Examining The Gaps In The Execution Of Individual Insolvency And Personal Guarantee Mechanisms Under IBC
- IJLLR Journal
- May 30
- 2 min read
R. Arshiya Banu, LLM, Amity Law School, Amity University Bengaluru
Jyotirmoy Banerjee, Assistant Professor, Amity Law School, Amity University Bengaluru
ABSTRACT
The IBC of India, introduced in 2016, marked a transformative shift in the country's insolvency framework, providing a streamlined approach for resolving financial distress across corporate entities. However, the execution of individual insolvency and personal guarantee mechanisms under the IBC remains a challenging area, with significant gaps affecting their effectiveness. This paper critically examines the practical shortcomings in implementing these mechanisms, focusing on procedural bottlenecks, jurisdictional complexities, and the evolving legal interpretations by the judiciary. Despite the IBC's intent to create a comprehensive insolvency resolution framework, the treatment of personal guarantors and individual debtors has been inconsistent, often leading to prolonged litigation and uncertain recoveries. The challenges include a lack of clarity in defining the liability of personal guarantors, difficulties in asset tracing, and the absence of standardized processes for individual insolvency resolution. Moreover, the interplay between the rights of creditors and the protections afforded to individual debtors under the IBC has led to conflicting judicial outcomes, further complicating the landscape. Through an analysis of recent case law and stakeholder perspectives, this study highlights critical areas where legislative and procedural reforms are needed to enhance the effectiveness of personal insolvency mechanisms. The paper also explores international best practices, drawing lessons from jurisdictions that have successfully balanced debtor protection with creditor recovery. By addressing these gaps, the Indian insolvency regime can better align with global standards, ensuring timely and fair resolution of financial distress for individuals. This analysis aims to provide actionable insights for policymakers, practitioners, and scholars seeking to strengthen the IBC's framework for individual insolvency and personal guarantees, ultimately fostering a more predictable and robust financial ecosystem.
Keywords: Individual Insolvency, Personal Guarantees, IBC, Debt Resolution, Financial Distress.
