Jun 30, 2021

SC Upholds Constitutional Validity of Provisions Relating to Insolvency of Personal Guarantors

The Supreme Court in Lalit Kumar Jain v. Union of India[1] upheld the constitutional validity of the Notification dated November 15, 2019 issued by the Central Government making personal guarantors liable to insolvency proceedings under the IBC. The Supreme Court further held that approval of a resolution plan for a corporate debtor does not ipso facto discharge its personal guarantor under the contract of guarantee. This is because the release or discharge of a principal borrower from the debt owed by it to its creditor, by an involuntary process, i.e. by operation of law, or because of liquidation or insolvency proceeding, does not absolve the surety/guarantor of his or her liability, which arises out of an independent contract.


[1] 2021 SCC Online SC 396.




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