By LE Desk

New Delhi, May 21: The Supreme Court has made way for lenders to initiate insolvency proceedings against personal guarantors, usually promoters, of stressed companies by upholding the constitutionality of the government notification that had operationalised the Insolvency and Bankruptcy Code provision against personal guarantors of companies facing insolvency.

The notification is legal and valid, the apex court said, as reported by BloombergQuint. “It is also held that the approval of the resolution plan relating to a corporate debtor does not operate so as to discharge the liabilities of the personal guarantors of the corporate debtor. The writ petition and transferred petitions are dismissed in above terms without costs,” the apex court has held.

Personal insolvency provisions constitute Part III of the IBC. While it applies to partnerships and individuals, the government had operationalised the provisions in November 2019 only for personal guarantors. This made way for creditors to go after individual promoters and others who stood as guarantors for loans granted to the companies undergoing insolvency proceeding.

The top court was hearing a batch of over 40 petitions challenging the operationalisation of these provisions which included industrialists Kapil Wadhawan, Anil Ambani, Venugopal Dhoot and others. The top court heard the arguments and had reserved its judgment in March, 2021.

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