Personal guarantor liability survives resolution plan where unpaid dues remain enforceable and Section 95 action stays within limitation

Section 95 insolvency applications against personal guarantors were treated as within limitation because the default had already been invoked, the debt was crystallised by prior adjudication, and later developments, including the COVID-related extension, preserved timeliness. The challenge based on limitation was rejected. The tribunal also held that approval and implementation of a resolution plan for the corporate guarantor do not, by themselves, discharge a personal guarantor's co-extensive liability unless the plan expressly provides for such release. As the plan did not extinguish the unpaid balance, the personal guarantee remained enforceable and the plea of discharge was rejected.

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Issues: (i) Whether the applications under Section 95 of the Insolvency and Bankruptcy Code, 2016 were barred by limitation; (ii) Whether approval and implementation of the resolution plan of the corporate guarantor extinguished the liability of the personal guarantors.

Issue (i): Whether the applications under Section 95 of the Insolvency and Bankruptcy Code, 2016 were barred by limitation.

Analysis: The default had been invoked earlier, the liability had been crystallised by the DRT adjudication, and the limitation period was held to have been extended by the subsequent adjudicatory developments and the effect of the Supreme Court's COVID-related extension of limitation. The later demand notice and the filing of the Section 95 applications were therefore treated as within time.

Conclusion: The objection of limitation was rejected.

Issue (ii): Whether approval and implementation of the resolution plan of the corporate guarantor extinguished the liability of the personal guarantors.

Analysis: The liability of a guarantor is co-extensive with that of the principal debtor, and the approval of a resolution plan does not by itself discharge the guarantor unless the plan expressly so provides. The resolution plan of the corporate guarantor did not nullify the surviving unpaid dues, and the personal guarantee remained enforceable for the balance amount.

Conclusion: The plea of discharge on account of the resolution plan was rejected.

Final Conclusion: The tribunal upheld admission of the Section 95 proceedings against the personal guarantors and found no merit in the challenge to the impugned order.

Ratio Decidendi: Approval of a resolution plan does not discharge a personal guarantor's co-extensive liability for unpaid dues, and a Section 95 application is maintainable where the debt remains crystallised and within limitation.

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