Personal Guarantors Liable for Corporate Debt : SC

Personal Guarantors Liable for Corporate Debt : SC

Part of: GS Prelims and GS – III – Economy 

In news

• The Supreme Court upheld a government move to allow lenders to initiate insolvency proceedings against personal guarantors, along with the stressed corporate entities for whom they gave guarantee.
• These personal guarantors are usually the promoters of big business houses. 

Key takeaways 

• It held that the November 15, 2019, government notification which allowed creditors (usually financial institutions and banks), to move against personal guarantors under the Indian Bankruptcy and Insolvency Code (IBC) was “legal and valid”.
• The government had also decided that corporate debtors and their personal guarantors should be dealt with by a common forum — National Company Law Tribunal (NCLT) — through the same adjudicatory process.
• Besides, Section 60(2) of the IBC had required the bankruptcy proceedings of corporate debtors and their personal guarantors to be held before the NCLT.