Not necessary to start insolvency against principal borrower first: NCLAT

It also held that the corporate guarantee provided was joint and co-extensive with that of the principal debtor

A financial creditor can seek to first initiate insolvency proceedings against a corporate guarantor of a company, instead of the company itself, in case the guarantee fails, the National Company Law Appellate Tribunal (NCLAT) has held.

The corporate insolvency resolution process, thus, can go ahead against the guarantor under Section 7 of the Insolvency and Bankruptcy Code (IBC), even without having proceeded with and exhausted all legal remedies against the principal debtor, it has said.

The appellate tribunal reasoned that any corporate guarantee given by a parent company for a subsidiary becomes debt as soon it is invoked; subsequently, the