Under right of subrogation guarantor is entitled to initiate cirp against principal borrower

Last updated: 02 July 2022

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The National Company Law Tribunal (NCLT) has ruled that a guarantor who pays a debt on behalf of a principal borrower effectively steps into the shoes of the creditor. This means the guarantor gains all the creditor's rights, including the ability to initiate Corporate Insolvency Resolution Process (CIRP) against the principal borrower. The ruling clarifies that this right exists under the 'right of subrogation' as per the Indian Contract Act, 1872, even without a direct agreement between the guarantor and the borrower.

Court :
Kolkata NCLT Bench

Brief :
A contract of guarantee is of between three persons Creditor, Debtor and the Surety. The Contract of Guarantee generally made to protect interest of the creditor and provide him trust and security for payment of debt advanced to the Corporate Debtor. T

Citation :
C.P (IB) NO. 2046/KB/2019

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Judgement posted by

FCS Deepak Pratap Singh

Associate Vice President - Secretarial & Compliance (SBI General Insurance Co. Ltd.)

Dear Friends, MyselfFCSDeepak P. Singh ( B.Sc.. LLB, FCS. FIII, CIAFP, CRMP, ID) , A Fellow Member of ICSI, Law Graduate ,Fellow Member of Insurance Institute of India, Certified Independent Director ,Certified Insurance Anti Fraud Professional , Certified Risk Governance Professional ( ICSI-III) and cleared Limited I ... Read more

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