Rethinking ‘Third-Party Security Providers’ Liability Under the IBC

Post introduction of the new insolvency regime in India under the Insolvency and Bankruptcy Code, 2016 (“IBC”), a lot has been discussed and debated on the extent of liability of a third-party security provider when a borrower is dragged into the insolvency resolution process (CIRP) proceedings under the IBC. Typically in a lot of financing transactions, to secure any financing availed by a corporate borrower, its parent entity(s) or group companies offer a guarantee or security. While the position as to the treatment of such ‘guarantor’ under the IBC is generally understood clearly now, the recent judgment of the Hon’ble Supreme Court in ‘Phoenix Arc Private Limited vs. Ketulbhai Ramubhai Patel settles the conundrum as regards the treatment of such ‘third-party security provider’ in CIRP proceedings.

Please click here to read the full article by Archana Tewary & Ananda Chakraverty, published in BW Legal World.