If Secured Financial Creditors have assigned their entire debt from the Borrower to the Successful Resolution Applicant under a Resolution Plan, they cannot invoke the Personal Guarantees after approval of the Resolution Plan – State Bank of India Vs. Mr. Prashant S. Ruia – DRT Ahmedabad Bench (DRT-1)
April 20, 2022
It was argued on behalf of Personal Guarantors that as the entire debt of the principal borrower came to be assigned to the ArcelorMittal, no debt could be said to be due on the books of account of the Bank. In other words, the argument is that no debt exists as on date so far as the Applicant - Bank is concerned. The entire debt owed by the principal borrower to the Bank stood completely extinguished in light of the resolution plan. In the absence of any debt remaining to be paid to the Bank, the question of enforcing the personal guarantees in relation thereto would not survive. The Tribunal held that a conjoint reading of the clauses of the Deed of Guarantee and the approved Resolution Plan reveals that the Secured Financial Creditors have assigned their entire debt from the Borrower (i.e.ESIL) to the resolution applicant (i.e.Arcelor) under the Resolution Plan and have also accepted the amounts paid to them by Arcelor in discharge of the total debt owed by the ESIL to such Financial Creditors. This factual matrix invariably leads to the singular conclusion that the debt owed by the ESIL to the said Financial Creditors stands fully and finally satisfied.
