Resolution plan rights against personal guarantors upheld; subrogation did not survive and no mere right to sue was transferred.

In a corporate insolvency resolution plan, rights expressly carved out and retained by financial creditors, including recourse against personal guarantors, were held valid where only the remaining debt was assigned to the purchaser SPV and the plan preserved excluded rights; the challenge that this amounted to an impermissible transfer of a mere right to sue failed. The tribunal also held that guarantors' subrogation rights did not survive against the corporate debtor after plan approval, because the Insolvency and Bankruptcy Code prevails over general suretyship principles and requires resolution on a clean slate.

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Issues: (i) Whether the approved resolution plan could validly preserve the financial creditors' rights under the "Excluded Rights" clause to proceed against the personal guarantors after assignment of the remaining debt to the purchaser SPV; (ii) whether the guarantors' right of subrogation survived approval of the resolution plan; and (iii) whether retention of remedies against the guarantors amounted to an impermissible transfer of a mere right to sue under Section 6(e) of the Transfer of Property Act, 1882.

Issue (i): Whether the approved resolution plan could validly preserve the financial creditors' rights under the "Excluded Rights" clause to proceed against the personal guarantors after assignment of the remaining debt to the purchaser SPV.

Analysis: The approved plan separately defined "Remaining Debt" and "Excluded Rights". Only the remaining debt was assigned to the purchaser SPV, while the plan expressly preserved the financial creditors' rights to enforce guarantees and other remedies in respect of the excluded rights. The plan was approved in exercise of the commercial wisdom of the CoC, and the Adjudicating Authority had already recorded that any provision inconsistent with Section 30(2)(e) of the Insolvency and Bankruptcy Code, 2016 would not be treated as approved. The appellate tribunal held that the plan did not extinguish the creditors' remedies against the guarantors.

Conclusion: The clause preserving recourse against the personal guarantors was held valid and enforceable, in favour of the respondent.

Issue (ii): Whether the guarantors' right of subrogation survived approval of the resolution plan.

Analysis: The tribunal relied on Sections 140 and 141 of the Indian Contract Act, 1872 and noted that, in insolvency resolution, those general suretyship principles yield to the scheme of the Insolvency and Bankruptcy Code, 2016. It held that the object of the Code is resolution of the corporate debtor on a clean slate and that continued subrogation claims would undermine the resolution and expose the corporate debtor to revived claims after plan approval. In view of Section 238 of the Code and binding precedent, the right of subrogation was treated as not surviving against the corporate debtor after approval of the plan.

Conclusion: The guarantors had no surviving right of subrogation against the corporate debtor after plan approval, against the appellants.

Issue (iii): Whether retention of remedies against the guarantors amounted to an impermissible transfer of a mere right to sue under Section 6(e) of the Transfer of Property Act, 1882.

Analysis: The tribunal held that Section 6(e) was not attracted because the resolution plan did not transfer a bare right of litigation. The plan retained specific, independent rights in favour of the financial creditors and carved them out from the assignment. Since the creditors' remedies against the guarantors were expressly preserved and were not assigned to the SPV, the situation was not one of transfer of a mere right to sue. The tribunal also observed that the insolvency framework and the approved plan enabled such allocation of rights in aid of resolution.

Conclusion: The challenge based on Section 6(e) failed, against the appellants.

Final Conclusion: The resolution plan was upheld to the extent that it preserved the financial creditors' remedies against the personal guarantors, while the appeals challenging that treatment were rejected.

Ratio Decidendi: In a corporate insolvency resolution plan, rights expressly carved out and retained by financial creditors, including recourse against personal guarantors, are not a transfer of a mere right to sue, and the guarantors' subrogation claims do not survive against the resolved corporate debtor where the plan and the Code so provide.

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