Supreme Court Upholds Dual CIRP Proceedings for Debtors and Guarantors

The Supreme Court ruled that simultaneous insolvency proceedings can be initiated against both a principal debtor and its guarantor for the same debt under the Insolvency and Bankruptcy Code. This verdict emphasizes the co-extensive liability principle and allows creditors to pursue parallel actions without waiting for one process to conclude.

The Supreme Court has affirmed that simultaneous insolvency proceedings are permissible against both a principal debtor and its corporate guarantor for the same debt.

A bench of Justices Dipankar Datta and Augustine George Masih determined that the Insolvency and Bankruptcy Code (IBC) does not prohibit financial creditors from initiating parallel actions.

The ruling emphasizes that a creditor's attempt to secure payment through guarantees must be respected, without waiting for separate insolvency processes to conclude.

(With inputs from agencies.)