Corporate Guarantor independently subject to IB proceedings

The Kolkata Bench of the National Company Law Tribunal (NCLT) has reiterated the settled principle that a corporate guarantor can independently be subjected to insolvency proceedings under Section 7 of the Insolvency and Bankruptcy Code, 2016 upon default by the principal borrower. 

The Tribunal held that the liability of a guarantor is co-extensive with that of the principal debtor and that initiation of parallel insolvency proceedings against both the principal borrower and the corporate guarantor is legally permissible.

Finding the existence of a financial debt, a valid guarantee, invocation of the guarantee and continuing default, the Tribunal admitted the application and commenced the Corporate Insolvency Resolution Process (CIRP) against the corporate guarantor.