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The Tax Publishers Insolvency and Bankruptcy Code, 2016--Personal Guarantors Institution of Bankruptcy Proceedings against Personal Guarantors Pragya Bhandari This article aims at enlightening readers about the provisions and aspects related to the process and forms of making applications for initiating bankruptcy proceedings against personal guarantors to corporate debtors, withdrawal of such applications, etc., under the Insolvency and Bankruptcy Code, 2016. 1. Prologue Many times a corporate debtor takes a loan guaranteed by another corporate person or an individual (personal guarantor to the corporate debtor). The lender may pursue a remedy against the corporate debtor or the guarantor, when a default in repayment of the loan is made. The Insolvency and Bankruptcy Code, 2016 (the Code) has brought personal guarantor of a corporate debtor under its purview. Earlier, the Code was limited to adjudication of cases of corporate insolvency and corporate guarantors, however, with the expansion of the scope of the Code by bringing personal guarantor of a corporate debtor under itself, creditor can initiate bankruptcy proceeding against a personal guarantor, further, personal guarantor can himself also be able to approach the Adjudicating Authority to claim their own bankruptcy. In this regard, the Insolvency and Bankruptcy (Application to Adjudicating Authority for Bankruptcy Process for Personal Guarantors to Corporate Debtors) Rules, 2019 as well as the Insolvency and Bankruptcy Board of India (Bankruptcy Process for Personal Guarantors to Corporate Debtors) Regulations, 2019have been notified w.e.f. 1-12-2019 that would apply to bankruptcy process for personal guarantors to corporate debtors so that faster resolution would be available to bankruptcy cases of personal guarantor of corporate debtor. Proceedings against the corporate debtor as well as personal guarantors may be initiated simultaneously before Adjudicating Authority. Sections 121 to 123 read with the Insolvency and Bankruptcy (Application to Adjudicating Authority for Bankruptcy Process for Personal Guarantors to Corporate Debtors) Rules, 2019 provide for the process and forms of making applications for initiating bankruptcy proceedings against personal guarantors to corporate debtors, withdrawal of such applications and further provisions thereof. In case of the death of the corporate guarantor, the bankruptcy proceedings would be maintainable against their legal representatives. SUBSCRIBE FOR FULL CONTENT

The Tax Publishers

Insolvency and Bankruptcy Code, 2016--Personal Guarantors

Institution of Bankruptcy Proceedings against Personal Guarantors

Pragya Bhandari

This article aims at enlightening readers about the provisions and aspects related to the process and forms of making applications for initiating bankruptcy proceedings against personal guarantors to corporate debtors, withdrawal of such applications, etc., under the Insolvency and Bankruptcy Code, 2016.

1. Prologue

Many times a corporate debtor takes a loan guaranteed by another corporate person or an individual (personal guarantor to the corporate debtor). The lender may pursue a remedy against the corporate debtor or the guarantor, when a default in repayment of the loan is made. The Insolvency and Bankruptcy Code, 2016 (the Code) has brought personal guarantor of a corporate debtor under its purview. Earlier, the Code was limited to adjudication of cases of corporate insolvency and corporate guarantors, however, with the expansion of the scope of the Code by bringing personal guarantor of a corporate debtor under itself, creditor can initiate bankruptcy proceeding against a personal guarantor, further, personal guarantor can himself also be able to approach the Adjudicating Authority to claim their own bankruptcy. In this regard, the Insolvency and Bankruptcy (Application to Adjudicating Authority for Bankruptcy Process for Personal Guarantors to Corporate Debtors) Rules, 2019 as well as the Insolvency and Bankruptcy Board of India (Bankruptcy Process for Personal Guarantors to Corporate Debtors) Regulations, 2019have been notified w.e.f. 1-12-2019 that would apply to bankruptcy process for personal guarantors to corporate debtors so that faster resolution would be available to bankruptcy cases of personal guarantor of corporate debtor. Proceedings against the corporate debtor as well as personal guarantors may be initiated simultaneously before Adjudicating Authority.

Sections 121 to 123 read with the Insolvency and Bankruptcy (Application to Adjudicating Authority for Bankruptcy Process for Personal Guarantors to Corporate Debtors) Rules, 2019 provide for the process and forms of making applications for initiating bankruptcy proceedings against personal guarantors to corporate debtors, withdrawal of such applications and further provisions thereof. In case of the death of the corporate guarantor, the bankruptcy proceedings would be maintainable against their legal representatives.