Creditors set sights on corporate guarantors

NCLT upholds moratorium on claims against companies undergoing insolvency proceedings

Creditors are seeking to recover dues by invoking corporate guarantees even as defaulters undergo insolvency proceedings in the National Company Law Tribunal (NCLT).

The principal Bench of the NCLT in Delhi observed in one such case that corporate guarantees could not be invoked as that would violate the moratorium provided to a firm undergoing insolvency resolution. After a case of insolvency is admitted by the NCLT, the insolvency and bankruptcy code provides a firm 180 days to restructure itself. It also imposes a moratorium on anybody claiming dues from the firm during this period.

A Bench of the NCLT rejected Axis Bank’s