Supreme Court Clarifies Personal Guarantee Liability Under IBC
· Business · Business Standard
The Supreme Court has upheld the validity of proceedings against personal guarantors of corporate debtors under the Insolvency and Bankruptcy Code. This ruling confirms that creditors can initiate insolvency proceedings against individuals who provided personal guarantees even if the corporate entity itself is undergoing a separate resolution process. The court determined that the liability of a personal guarantor is independent and co-extensive with that of the principal borrower. This legal position ensures that lenders retain the right to recover dues from guarantors without waiting for the conclusion of the corporate insolvency resolution process. The decision provides clarity to financial institutions regarding the enforcement of guarantees in debt recovery cases.
Why it matters
This ruling strengthens the position of banks and financial institutions in recovering bad loans by allowing them to pursue personal assets of promoters and guarantors independently of corporate insolvency proceedings.
Read the original report — Business Standard
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