The Ahmedabad Bench of the National Company Law Tribunal (NCLT) on 17 June held that insolvency proceedings against a corporate guarantor cannot be made conditional on the realisation of assets of the principal borrower and reaffirmed that a guarantor’s liability remains co-extensive with that of the principal debtor under Section 128 of the Indian Contract Act, 1872.
Judicial Member Chitra Hankare and Technical Member Dr. V.G. Venkata Chalapathy admitted the insolvency petition filed by Krishkan Investment Pvt. Ltd. against Utkal Steels Ltd., a subsidiary of JSW Steel initiated the Corporate Insolvency Resolution Process (CIRP), and appointed Pankaj Bhattad as Interim Resolution Professional (IRP). The Bench held:
“The realization…