Whether debt of Personal Guarantor or Third Party which arises out of different contract shall automatically extinguished after the approval of Resolution Plan – UV Asset Reconstruction Company Ltd. Vs. Electrosteel Castings Ltd. – NCLAT New Delhi
Hon’ble NCLAT holds that:
(i) After the approval of the Resolution Plan, entire debt of the Corporate Debtor against the Financial Creditor stand discharged and after approval of Resolution Plan, Financial Creditor can have no further recourse against the Corporate Debtor.
(ii) Law on extinguishment of claim against personal guarantor and third party on approval of Resolution Plan has been settled by Hon’ble Supreme Court in its judgment in Lalit Kumar Jain v. Union of India & Ors. (2021) ibclaw.in 61 SC, where the Hon’ble Supreme Court held that approval of resolution plan does not ipso facto discharge a personal guarantor (of a Corporate Debtor) of her or his liabilities under the contract of guarantee.
(iii) The law laid down by the Hon’ble Supreme Court is categorical that approval of a Resolution Plan does not ipso facto discharge a personal guarantor.
(iv) We have to look into the Resolution Plan to find out as to whether approval of Resolution Plan discharge guarantor or third parties or not.
(v) There is no finding recorded by the Adjudicating Authority in the impugned order that after approval of the Resolution Plan, it would lead to extinguishment and effacement of the entire debt of third party including the Corporate Debtor.
