Personal guarantors accountable in IBC - Supreme Court
PrintListen to this Article
0:00
0:00
Lenders can initiate insolvency proceedings against promoters, managing directors and chairpersons who have signed personal guarantees on corporate loans in case the borrowers default, the Supreme Court ruled.
The apex court on Friday upheld the central government’s November 2019 notification issued under the Insolvency and Bankruptcy Code (IBC) as “legal and valid".
“It is held that the impugned notification was issued within the power granted by Parliament and in valid exercise of it. The exercise of power in issuing the impugned notification is, therefore, not ultra vires; the notification is valid," said a bench of justices L. Nageswara Rao and S. Ravindra Bhat.
The bench dismissed a clutch of 75 petitions challenging the 2019 notification.
The petitioners included industrialists Anil Ambani, Venugopal Dhoot, Kapil Wadhawan, Sanjay Singal and Atul Punj, each of whom had stood as personal guarantor to corporate debts.
The 2019 notification sought to make them personally liable for that part of the debt that had remained outstanding in the resolution proposal of the companies under insolvency.
Friday’s ruling means if the debt owed by a company is not repaid under the resolution plan, the personal guarantor would not only not stand discharged but could find himself taken into bankruptcy proceedings by the creditors.
The apex court on Friday upheld the central government’s November 2019 notification issued under the Insolvency and Bankruptcy Code (IBC) as “legal and valid".
“It is held that the impugned notification was issued within the power granted by Parliament and in valid exercise of it. The exercise of power in issuing the impugned notification is, therefore, not ultra vires; the notification is valid," said a bench of justices L. Nageswara Rao and S. Ravindra Bhat.
The bench dismissed a clutch of 75 petitions challenging the 2019 notification.
The petitioners included industrialists Anil Ambani, Venugopal Dhoot, Kapil Wadhawan, Sanjay Singal and Atul Punj, each of whom had stood as personal guarantor to corporate debts.
The 2019 notification sought to make them personally liable for that part of the debt that had remained outstanding in the resolution proposal of the companies under insolvency.
Friday’s ruling means if the debt owed by a company is not repaid under the resolution plan, the personal guarantor would not only not stand discharged but could find himself taken into bankruptcy proceedings by the creditors.
Category : Insolvent Professional | Comments : 0 | Hits : 580
The National Company Law Tribunal (NCLT) on Monday ordered insolvency proceedings against media baron Subhash Chandra on a plea filed by Indiabulls Housing Finance. A two-member Delhi b...
Also Read -
IBBI invites suggestions to simplify, ease & reduce cost of compliance of Regulations notified under IBC
The Insolvency and Bankruptcy Board of India (IBBI) invites suggestions/comments from public and regulated entities, on the Regulations for simplifying, easing and reducing cost of compliance. The ...
Also Read -
Govt considers giving financial creditor status to insurers issuing surety bond during resolution
To make surety bond business more attractive, the government is looking at making relevant changes in the Insolvency and Bankruptcy Code (IBC) to consider insurers as financial creditor in case of def...
Comments