Whether liability of the personal guarantor stand consequently reduced or extinguished on the secured financial creditor receiving the payments in terms of a Resolution Plan in respect of a company undergoing a process of CIRP under the provisions of the IBC, 2016- Gouri Shankar Jain Vs. Punjab National Bank & Anr. – Calcutta High Court

The Hon’ble High Court has clarified lots of questions including right to apply for insolvency does not arise out of a contract between the parties; Resolution plan is neither nor a compromise or composition nor voluntary compromise with the corporate debtor; Section 14 of the Code of 2016 does not apply to a personal guarantor; The existing contracts between the surety, principal debtor and the creditor remains unaffected during the moratorium under Section 14; Principal debtor has gone into liquidation would not have any effect on the liability of the guarantor; Pre insolvency right of the creditor does not undergo any metamorphosis on the principle; When, the creditor is dealing with the principal debtor in terms of the Code of 2016, the consent of the surety is not required; The sanctioned Resolution Plan cannot be construed to be a variation of the terms of the contract between the principal debtor and the creditor and held that the issue is answered in the negative and liability of the personal guarantor is not extinguished upon approval of the resolution plan. In view of the answer to the issue being in the negative, no relief can be granted to the writ petitioner.

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