Guarantors And The Moratorium Under The Bankruptcy Code: An On-Going Battle

• Allahabad High Court stays proceedings against guarantor of Corporate Debtor in the Debt Recovery Tribunal;
• Recent pronouncements provide contradictory positions with regard to the scope of moratoriums under the Insolvency and Bankruptcy Code, 2016 ("Code");
• During the moratorium, creditors unable to enforce a contract of guarantee.

INTRODUCTION

The present ruling arises in a writ petition filed by directors of a corporate debtor challenging an order of a DRT. In terms of the order challenged, DRT permitted proceedings against the directors, while staying the proceeding against the Company (DRT Order). The High Court, in exercise of its writ jurisdiction, by the present order under analysis, however, set aside the order of the DRT and has stayed proceedings against the directors as well.