Indian banks have traditionally used personal guarantees of company promoters as insurance to offset limited institutional recourse to debt recovery. A personal guarantor stands surety through a legal contract. Based on early experience of the Insolvency and Bankruptcy Code, GOI in 2019 brought personal guarantors into its ambit. It allows financial creditors to invoke personal guarantees when the corporate debtor is unable to repay. This was challenged in the Supreme Court last year (Anil Ambani vs Union of India). On November 9, SC in a critical judgment upheld the constitutional validity of IBCs sections on insolvency process against personal guarantors.
Its importance lies in the judicial sanction to plug loopholes in IBC and ensu…
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