The Resolution Plan excludes personal guarantors, limiting the ...

NCLT resolution plan excludes personal guarantors, assignee NBFC can't recover from them. Debt liability survives between lenders & guarantors.

Case Laws     Insolvency and Bankruptcy

August 9, 2024

The Resolution Plan excludes personal guarantors, limiting the assignment of debt and security interests to the corporate debtor only. Consequently, the assignee NBFC cannot recover debt from guarantors, as they are excluded from the Resolution Plan and assignment process. The surviving liability for debt is retained by the original financial creditors, including the bank, to be exercised solely against the guarantors. The corporate debtor is absolved by law under the Resolution Plan, while the assignee never acquires the right to recover from guarantors. The debt survives only between financial creditors/bank and guarantors. Despite account classification as NPA, borrowers can regularize accounts by repaying loans. Conversely, failure to repay despite means can lead to Wilful Defaulter declaration under RBI guidelines. The HC allows the petition, setting aside the decision confirming the petitioner as a Wilful Defaulter.

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