Supreme Court held that a corporate guarantor cannot claim the status of a financial creditor against the corporate debtor.
The Supreme Court Bench of Justice Sanjiv Khanna and Justice Dipankar Datta was hearing an appeal and held that a corporate guarantor under Section 5(5A) of the Insolvency and Bankruptcy Code, 2016, cannot claim the status of a financial creditor against the corporate debtor based on claims against new promoters or management. The Bench clarified that Section 140 of the Contract Act, 1872, does not apply.
In the matter concerning Skil Infrastructure Limited, the Supreme Court dismissed the present appeal, concluding that there were no sufficient grounds to interfere with the impugned judgment. Skil Infrastructure Limited, acting as a corporate guarantor under Section 5(5A) of the Insolvency and Bankruptcy Code, 2016, sought to establish its claims against the new promoters or management as financial creditor claims against the corporate debtor. The Supreme Court held that this assertion was unfounded and that Skil Infrastructure Limited could not be recognized as a financial creditor of the corporate debtor based on these claims.
The Court further determined that Section 140 of the Contract Act, 1872, which pertains to the rights of a surety, was not applicable in this case. The attempt to invoke this provision to support Skil Infrastructure Limited's position was rejected by the Court. As a result, the appellant's argument relying on Section 140 was deemed invalid and could not be pressed.
Finally, the Supreme Court ordered that any pending applications related to this case should be disposed of. This decision upheld the previous judgment without any modification, reinforcing the legal interpretations regarding the status of corporate guarantors and the applicability of specific contractual provisions in insolvency proceedings.
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