The NCLAT has held that without initiating Corporate Insolvency Resolution Process (CIRP) against the principal borrower, financial creditor can initiate CIRP against the Corporate Guarantors.

It noted that as per IBC Section 5(8)(h), counter-indemnity obligation in respect of a guarantee comes within the meaning of a ‘financial debt’.

The Tribunal in Vishnu Kumar Agarwal v. Piramal Enterprises also held that two applications under Section 7 cannot be admitted simultaneously, against two corporate guarantors, for the same set of claim and default, unless the corporate debtors are joint venture company.