The Supreme Court has reaffirmed that a financial creditor is legally entitled to maintain simultaneous insolvency proceedings against a principal borrower and its corporate guarantor for the same debt, under the Insolvency and Bankruptcy Code, 2016 (IBC).
The Bench said that while a creditor is prohibited from “double enrichment” meaning they cannot recover more than the total debt owed, there is no bar on seeking the initiation of CIRP against multiple obligors to maximize the chances of debt resolution. The Court noted that the liability of a surety is co-extensive with the principal debtor under Section 128 of the Indian Contract Act, 1872 and the IBC does not displace this fundamental principle.
Justice Dipankar…