Insolvency Proceedings against Personal Guarantors under Insolvency and Bankruptcy Code, 2016

An interesting issue, which has cropped in for consideration before various Courts in India is as to whether in respect of the Companies in which a Corporate Insolvency Resolution Process (CIRP) has resulted in the approval of the Resolution Plan under the provisions of Section 31 of the Insolvency and Bankruptcy Code, 2016 or alternatively, liquidation of a Corporate Debtor Company under the provisions of Insolvency Code has been ordered, then in such a scenario, whether the proceedings can still be initiated under Part III of the Insolvency Code against the Guarantors of such corporate entities. There are various Orders, which have been passed by different Courts in India either issuing notice or alternatively staying the personal insolvency proceedings against the Guarantors. However, this issue is of extreme significance from the perspective of the Guarantors of the Corporate Debtors and is yet to take a final conclusive shape on the interpretation of the provisions of Section 95 of the Insolvency Code read with Section 60 of the Insolvency Code. Of course, it will be another interesting legal settlement, which is expected to happen only before Hon’ble Supreme Court.