Lenders can invoke personal guarantees in IBC cases, says Supreme Court

IBC provision requires initiation of CIRP to proceed against personal guarantors

The Supreme Court has rejected a plea against a recent ruling by the National Company Law Appellate Tribunal (NCLAT), paving the way for lenders to initiate insolvency proceedings against promoters, directors and chairman who have signed personal guarantees on corporate loans. This is irrespective of pendency of any proceeding against the corporate debtor under the Insolvency Bankruptcy Code (IBC).

The appellate tribunal had in late January ruled that initiation of corporate insolvency was not a pre-requisite to initiate insolvency process against the personal guarantor of the corporate. The matter pertains to an appellate tribunal order in the State Bank of India