Supreme Court – Landmark 2026 Judgment – Financial Creditors Free to Pursue Dual Insolvency Actions for One and Same Debt against two – Borrowers and Guarantors.
IBC – Simultaneous CIRP proceedings of financial creditor(s) against principal debtor – borrower and its corporate guarantor / surety or vice-versa – Maintainability
The Judge is not to innovate at pleasure. He is not a knight errant roaming at will in pursuit of his own ideal of beauty or of goodness
Sub-section (2) of Section 60 contemplates separate or simultaneous insolvency proceedings against the corporate debtor and guarantor. Therefore, sub-section (3) of Section 60 provides that if CIRP in respect of the corporate guarantor is pending before an adjudicating authority and if the CIRP against the corporate debtor is 47 Order dated 16th December, 2024 in Civil Appeal No. 878 of 2019. 32 pending before another adjudicating authority, CIRP proceedings against the corporate guarantor must be transferred to the adjudicating authority before whom CIRP in respect of the corporate debtor is pending.
Thus, consistent with the basic principles of the Contract Act that the liability of the principal borrower and surety is coextensive, the IBC permits separate or simultaneous proceedings to be initiated under Section 7 by a financial creditor against the corporate debtor and the corporate guarantor.
Restricting the claim of a creditor against a debtor or a guarantor is likely to defeat the purpose of a guarantee. Since a guarantor’s liability is co-extensive, forcing the creditor to elect would essentially make it sacrifice part of its claim. This is not how a guarantee works, particularly when the Code does not provide for such election.
It is settled law that a creditor can pursue proceedings against multiple debtors, simultaneously. The question is how the debt gets split. Can the creditor be compelled to claim part against the debtor and the rest against the guarantor?
Regulation 12A of the 2016 Regulations sets up an obligation upon the creditor to update its claim as and when it is satisfied, either partly or fully, from any other source. Regulation 12A reads as under:
12A. Updation of claim. A creditor shall update its claim as and when the claim is satisfied, partly or fully, from any source in any manner, after the insolvency commencement date.
Judgment dated 26.2.2026 of the Supreme Court of India in Civil Appeal No.6094 of 2019 of ICICI Bank Ltd Vs. Era Infrastructure (India) Limited with connected civil appeals.
