Insolvency Process maintainable against corporate guarantor even if principal borrower is not a corporate person: SC

The Supreme Court has held that the principal borrower need not be a “corporate person” for insolvency process to be initiated against a company which stood as its guarantor. “Corporate Insolvency Resolution Process under Section 7 of the Insolvency and Bankruptcy Code, 2016 can be initiated by a financial creditor against a corporate person in respect of guarantee to the loan amount secured by person not being a corporate person, in case of default in payment of such a debt”, the Court held. Upon default committed by the principal borrower, the liability of the company (corporate person), being the guarantor, instantly triggers the right of the financial creditor to proceed against the corporate person (being a corporate debtor), the bench comprising Justices AM Khanwilkar, BR Gavai and Krishna Murari observed.