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2023 (8) TMI 998 - AT - Insolvency and BankruptcyApproval of Resolution plan - CIRP - NCLT rejected the plan - Plan contains the provision for extinguishment of personal guarantee of the personal guarantors - HELD THAT:- The Hon’ble Supreme Court again in LALIT KUMAR JAIN VERSUS UNION OF INDIA AND ORS. [2021 (5) TMI 743 - SUPREME COURT] had occasion to consider the provisions of the Code as well as the law pertaining to personal guarantor and the consequence of approval of the Resolution Plan on the rights of the personal guarantors. In the said judgment, the Hon’ble Supreme Court held that sanction of a resolution plan does not per se operate as a discharge of the guarantor’s liability. It was held that approval of a resolution plan does not ipso facto discharge a personal guarantor. The use of expressions ‘per se’ and ‘ipso facto’ clearly indicate that by approval of the Resolution Plan, personal guarantors are not per se and ipso facto discharge from its obligation which may arise of the guarantee given to the Financial Creditor. The use of above expressions conversely indicates that there may be situations and circumstances, for example, relevant clauses in the Resolution Plan by which personal guarantors may be discharged. The judgment of the Hon’ble Supreme Court in Lalit Kumar’s case cannot be read to mean as laying down law that personal guarantee never can be discharged in a Resolution Plan. There can be no dispute that Moratorium under Section 14 is not applicable on the personal guarantors. Non-applicability of the Moratorium on personal guarantor is with different object and purpose. Personal guarantors are liable along with the principal borrower and can be proceeded with for recovery of dues by the Financial Creditor but the question as to whether personal guarantee given to the Financial Creditor can be extinguished in a Resolution Plan is a question which is a separate question and was not under consideration by the Hon’ble Supreme Court in “State Bank of India vs. V. Ramakrishnan and Anr” [2005 (10) TMI 542 - SUPREME COURT]. The present is a case where CoC consciously considered the clauses in the plan for relinquishing the personal guarantees of the Financial Creditors and as noticed above for a consideration offered by the Successful Resolution Applicant for release of the personal guarantee passed the Resolution Plan accepting the clause in the plan for release of the personal guarantee - The present is not a case where issue pertaining to the release of the personal guarantee was not before the CoC and was not deliberated. There is no error in the consideration of the CoC of the Resolution Plan and the commercial wisdom of the CoC by approving the Resolution Plan has to be given due weightage. The Adjudicating Authority committed error in rejecting the Application for approval of the Resolution Plan on the ground that plan could not have contained a provision for extinguishment of personal guarantee of the personal guarantors. Plan allocates a plan value for extinguishment of personal guarantee which has been accepted by the Financial Creditors by a vote share of 78.04% - the order of the Adjudicating Authority dated 06.01.2023 is unsustainable - Appeal allowed.
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