India – Application For Insolvency Of Personal Guarantor Is Not Maintainable Unless Insolvency Or Liquidation Is Ongoing Against The Corporate Debtor.

Order dated: 10 August 2021
 

Summary:
 

In the present matter, the NCLT Mumbai Bench was dealing with the issue of whether a financial creditor can initiate CIRP against the personal guarantor, without CIRP or liquidation proceedings pending against the Corporate Debtor.
 

The NCLT noted that in relation to application for CIRP and liquidation for corporate persons including corporate debtors and personal guarantors, the NCLT within whose territory the registered office of the corporate person is located will have jurisdiction to hear and decide the application. Where a CIRP or liquidation proceeding is pending against a corporate debtor before a NCLT, an application relating to CIRP or liquidation or bankruptcy of a corporate guarantor or personal guarantor of such corporate debtor shall also be filed before the same NCLT.
 

The NCLT, emphasized that only when a CIRP or liquidation proceeding against a corporate debtor is pending before the NCLT, an application against the personal guarantor for the corporate debtor could be filed before such NCLT. NCLT further opined that, filing of an application against the personal guarantor without the corporate debtor undergoing CIRP would vest NCLT with jurisdiction on two courses, one being NCLT and the other one Debt Recovery Tribunal.
 

 

For further information, please contact:  

Souvik Ganguly, Partner, Acuity Law

al@acuitylaw.co.in