is not a defence and need not delay a filing. Frame the petition on the guarantee, the demand notice and the fourteen day default under Section 95(4), and do not plead into the cross-border question unless the respondent raises it.
For creditors realising against foreign assets: Distinguish admission from realisation. The Tribunal's reach over the person is one question; recovering assets abroad engages Sections 234 and 235 and remains the harder part. Plan the recovery strategy on that basis.
For guarantors: A change of residence or citizenship does not extinguish a guarantee governed by Indian law, and neither does approval of the corporate debtor's resolution plan. Where a plan has been approved, check what it actually provides about the guarantee before assuming the liability has gone.
For advisers on service and participation: Because residence abroad does not defeat the petition, a guarantor who ignores the demand notice risks an admission order in absence. Engagement at the notice stage is usually cheaper than a challenge after admission.
On the resolution professional's report: Under Section 99 the resolution professional examines the application within ten days of appointment and reports to the Adjudicating Authority recommending approval or rejection. That report is the practical opportunity to put the guarantor's case on quantum and on the existence of the debt.
Key Provisions Discussed
Section 95 of the Insolvency and Bankruptcy Code, 2016: Application by a creditor to initiate the insolvency resolution process against a personal guarantor, including the fourteen day default and service requirements.
Section 99 of the Insolvency and Bankruptcy Code, 2016: Examination of the application by the resolution professional within ten days of appointment and submission of a report recommending approval or rejection.
Section 234 of the Insolvency and Bankruptcy Code, 2016: Power of the Central Government to enter into agreements with foreign governments for enforcing the Code.
Section 235 of the Insolvency and Bankruptcy Code, 2016: Letter of request to a court or authority of a country outside India where assets are situated there.
Section 128 of the Indian Contract Act, 1872: The liability of the surety is co-extensive with that of the principal debtor unless otherwise provided by the contract.
Case Details
Case: M. Gagan Bothra v. Senthil Kumar
Case No: CP(IB)/96(CHE)/2025
Tribunal: National Company Law Tribunal, Chennai
Date of Order: September 7, 2026
Bench: Judicial Member Sanjiv Jain and Technical Member Venkataraman Subramaniam
Corporate Debtor: PRC International Hotels Private Limited
Outcome: Petition admitted. Residence in the United States held to be no answer to liability under the Code, and S.R. Shriram Shekhar appointed Resolution Professional.
Sources and References
IBC Can Apply To Personal Guarantors Residing Abroad, Nationality No Bar: NCLT Chennai
Lalit Kumar Jain v. Union of India, Supreme Court, May 21, 2021
Insolvency and Bankruptcy Code, 2016, Sections 95, 99, 234 and 235
Indian Contract Act, 1872, Section 128
Disclaimer: This article is for informational purposes only and does not constitute legal advice. Readers should consult a qualified legal professional for advice specific to their circumstances.
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