The Increasing Conundrum For Guarantor In The Insolvency System

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Ms Vaidehi Vyas, SVKM’s Pravin Gandhi College of Law

ABSTRACT

This article aims to address the following topics and also incorporates the definition of a financial creditor, the contract of guarantee and its principles, the idea of a corporate guarantor, and the relevant provisions of the Insolvency and Bankruptcy Code & Contract Act that address the contract of guarantee and the guarantor’s position1. The paper also additionally wraps up by summarizing the relevant case laws and decisions together with my introspection on the matter. Since the corporate guarantor acts as the debtor’s surety in the event of failure, it is imperative that their interests be appropriately protected. Since the Insolvency and Bankruptcy Code is based on the idea of protecting the interests of all parties concerned, guarantors’ or sureties’ rights should not be disregarded.2 The original agreement between the major debtor and the creditor gives rise to a secondary agreement known as the contract of guarantee. Understanding the scope of the contract of guarantee under the Insolvency and Bankruptcy Code is the aim of this study. In order to simplify India’s insolvency process, the IBC was put into effect in 2016. India’s insolvency laws and regulations saw numerous changes as a result of the IBC. Since IBC was passed, there has also been a continuous change in how guarantors of corporate debtors undergoing bankruptcy proceedings are treated. Through this study I’ve attempted to comprehend the same and examine with the extent of guarantee contract.

Keywords: Guarantor, Principal Debtor, Contract, Guarantee, Moratorium, Insolvency, Debts, and Creditors.

THE INCREASING CONUNDRUM FOR GUARANTOR IN THE INSOLVENCY SYSTEM.pdf

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