The Supreme Court affirmed the provisions of the Insolvency and Bankruptcy Code relating to personal guarantors' insolvency that was enacted in 2019 and empowered banks to move an application for initiation of insolvency against personal guarantors.

In the instant case titled  Lalit Kumar Jain vs. Insolvency and Bankruptcy Board Of India two issues were raised before the Supreme Court for clarification:

1. The position of law in the Insolvency and Bankruptcy Code relating to insolvency of personal guarantors.

2. The liability of the personal guarantor to the corporate debtor in case the resolution plan is approved.

With regard to the first issue, The court upheld the validity of the contested notification. The Court found that the contested notification is not an example of excessive legislative exercise since the Code does not require that it be applied in its entirety to all individuals at the same time. As a result, the exercise of power in issuing the challenged notification under Section 1(3) is not unconstitutional. The Hon'ble Court further stated that the personal guarantors and their corporate debtors had an "intrinsic" link.

As on the second issue, the court held that a personal guarantor (of a corporate debtor) is not ipso facto released from her or his obligations under the guarantee contract because of the resolution plan. The sanction of a resolution plan and the finality conferred on it by Section 31 does not, as this court has decided, act as a discharge of the guarantor's liability. That an involuntary procedure, such as through operation of law or owing to liquidation or insolvency, does not acquit the surety/guarantor of his or her duty arising from an independent contract.

The Court categorically held that:

“impugned notification is not an instance of legislative exercise or amounting to impermissible and selective application of provisions of the Code. There is no compulsion in the Code that it should, at the same time, be made applicable to all individuals, (including personal guarantors) or not at all. There is sufficient indication in the Code- by Section 2(e), Section 5(22), Section 60 and Section 179 indicating that personal guarantors, though forming part of the larger grouping of individuals, were to be, in view of their intrinsic connection with corporate debtors, dealt with differently, through the same adjudicatory process and by the same forum (though not insolvency provisions) as such corporate debtors."

The notification in question is found to be legal and valid. It is also held that approval of a corporate debtor's resolution plan does not discharge personal guarantors' obligations (to corporate debtors). The writ petitions transferred cases and transfer petitions are accordingly dismissed in the terms set forth above, with no order as to costs. The petition challenging the notification of November 15, 2019, and the Insolvency and Bankruptcy (Application to Adjudicating Authority for Insolvency Resolution Process of Personal Guarantors to Corporate Debtors) Rules, 2019 was dismissed by the court.