Principal borrower is not required to be “corporate person” as in the present case, proprietorship concern, for the lender to initiate such proceedings against guarantor who is a corporate person. A right or cause of action enures to the lender (financial creditor) to proceed against the principal borrower, as well as the guarantor in equal measure in case they commit default in repayment of the amount of debt acting jointly and severally. Further, held, the principal borrower may or may not be a corporate person, but if a corporate person extends guarantee for the loan transaction concerning a principal borrower not being a corporate person, it would still be covered within the meaning of expression “corporate debtor” in S. 3(8) IBC. The status of the guarantor, who is a corporate person, metamorphoses into corporate debtor, the moment principal borrower (regardless of not being a corporate person) commits default in payment of debt which had become due and payable. Thus, action under S. 7 IBC could be legitimately be invoked even against a guarantor who is corporate person.
[Laxmi Pat Surana v. Union Bank of India, (2021) 8 SCC 481]