Till now companies had declared the company insolvent under the IBC code as an excuse for not repaying the bank’s debt. But after this decision of the Supreme Court, banks will be able to recover their dues from personal guarantors.
The Supreme Court has given an important decision on bad loans on Friday. The Supreme Court on Friday upheld the validity of the Centre’s notification allowing banks to take action against individual guarantors for debt recovery under the Insolvency and Bankruptcy Code (IBC).
This decision of the court will increase the difficulties for businessmen like Anil Ambani, Kapil Wadhawan and Sanjay Singhal. In fact, the government had enacted a law regarding personal bankruptcy which has been upheld by the Supreme Court. After this decision of the court, banks can now file a case of personal bankruptcy against the promoters of companies whose companies have been sent to the NCLT for debt resolution. The names of businessmen like Anil Ambani, Kapil Wadhawan and Sanjay Singhal are included in this list.
Personal guarantor will pay the money of the banks
Till now companies had declared the company insolvent under the IBC code as an excuse for not repaying the bank’s debt. But after this decision of the Supreme Court, banks will be able to recover their dues from personal guarantors. With this decision of the court, banks will be able to clear their bad loan book. A bench of Justice L Nageswara Rao and Justice S Ravindra Bhat said that the approval of the resolution scheme under the IBC does not eliminate the liability of individual guarantors to banks.
In case of 52 companies in NCLT
The IBC Act was enacted in 2016, but by the end of 2017, at least 52 companies were sent to the NCLT for default in payment of bank loans. These included Videocon Industries, Bhushan Steel, Punj Lloyd and Essar Steel. After this decision, it will be easy for the bank to recover money from the personal guarantor. In the court, Justice Bhat read the conclusion of the verdict and said, “In the judgment, we have retained the notification. The petitioners challenged the notification dated 15 November 2019 issued under the IBC and other provisions relating to personal guarantors to corporate debtors. While upholding the validity of the notification, the apex court held that the introduction of insolvency resolution scheme for a company does not end the corporate guarantee given by individuals towards the payment of dues to financial institutions.
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