Kapil Kumar, a prominent businessman, had provided personal guarantees to several financial institutions for loans extended to his company, "KK Enterprises Limited", institutions invoked Kapil's personal guarantees and i

CS Professional · Insolvency and Bankruptcy - Law and Practice · PYQS · June 2025
Kapil Kumar, a prominent businessman, had provided personal guarantees to several financial institutions for loans extended to his company, "KK Enterprises Limited", institutions invoked Kapil's personal guarantees and initiated insolvency proceedings against him under the Insolvency and Bankruptcy Code, 2016 (IBC, 2016), specifically under the provisions related to personal guarantors to corporate debtors. Kapil challenged the validity of these proceedings, arguing that the notification bringing personal guarantors within the ambit of the IBC was arbitrary and discriminatory. On this background, mentioning relevant provisions of the IBC, 2016 and applicable case laws answer the following questions: What is the effect of the Supreme Court ruling on financial Creditors (Banks and Financial Institutions)?

Answer & Explanation:

The Supreme Court has affirmed the notification's constitutional validity, and opened the door for banks and other financial institutions to file for the bankruptcy of personal guarantors of corporate debtors facing insolvency or liquidation proceedings before the NCLT.

Topics: Personal Guarantors

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