IBC| Creditors Can Initiate CIRP Against Both Borrower And Guarantor For Same Debt: Supreme Court

The Bench said that while a creditor is prohibited from "double enrichment" meaning they cannot recover more than the total debt owed, there is no bar on seeking the initiation of CIRP against multiple obligors to maximize the chances of debt resolution. The Court noted that the liability of a surety is co-extensive with the principal debtor under Section 128 of the Indian Contract Act, 1872 and the IBC does not displace this fundamental principle.

Justice Dipankar Datta and Justice Augustine George Masih while reaffirming the principle in BRS Ventures Investments Ltd. v. SREI Infrastructure Finance Ltd. & Anr. (2025) 1 SCC 456 , the bench noted, “Sub-section (2) of Section 60 contemplates separate or simultaneous insolvency proceedings against the corporate debtor and guarantor. Therefore, sub-section (3) of Section 60 provides that if CIRP in respect of the corporate guarantor is pending before an adjudicating authority and if the CIRP against the corporate debtor is pending before another adjudicating authority, CIRP proceedings against the corporate guarantor must be transferred to the adjudicating authority before whom CIRP in respect of the corporate debtor is pending. Thus, consistent with the basic principles of the Contract Act that the liability of the principal borrower and surety is coextensive, the IBC permits separate or simultaneous proceedings to be initiated under Section 7 by a financial creditor against the corporate debtor and the corporate guarantor”.

“To reiterate, the contention that simultaneous proceedings must be necessarily barred apprehending double enrichment is far-fetched and stands rejected”, the Bench observed.

The Division Bench clarified that the right to proceed against both parties concurrently is a hallmark of the law of guarantee, and restricting this right would seriously impair a lender's ability to recover legitimate dues. 

Senior Advocates Gopal Sankaranarayan and Abhijeet Sinha appeared for the appellant and Senior Advocate Tapesh Kumar Singh appeared for the respondent.

The matter, primarily, pertained to multiple appeals involving high-stakes defaults. In the lead matter, ICICI Bank had extended credit facilities to various subsidiaries of the Era Group, including Era Infrastructure (India) Limited. The parent company, Era Infra Engineering Private Limited, stood as a corporate guarantor for these loans. Following defaults, ICICI Bank successfully initiated CIRP against the parent guarantor.

However, when the bank subsequently sought to initiate CIRP against the actual subsidiary borrower (Era Infrastructure), its application was rejected.

Now, the NCLT and NCLAT had delivered conflicting judgments on this issue, while some tribunals, relying on Vishnu Kumar Agarwal v. Piramal Enterprises Ltd. 2019 SCC OnLine NCLAT 81, held that once a claim was admitted against one corporate debtor, a second application for the same debt against another was barred.

Conversely, other benches followed the SBI v. Athena Energy Ventures (P) Ltd. (2021) 226 Comp Cas 744, which permitted concurrent proceedings.

Therefore, the Supreme Court was to now resolve this split to determine the maintainability of simultaneous CIRP applications.

The Court reasoned that under Section 128 of the Indian Contract Act, the liability of a surety is co-extensive with the principal debtor, meaning a creditor is not required to exhaust remedies against one before proceeding against the other.

It rejected the "doctrine of election", noting that filing claims in two proceedings does not constitute inconsistent remedies but rather a single effort to resolve a debt. Furthermore, the Court noted that the "clean slate" principle of the IBC requires creditors to submit their full claims in any CIRP; otherwise, they risk losing the right to recover that debt entirely once a resolution plan is approved. Safeguards, such as the Resolution Professional’s duty to update claim lists, were deemed sufficient to prevent actual double recovery.

The Court, thus, allowed the appeals filed by ICICI Bank and the State Bank of India where their CIRP applications had been previously rejected by lower tribunals, while setting aside the impugned orders that had barred simultaneous proceedings.

However, it dismissed certain appeals where settlements had already been reached or where the issues were restricted to specific procedural facts like the constitution of the Committee of Creditors.

“…IBC is a product of a well-thought, deliberated, and extensively researched policy framework. The rules and regulations, too, are framed thereunder after rigorous research. Furthermore, though the IBC primarily operates in the judicial and quasi-judicial arena, its effects are far reaching, often affecting banking, economy, and other sectors. To venture into unchartered territories, wearing the legislative hat, would be nothing short of judicial exploration, which we do not propose to do. We leave it to the wisdom of the legislature and the IBBI to frame appropriate policy framework and guidelines with an inclusive consultative process of all the stakeholders, if so required”, the judgment read.

Cause Title: ICICI Bank Limited v. Era Infrastructure (India) Limited [Neutral Citation: 2026 INSC 201]

Appearances:
Appellant: Komal Mundhra, AOR, Saurabh Agrawal, Aniket Bhattacharyya, Ranghasayee, Poornima Devi, Diwakar Mishesmori, Pratiksha Mishra, Karun Mehta, AOR, Sanjay Kapur, AOR, Surya Prakash, Shubhra Kapur, Mahima Kapur, Mansi Kapur, Santha Smruthi, Anuraj Mishra, Gopal Sankaranarayan, Sr. Adv., Abhijeet Sinha, Sr. Adv., Vipul Jai, Soayib Qureshi, AOR, Saikat Sarkar, Vishal Sinha, Neha Nagpal, Puneet Singh Bindra, Anirudh Purshottaman, Saumya, M/S. Cyril Amarchand Mangaldas Aor, AOR, Surabhi Khattar, Sriharsh Raj, Shivansh Vishwakarma, Pallavi Agarwal, Suresh Dutt Dobhal, AOR, Shikhar Kumar, Abhinav Sharma, Advocates.

Respondent: Ankur Mittal, AOR, Nidhi Mittal, Muskan Jain, Nithin Chowdary Pavuluri, Soubhagyavalli Vedantam, Vijaya Bhaskar Reddy Kandhala, Subham Saurabh, Gp. Capt. Karan Singh Bhati, AOR, Devender Singh, Hitesh Kumar Sharma, Amit Kumar Chawla, Akhileshwar Jha, Varun Varma, Shreya Jha, Vaibhav Manu Srivastava, AOR, Savita Nangare, Tungesh, AOR, T. Ravichandran Thru Vc, K. V. Mohan, AOR, K. V. Balakrishnan, Devesh Kr. Khanduni, Soumya Dutta, AOR, Siddhant Upmanyu, Abhijeet Pandey, Indrani Dey, Tapesh Kumar Singh, Sr. Adv., Prabhat Ranjan Raj, AOR, Anil Kumar, Gunjesh Ranjan, Amarjeet Gupta, Mannoneet Dwidedi, Abhishek Kumar, Prakash Kumar Mangalam, Prabhat Kaushik, AOR, Venkata Subramanian, Prabhat Kaushik, Paramvir Singh Narang, Vinay Tomar, Pratibha Kaushik, Harshita Lulla, Shruti Jangid, Maneesh Arora, Lakhan Singh, M/S. Dua Associates, AOR, Samar Vijay Singh, AOR, Shashwat Parihar, Sabarni Som, Keshav Mittal, Aman Dev Sharma, Gaj Singh, Amit Ojha, Azeem A Dost, Prashant Sharma, Mayank Sapra, Snehasish Mukherjee, AOR, Sulaiman Bhimani, Lalima Das, Advocate General, Brijesh Kumar Tamber, AOR, Rajesh Kumar Gautam, AOR, Anant Gautam, Deepanjal Choudhary, Vibhu Sharma, Likivi Jakhalu, Aman Gahlot, Rishi Chauhan, Azal Aekram, Pallavi Pratap, AOR, Amjid Maqbool, Prachi Pratap, Prashant Pratap, Yashvi Aswani, Anupriya Dixit, Ashish Aggarwal, Ramya Aggarwal, Tanya Aggarwal, Vinayak Mehrotra, AOR, Kaushik Poddar, AOR, Siddharth Sharma, AOR, Ishika Chauhan, B. K. Satija, AOR, Shashwat Anand, AOR, Rishab Kumar, Shashank Singh, Kanishk Khetan, Dharampal Singh, Prem Sagar Keshri, Mayank Rajan Joshi, Pankaj Bhagat, AOR, Ravi S Gupta, Dolly Nair, Advocates.

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