Full Payment Of Admitted Claim In Guarantor's CIRP Bars Creditor's Recovery From Principal Borrower

The NCLT Guwahati has recently held that full settlement of an admitted claim under a resolution plan in the corporate guarantor's CIRP discharges the debt, extinguishing the creditor's rights against both the borrower and the guarantor.

A coram of Judicial Member Rammurti Kushawaha and Technical Member Yogendra Kumar Singh was dealing with applications arising out of the Corporate Insolvency Resolution Process of National Plywood Industries Limited.

“Upon implementation of the Resolution Plan and payment of ₹2,04,72,967/-, all claims of the Financial Creditor arising from the said debt, against both the Corporate Debtor/Guarantor and the Principal Borrower, shall stand fully extinguished.” It held

IDBI Bank had granted loan facilities of over Rs 3 crore to National Boards Limited in March 1997 under its project finance scheme. National Plywood Industries Limited executed a Deed of Corporate Guarantee for the said loan.

Upon default, IDBI Bank initiated recovery proceedings against the borrower and its guarantors. Meanwhile, IDBI Bank assigned its debts in favour of Omkara Assets Reconstruction Private Limited. Subsequently, insolvency proceedings were initiated against the guarantor.

During the CIRP, Omkara ARPL's claim, originally exceeding Rs.16 crore, was finally admitted at Rs.2.04 crore after adjudication up to the Supreme Court.

The resolution plan approved by the Committee of Creditors proposed full payment of the admitted claim of Omkara ARPL. However, upon such payment, Clause 7.4(d)(ii)(g) of the resolution plan also required release of securities, issuance of a no objection certificate, and withdrawal of proceedings.

Omkara ARPL filed an application challenging the clause. It contended that while the guarantor's liability may be settled under the resolution plan, its independent rights against the principal borrower could not be extinguished.

The resolution professional contended that once the resolution plan is implemented and the amount is paid, nothing more would be owed by either the guarantor or the borrower, since the liability of the guarantor is co-extensive with that of the borrower.

The tribunal noted that the resolution plan, including the clause in challenge, was approved by the CoC with the required majority. Although the Omkara ARPL dissented, it is receiving full payment exceeding its liquidation entitlement.

“To permit the Financial Creditor to retain securities or pursue further recovery against the Principal Borrower after receiving 100% of the finally adjudicated debt would result in unjust enrichment and defeat the doctrine of subrogation.” It observed

Accordingly, the application challenging the clause was disposed of. However in a separate plea filed by another unsuccessful resolution applicant, the tribunal remanded the matter back to CoC to reconsider the feasibility of the plan.

Case Title: Omkara Asset Reconstruction Private Limited v. Amit Pareek

Case Number: IA(IBC)/137/GB/2024 IA(IBC)(Plan)/1/GB/2024 and IA(IBC)/50/GB/2025 in CP(IB)/9/GB/2019

Citation: 2026 LLBiz NCLT (GUA) 59

For Applicants: Advocates A. Anand, A. Kulkarni, G. Mitra, Mr. V. Hirawat and Resolution Professional A Pareek

For Respondents: Advocates A. Sarkar, I. Saha and S. Gautam