The sanction of a resolution plan and finality imparted to it by Section 31 of Insolvency and Bankruptcy Code, 2016 does not per se operate as a discharge of the guarantor’s liability.As to the nature and extent of the liability, much would depend on the terms of the guarantee itself.
Approval of a resolution plan does not ipso facto discharge a personal guarantor (of a corporate debtor) of her or his liabilities under the contract of guarantee. As held by this court, the release or discharge of a principal borrower from the debt owed by it to its creditor, by an involuntary process, i.e. by operation of law, or due to liquidation or insolvency proceeding, does not absolve the surety/guarantor of his or her liability, which arises out of an independent contract.
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