The Supreme Court has rejected an application challenging a recent judgment of the National Company Law Appellate Tribunal (NCLAT) for the recovery of a corporate loan. Lenders will be able to initiate bankruptcy proceedings against the signing promoters, directors and chairmen.
The case is linked to the tribunal's decision in the case of State Bank of India and Mahendra Kumar Jajodia. In its March ruling, the tribunal said bankruptcy proceedings could be instituted against individuals who provided personal guarantees when giving loans to a company and did not require a first bankruptcy lawsuit against the company. Jajodia had appealed to the court against the decision.
Under bankruptcy law, it is necessary to initiate resolution or bankruptcy proceedings against corporate debtors in order to initiate proceedings against personal guarantees.
The apex court had stayed the tribunal's order in early April in view of the last few judgments and provisions of the Bankruptcy Act. After hearing arguments from both the parties, the court said on May 8, "We do not see a valid reason for hearing the appeal." In the order of NCLAT no h
Intervention is not required. The court order means that the proceedings against the personal guarantor are not dependent on the principal debtor (company) and therefore bankruptcy proceedings may be instituted against the personal guarantor even if the corporate resolution proceedings against the company have not been initiated, ongoing or completed.
