Part III of the Code, as it applies to personal guarantors to corporate debtors, was brought into force by notification dated 15 November 2019. In Lalit Kumar Jain v. Union of India (2021), the Supreme Court upheld that notification and held that the approval of a resolution plan for the corporate debtor does not by itself discharge the personal guarantor. A creditor may proceed against both.
In Dilip B. Jiwrajka v. Union of India (2023), the Supreme Court upheld the constitutional validity of Sections 95 to 100. The Court held that the resolution professional appointed under Section 97 performs a facilitative role and does not adjudicate, so that no hearing is required before that appointment, and that the interim moratorium under Section 96 operates on the filing of the application.
For lenders, the route against a personal guarantor is now settled. For guarantors, the stage to raise every defence, whether on the existence of the guarantee, the debt or limitation, is before the Adjudicating Authority under Section 100, when it considers the report of the resolution professional under Section 99.
This note is for general information on the law as stated in the decisions cited and is not legal advice on any specific matter.