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IBC Shift: Personal Guarantees, Debts, and Legal Dynamics



  Nov 18, 2023

IBC: Personal Guarantees and Insolvency in India



What is the significance of the Supreme Court’s judgment on personal guarantees?

The Supreme Court’s judgment has reinforced the obligations of personal guarantors under the Insolvency and Bankruptcy Code (IBC), which means creditors can have a better chance of recovering debts due to personal guarantees.

How does this judgment affect the recovery of bad debts?

It improves the ability of creditors to enforce personal guarantees without legal battles, potentially speeding up the recovery of bad debts.

What was the Supreme Court’s stance on the release of personal guarantors from their obligations?

The Court maintained that the approval of a resolution plan did not automatically release personal guarantors from their obligations, as these are separate from the debtor’s liabilities and obligations.

How does this impact promoters and businesses?

Promoters and business owners are now more accountable for the debts due to enhanced enforceability of personal guarantees. This serves as a wake-up call to promoters to manage their assets responsibly.

What does this mean for the future of insolvency proceedings?

The judgment is expected to strengthen the IBC and its framework by plugging loopholes and maintaining the sanctity of contracts, leading to more disciplined financial and corporate governance.


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