Banks Get SC Nod to Sue Guarantors of Borrowers under IBC

The Supreme Court confirmed the validity of the Centre's notification enabling banks to proceed against personal guarantors for loan repayments made to a company under the Insolvency and Bankruptcy Code on Friday (IBC).

The approval of a resolution plan under the IBC does not relieve personal guarantors of their duty to the banks, according to a bench consisting of justices L. Nageswara Rao and S. Ravindra Bhat.

"We have upheld the notification in the judgement," Justice Bhat remarked while reading out the conclusion of the judgement which decided as many as 75 petitions pertaining to the validity of the notification.

The November 15, 2019 notification issued under the IBC, as well as other provisions relating to personal guarantors to corporate debtors, had been challenged by petitioners. The Supreme Court upheld the validity of the notice, ruling that the start of an insolvency resolution plan for a business does not exempt corporate guarantees issued by individuals from paying financial institutions their debts.