The Assignment Paradox: Reconciling Personal Guarantor Liability with Debt Transfers under IBC Resolution Plans

This article examines the “assignment paradox” in Indian insolvency law, where creditors assign resolved corporate debts under IBC resolution plans while continuing to enforce personal guarantees, producing contradictory judicial outcomes and Article 14 concerns. It maps the split between “discharge on assignment” and “guarantee survival” lines of authority and shows how current approaches permit either creditor double recovery or arbitrary guarantor discharge. Drawing on Sections 31 IBC and 133–134 of the Contract Act, as well as key decisions including Essar Steel, Lalit Kumar Jain, Ramakrishnan and BRS Ventures, the article argues that tribunals have misread the statutory hierarchy governing guarantees. It proposes a Dual Consent Framework under which CoC commercial wisdom governs corporate restructuring, but any modification or extinction of guarantees requires express creditor–guarantor consent and NCLT verification of a “resolution value gap” cap on total recovery, reconciling collective efficiency with guarantor equity.

Dhiren Gupta