A Corporate Guarantor Cannot Be Absolved From Its Liability Only Because The Guarantee Is Not Invoked

In the case of Iskon Infra Engineering Private Limited vs. Central Bank of India¹, the National Company Law Appellate Tribunal ("NCLAT") rejected the dissolution of a company undergoing voluntary liquidation on the ground that such a Company had extended corporate guarantees of substantial amounts for a principal borrower, and even though the guarantee is not invoked, the lenders could require a guarantor to perform its obligations.

Background

1. M/s Iskon Infra Engineering Private Limited ("Company") initiated voluntary liquidation under Section 59 of the IBC. The proceeding was at its final stage. The Company, through the liquidator filed a company petition under Section 59(7) of the IBC² seeking dissolution of the Company before the NCLT, New Delhi Bench – VI.