Landmark Ruling of the Supreme Court on Personal Guarantors under IBC will shape the Future of Lender-Creditor Dynamics

Part III of the Insolvency and Bankruptcy Code, 2016 (the Code) focuses on the processes of insolvency resolution and bankruptcy applicable to individuals and partnership firms. As of now, the provisions of the Code apply only to personal guarantors of corporate debtors. The provisions were brought into effect by way of notification1 dated November 15, 2019 issued by the Union Government in the Ministry of Corporate Affairs. The notification was challenged before the Supreme Court in the case of Lalit Kumar Jain v Union of India, where a two-Judge Bench inter alia, held that the liability of a guarantor is not discharged merely on the discharge of the corporate debtor.

The detailed judgment is discussed in our alert