Guarantor cannot enjoy a right of subrogation when the payment is made by the guarantor with respect to the debt for which the guarantee is provided – State Bank of India Vs. Shri. Ghanshyam Surajbali Kurmi – NCLT Hyderabad Bench
Adjudicating Authority held that conclusion of Corporate Insolvency Resolution Plan does not bar Financial Creditor against Guarantor, and Financial Creditor can always approach this Adjudicating Authority as envisaged under the Code. Financial Creditor is also at liberty to initiate Interim Resolution Professional/Personal Guarantor the resolution plan approved by Adjudicating Authority is not for recovery but for revival. Further as per Section 134 of the Indian Contract Act, 1872, a guarantor is discharged of its liability towards the creditor only if the creditor on its own instance discharges the principal debtor through voluntary act of the creditor and not due to operation of law. Further, it held that guarantor cannot enjoy a right of subrogation when the payment is made by the guarantor with respect to the debt for which the guarantee is provided.
