Initiation of CIRP based on a corporate guarantee provided to a ...

Tribunal Upholds Corporate Insolvency Process Despite Guarantee Exceeding Limits; Validates Lender's Enforcement Rights.

April 15, 2024

Case Laws     Insolvency and Bankruptcy     AT

Initiation of CIRP based on a corporate guarantee provided to a consortium of lenders- Validity of deed of Guarantee - The tribunal noted that the guarantee exceeded the statutory limits under Section 186 but highlighted that the corporate debtor and principal borrower were closely linked family businesses. This closeness implied a level of awareness and consent to the risks involved, undermining the appellant's argument for invalidity based on statutory non-compliance. It was established that the deed of guarantee was executed in favor of the trusteeship managing the consortium’s interest, thus granting the lenders, including the respondent bank, the right to enforce the guarantee. The tribunal dismissed the appellant's claim of lack of privity of contract.

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