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Mahesh is the personal guarantor of a loan to Sun Ltd. Sun Ltd's resolution plan, approved under…

Lalit Kumar Jain (2021) held that "approval of a resolution plan does not ipso facto discharge a personal guarantor (of a corporate debtor) of her or his liabilities under…

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Mahesh is the personal guarantor of a loan to Sun Ltd. Sun Ltd's resolution plan, approved under section 31 of the Insolvency and Bankruptcy Code, 2016, pays the lender only part of its claim. Relying on Lalit Kumar Jain v Union of India (2021), can the lender still proceed against Mahesh for the balance?

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Correct answer A

Lalit Kumar Jain (2021) held that "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". The release of the corporate debtor by operation of law under section 31 does not release the surety. The 2026 Explanation I to section 31(6) likewise says the extinguishment of claims does not affect claims against a guarantor of the corporate debtor.

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