One Debt, Multiple CIRPs: Supreme Court Rewrites the Rules for Creditors

The Supreme Court has, through a recent decision (2026 INSC 201), now conclusively settled a long-standing controversy under the Insolvency and Bankruptcy Code, 2016 (“IBC”) whether a financial creditor can initiate CIRP against both a principal borrower and its guarantor for the same debt.

For a while, tribunals were taking a restrictive view. Based on Vishnu Kumar Agarwal v. Piramal Enterprises[1], the approach was that once CIRP is admitted against one entity, a second proceeding for the same debt should not be allowed. This created real practical problems for lenders, especially in structured financings where guarantees are central. This judgment corrects that position and brings the law back in line with commercial reality.

The confusion stemmed from two competing principles. On one hand, the IBC is not a recovery mechanism but a resolution framework. On the other hand, guarantors are co-extensively liable for the same debt. Tribunals began treating these principles as mutually exclusive, leading to the restrictive view that once CIRP is admitted against one entity, proceedings against others for the same debt are barred.

The Supreme Court identified this gap and reframed the issue. As per the Supreme Court, the real question is not whether there is one debt, but whether the law allows action against all parties who are liable for that debt.

The Court held that simultaneous CIRP is permissible against all liable parties. This flows from the settled principle that the liability of a guarantor is co-extensive with that of the principal borrower.

The Court further relied on the structure of the IBC, particularly Section 60(2), to emphasise that the statute itself contemplates parallel proceedings before the same adjudicating authority. Rejecting the earlier “one debt, one CIRP” approach, the Court clarified that insolvency proceedings are entity-specific. Each CIRP concerns a distinct legal entity with its own asset pool and resolution process, and therefore cannot be treated as duplicative merely because the underlying debt is common.

The argument that creditors must elect between proceeding against the borrower or the guarantor was also rejected. The Court held that the doctrine of election does not apply, as the remedies are not inconsistent. A creditor is merely enforcing the same obligation against multiple liable parties. Requiring such an election would undermine the commercial purpose of guarantees and could prejudice creditors, particularly where resolution extinguishes part of the claim.

That being said, the Court acknowledged concerns of double recovery but clarified that the framework contains adequate safeguards. Creditors must update claims to reflect recoveries, and resolution professionals are required to ensure appropriate adjustments. While parallel proceedings are permissible, recovery remains capped at the total amount due.

Anhad Law’s Perspective

From a practical standpoint, this judgment significantly restores the commercial value of guarantees. Financial creditors can now proceed against both borrowers and guarantors without the risk of technical rejection, strengthening their enforcement strategy in complex financing structures.

For borrowers and guarantors, the ruling expands exposure, as parallel insolvency proceedings may now be initiated against multiple group entities.

For resolution professionals and committees of creditors, the decision introduces greater coordination challenges. Parallel CIRPs will require careful claim management to avoid duplication and ensure accurate recoveries.

At a broader level, the judgment underscores the need for a structured group insolvency framework an area where the IBC remains underdeveloped.

Overall, the ruling marks a decisive shift away from restrictive interpretations and aligns insolvency law with commercial realities, while maintaining safeguards against over-recovery.

© Anhad Law

Dhruv Gandhi, Partner and Ravi Kumar, Senior Associate