'Guarantee agreement holds the key in corporate borrowings'

New Delhi: Retired Justice MM Kumar on Thursday said that the government should ensure appointments of National Company Law Tribunal (NCLT) members together with appointment of the president and chairman of National Company Law Appellate Tribunal (NCLAT) at the earliest to dispose of more cases. He further highlighted the need of Section 128 of Indian Contract Act as it should be used more and more to write the guarantee agreement properly.

The former President of Associated Chambers of Commerce and Industry of India (Assocham India) said: "NCLT is a specialised tribunal, it has Companies Act and IBC (Insolvency and Bankruptcy Code), these specialist tribunals are required to be very well equipped and should be in a position to dispose of more cases."

Justice Kumar, while addressing the first session of an Asscoham series of National E-Summit on IBC and Valuation, further stated that the time has come for the government to take up these issues since the matters to be disposed of by NCLT stands at 750-800 cases. On liquidation period, (Retd.) Justice Kumar said: "Ease of Doing business is the banner, under that they can't show to the world at large that we take two years for liquidation. Therefore, if there is no efficient target fixed in law, there is a likelihood of being even more lazy."

He also said that Section 128 of Indian Contract Act should be used more and more to write the guarantee agreement properly.

"It is a very interesting section which says that liability of a guarantor is co-extensive with the principal borrower and in the contract of guarantee, a stipulation can be added that first the creditor will exhaust all the remedies against the corporate debtor, the principal borrower then he can resort to the personal guarantor."