While submitting the repayment plan in terms of the provisions of Section 105 of IBC, 2016 , the Personal Guarantor would be entitled to seek the benefit of all such payments which could be made to the Creditor by Principal Borrower or other Personal Guarantors as also the amount recovered by the Creditor from the Securities/Collaterals-NCLT Delhi

State Bank of India … Petitioner Versus Hem Singh Bharana NCLT Delhi  IB)-165(PB)/2021 IA-1058/2024 

Facts:

1) Application is filed by SBI for initiating insolvency proceedings against the personal guarantor under section 95 of the Code. 

Issue: Whether the application can be admitted ?

Argument:

Respondent:

1) Counsel submitted that In terms of the provisions of Section 60(2) of IBC, 2016, this Bench should not hear the present petition and since in the application filed by Union Bank of India against the Corporate Debtor, this Tribunal has passed order dated 11.06.2024, approving the resolution plan qua the Corporate Debtor, the Respondent stands absolved of his liability. 

Decision: NCLT admitted the application.

Rationale:

1) It held that  it is clear that the Contract of Guarantee is an independent contract and the liability of Personal Guarantor is different from that of the Principal Borrower. The Resolution Plan is not a contract, but is an instrument which takes shape in terms of provisions of Section 31(1) of IBC, 2016. Even if, the plan is perceived as a kind of contract though not a contract the same is formulated between the committee of creditors and the SRA and the Principal Borrower is not the party to the same in any manner.

2) It held that  not in a position to agree with the plea raised on behalf of the Personal Guarantor that with the approval of Resolution plan, the Personal Guarantor is absolved from his liability, incurred in terms of provisions of Deed of Guarantee.

Order: