Did You Know? · Corporate & Commercial Contracts
Do you know a personal guarantor can be dragged into insolvency separately from the company - and can no longer stall by filing their own case?
Lalit Kumar Jain (2021) upheld separate proceedings against personal guarantors, and the 2026 amendment removed the automatic interim moratorium.
The Supreme Court, in Lalit Kumar Jain v. Union of India (2021), upheld the framework under which personal guarantors to corporate debtors can face insolvency proceedings under Part III of the IBC - independently of, and even after, the corporate insolvency resolution process against the company concludes. A promoter's personal guarantee is not discharged just because the company's CIRP is closed.
What is new: the Insolvency and Bankruptcy Code (Amendment) Act, 2026 (Presidential assent 6 April 2026) inserted a new Section 96(4) removing the automatic interim moratorium a personal guarantor used to get the moment they filed their own insolvency application - a protection some guarantors had been using to stall bank recovery action indefinitely without ever pursuing the application to admission.