Personal Guarantor Liable Under Section 98 IBC: NCLT Admits Union Bank Insolvency Petition

NCLT Affirms Liability of Personal Guarantor in Insolvency Proceedings

The NCLT has ruled in favor of Union Bank, admitting its insolvency petition against a personal guarantor for default on guaranteed debt. The tribunal made it clear that dissatisfaction with the recommendations provided by the resolution professional (RP) does not suffice to justify the replacement of the RP.

This decision reinforces the accountability of personal guarantors in insolvency contexts under Section 98 of the IBC. The NCLT clarified that the presence of evidence demonstrating improper behavior or misconduct is crucial for managing claims against guarantors, thereby setting a precedent for the treatment of personal guarantees during insolvency proceedings.

The ruling emphasizes the notion that personal guarantees carry significant legal weight and that financial institutions can rely on these assurances during recovery efforts. Practitioners should advise their clients accordingly, particularly in advising on the implications of providing personal guarantees in business dealings.