SC has ruled that banks can invoke personal guarantees
Industrialists whose personal guarantees helped corporate entities owned by them get big loans only to later default are in trouble now as the Supreme Court has ruled that banks can act against guarantors even as proceedings under the Insolvency and Bankruptcy Code are on. The State Bank of India had filed an appeal against the concurrent findings of the National Company Law Tribunal and National Company Law Appellate Tribunal withholding banks from taking an action against guarantors. As per tribunals, since the corporate entity is already facing insolvency proceedings and enjoying a moratorium under the resolution plan, the banks could not move separately against the guarantor. The SBI counsel and the senior advocate for Bharat Cooperative Bank (Mumbai) argued that a corporate debtor and a personal guarantor are separate entities. If the debtor is facing insolvency proceedings under IBC does not imply that the personal guarantor is also supposed to undergo the same process.