In a first, Debt Recovery Tribunal in Chennai admits insolvency plea against personal guarantor
[ad_1]
Experts are of the view that the personal insolvency course of below Insolvency and Bankruptcy Code, 2016 is prone to have strict timelines to be adopted, in contrast to earlier regimes.
In a first of its sort in Tamil Nadu, Debt Recovery Tribunal – II, Chennai has admitted an insolvency petition against a personal guarantor Rohit Nath in a case filed by KEB Hana Bank.
Mr. Nath had given personal assure on loans availed by Alectrona Energy Private Limited.
The legislation on initiating insolvency proceedings against personal guarantors was notified on December 1, 2019 and in line with specialists the present improvement ought to come as a wakeup name for promoters and personal guarantors.
“Conventionally, in India, promoters and their family members, relatives, associates act as “Personal Guarantors” for money owed borrowed by the Company from lenders/monetary establishments. This is much more widespread in small and mid-sized Companies which have been already in the pink and now burdened with the pandemic impact,” Anant Merathia, a Chennai-based company lawyer mentioned.
“With changing times and legal frameworks, this is a serious aspect that Indian promoters/guarantors must factor in both for the ongoing personal guarantees issued vis-à-vis defaults and performance of their companies and ones they propose to give for further funding. They should think twice before involving family members as personal guarantors,” Mr Merathia identified.
Experts are of the view that the personal insolvency course of below Insolvency and Bankruptcy Code, 2016 is prone to have strict timelines to be adopted, in contrast to earlier regimes.
Another fascinating facet to attend and watch is the end result of the litigation difficult the constitutional validity of Provisions of Insolvency and Bankruptcy Code, 2016 with respect to personal guarantors.
The provisions are challenged earlier than the High Court in the matter of Anil Ambani vs State Bank of India, which remains to be pending. The Court has stayed the proceedings. Mr Merathia reckoned that finally a determination by the Supreme Court on the problem would set a strong footing for the legislation in this regard.
[ad_2]