Supreme Court permits banks to proceed against personal guarantors under IBC

New Delhi: On Friday, the Supreme Court allowed the banks to proceed against personal guarantors for recovery of loans given to a company under the Insolvency and Bankruptcy Code (IBC). 

Earlier the Central government has pushed a notification allowing banks to do so without any restrictions. The bench of the apex court comprising of justices L Nageswara Rao and S Ravindra Bhat held the Centre’s approval of resolution plan under the IBC that does not discharge personal guarantors of their liability towards the banks.

"In the judgment, we have upheld the notification," Justice Bhat said while reading out the conclusion of the judgement which decided as many as 75 petitions pertaining to the validity of the notification.

Petitioners had challenged the November 15, 2019 notification issued under the IBC and other provisions in as far as they relate to personal guarantors to corporate debtors.

Upholding the validity of the notification, the top court ruled that initiation of an insolvency resolution plan for a company does not absolve corporate guarantees given by individuals from paying up the dues to financial institutions.