Lenders Law

Section 128 of the Indian Contract Act, 1872 stipulates: “ The liability of the surety is co-extensive with that of the principal debtor, unless it is otherwise provided by the contract . Laxmi Pat Surana v. Union Bank of India (2021, SC) – A guarantor’s liability arises the moment the principal borrower commits default. SBI v. Athena Energy Ventures (2020, NCLAT) – A creditor can proceed simultaneously against the corporate debtor and guarantor. Thus, it was understood that once the principal borrower has defaulted, and an IBC petition is being filed for the principal borrower, relevant steps may also be taken against the guarantor for initiation of the guarantor's insolvency proceedings simultaneously.  The Turning Point — SBI v. Deepak Kumar Singhania (2025, NCLAT) In February 2025, the NCLAT in State Bank of India v. Deepak Kumar Singhania changed the ground reality. What Happened SBI had lent to LML Ltd. , which defaulted and went into liquidation. ...

The Insolvency and Bankruptcy (Application to Adjudicating Authority for Insolvency Resolution Process of Personal Guarantors to Corporate Debtors) Rules, 2019 (“PG Rules, 2019”) provide a framework for initiating insolvency proceedings against personal guarantors of corporate debtors. One of the critical procedural requirements under Rule 7(1) is the issuance of Form B notice by the financial creditor or operational creditor to the guarantor. This notice serves as a demand for repayment and must be accompanied by supporting documents to substantiate the default. 1. Purpose of Form B Notice Form B notice is a formal communication to the personal guarantor , informing them of the default by the corporate debtor and demanding repayment of the guaranteed debt. Proper documentation ensures the guarantor is aware of the exact amount of liability , and reduces chances of disputes in later proceedings. Annexing relevant documents also strengthens the application when filed wi...

  The Insolvency and Bankruptcy Code, 2016 (“ IBC ”) created the framework of Information Utilities (IUs) to serve as authenticated repositories of financial information. A record of default from an IU is treated as conclusive evidence under Section 215 of the Code. A recurring issue for creditors is: Should the default be filed with an IU before sending a demand notice, or only before filing an insolvency application? Statutory Position Section 215(2) IBC provides that financial creditors shall submit information of default to an IU. Rule 4 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016  (" Application to AA Rules ") requires that an application be accompanied by a record of default from an IU “wherever available”. Further, Regulation 20(1A) of the IBBI (Information Utilities) Regulations, 2017 , as inserted by Notification No. IBBI/2022-23/GN/REG085 dated 14 June 2022, expressly provides that:  “Before filing an applicatio...

When an operational creditor issues a demand notice under Section 8 of the Insolvency and Bankruptcy Code, 2016 , the corporate debtor has 10 days to: Repay the amount due, or Bring to notice the existence of a dispute . Sometimes, the real issue arises when a reply is sent — but instead of being a genuine dispute, it is a tactic to stall or avoid insolvency proceedings, or instead of a full reply, the corporate debtor sends an “interim reply” within those 10 days — saying something like “ We are in the process of preparing a detailed response to the Demand Notice. Meanwhile, we request you to kindly treat this communication as our interim/ holding response” .  Now, the question which arises here is: does this obligate the creditor to wait further before filing an application under Section 9? The Legal Framework Statutory Timeline : The Code strictly prescribes 10 days from receipt of the Section 8 notice. There is no provision for extending this timeline merely bec...

The Companies Act, 2013 lays down strict provisions for acceptance of deposits by companies. Sections 73–76 and the Companies (Acceptance of Deposits) Rules, 2014 regulate this area. However, the framework also provides specific exemptions for private companies. These exclusions often create confusion, particularly around shareholder and director loans. 1. Loan from director or director's relative: Rule 2(1)(c)(viii) : Any amount received from a person who, at the time of receipt, was a director or a director's relative , is not considered a deposit . Conditions: Only applicable to private companies. Disclosure in Board’s Report. Obtain a declaration that the loan has been given out of own funds, and not being given out of funds acquired by him/ her by borrowing or accepting loans or deposits from others.  .  2. Loan from shareholders MCA Notification No. GSR- 583(E) dated 13th June, 2017 granted further relief to private companies by exempting them from S...

For years, Indian startups set up holding companies abroad — commonly in Singapore or the US — to access global venture capital, enable easier exits, and leverage favorable regulations. However, a new trend is emerging: reverse flipping , where startups shift their headquarters back to India . This strategic move is driven by several factors. Why Startups Are Opting for Reverse Flipping IPO Readiness in Indian Markets: Simplifies compliance, reporting, and regulatory approvals for domestic IPOs. Access to Domestic Capital: Indian VCs and institutional investors increasingly prefer companies with a domestic presence. Policy Reforms (MCA/RBI): Regulatory clarity has reduced barriers to reverse flipping. Strategic Alignment: Being India-domiciled strengthens relationships with domestic customers, investors, and partners. Reverse flipping is no longer just a strategic option — it’s becoming a mainstream approach for startups preparing f...

When angel investors come on board, investment agreements (and often updated Articles of Association ) govern rights, protections, and obligations. Here’s what to consider: 🔹 Exit & Transfer What happens if the investor or any other shareholder wants to leave or sell shares? Pre-emption rights:  In case investor stays, and any other shareholder is exiting, the investor may seek for the first right to buy shares being sold. Drag-along & tag-along rights: Drag-along:  this clause is relevant for protection of majority shareholder- Allows the majority to compel minority shareholders to join a sale, ensuring smooth exits during strategic transactions. Tag-along:  this clause is relevant for protection of minority shareholder- Allows the minority to exit on the same terms if the majority is selling, safeguarding their interests. 🔹 Board & Governance Rights Right to appoint board members or observers. Veto/consent rights over major...