Appeal dismissed, guarantors remain liable post Resolution Plan acceptance. Creditor's choice to proceed.

The court dismissed the appeal, affirming the Adjudicating Authority's order. It held that the guarantors' liability was not discharged by the acceptance of the Resolution Plan, and they remain liable. The court also ruled that the creditor can choose to proceed against one or more guarantors and that the Liquidator's acceptance of the Consortium of Banks' claim was valid. Additionally, the court found no merit in the fraud allegations regarding the Guarantee Agreements.

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Issues Involved:

1. Whether the appellants are deemed to have discharged their liability as guarantors upon the approval of the claim of Respondent Nos. 2 to 6 in the CIRP proceeding of PMPL.
2. Whether Respondent Nos. 2 to 6 are entitled to proceed against the guarantor, Hari Machine Ltd., without proceeding against other guarantors.
3. Validity of the acceptance of the Consortium of Banks' claim by the Liquidator.
4. Allegations of fraud and the legality of the Guarantee Agreement.

Detailed Analysis:

Issue 1: Discharge of Liability as Guarantors

The appellants contended that the liability of the guarantors ceased to exist once the Resolution Plan was accepted by the Committee of Creditors (CoC) and approved by the Adjudicating Authority. They argued that the acceptance of the Resolution Plan for Rs. 37,02,26,590/- discharged the guarantors. However, the judgment referenced Sections 133, 134, 135, and 136 of the Indian Contract Act, emphasizing that the liability of the guarantors is not discharged by the acceptance of the Resolution Plan. The court cited the judgment in "State Bank of India vs. V. Ramakrishnan" and "Lalit Kr. Jain vs. Union of India," which clarified that the approval of a Resolution Plan does not discharge a guarantor's liabilities. The court held that the rights of creditors under the Contract of Guarantee are not extinguished by the Resolution Plan, and the guarantors remain liable.

Issue 2: Proceeding Against One Guarantor

The appellants argued that the Consortium of Banks should have proceeded against all guarantors equally as per Section 146 of the Indian Contract Act. However, the court held that it is the prerogative of the creditor to proceed against any or all guarantors. The court cited several judgments, including "Ram Kishun & Ors v. State of U.P. and others," which affirmed that the creditor can choose to proceed against one or more guarantors without being directed by the guarantors. The court concluded that the creditor's right to recover from any of the guarantors is valid, and the appellants' contention lacks merit.

Issue 3: Acceptance of Consortium of Banks' Claim by the Liquidator

The appellants challenged the Liquidator's acceptance of the Consortium of Banks' claim, arguing that it violated Section 146 of the Indian Contract Act and reduced their share. The court noted that the Liquidator is bound to verify and admit claims as per Sections 38 and 39 of the IBC. The court found that the Liquidator followed due process in admitting the claim of the Consortium of Banks and that the appellants did not file an appeal under Section 42 of the IBC against the Liquidator's decision. The court held that the Liquidator's decision was in accordance with the law and affirmed the Adjudicating Authority's order.

Issue 4: Allegations of Fraud and Validity of Guarantee Agreement

The appellants alleged that the Guarantee Agreements were obtained fraudulently and that the agreements did not contain the signature of an authorized person of PMPL. The court found no factual basis for the fraud allegations and noted that the appellants admitted to the execution of the Guarantee Agreements. The court held that the appellants could not approbate and reprobate by admitting the agreements and later alleging fraud. The court affirmed the Adjudicating Authority's finding that there was no fraud in obtaining the Guarantee Agreements.

Conclusion:

The court dismissed the appeal, affirming the Adjudicating Authority's order and holding that the appellants' contentions lacked merit. The court concluded that the appellants remain liable as guarantors, the Liquidator's acceptance of the Consortium of Banks' claim was lawful, and there was no fraud in obtaining the Guarantee Agreements.

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