NCLT Verdict in Subhash Chandra Personal Guarantee Case to Prompt Closer Scrutiny by Lenders

Recent legal outcomes surrounding Zee Group promoter Subhash Chandra's personal guarantee case are expected to influence how financial institutions approach similar recovery proceedings. The case is likely to impact lenders pursuing ongoing matters involving Anil Ambani, Venugopal Dhoot, and the legacy case of Sanjay Singhal, former promoter of Bhushan Power and Steel.

Data over the last six financial years shows that approximately 4,203 cases against personal guarantors involving claims worth ₹2.78 lakh crore have been filed. Resolution professionals have been appointed in 1,832 of these cases, with 664 admitted. Only 39 cases have resulted in approved repayment plans, yielding creditors ₹129 crore, which accounts for 2.49 percent of the admitted claims.

The roots of the Chandra case trace back to a loan taken by Vivek Infracon, for which he provided a personal guarantee for a ₹170-crore loan. After the loan turned bad, Indiabulls Housing Finance initiated action against Chandra, and the NCLT admitted the case in April 2024. The resulting verdict yielded a recovery of ₹6.5 crore against claims amounting to ₹22,007 crore, returning roughly three paise to lenders for every ₹100 claimed.

Akshaya Bhansali, Managing Partner at Mindspright Legal, noted that the verdict will encourage lenders to evaluate personal guarantees more carefully to determine corresponding recovery. She added that this may result in greater scrutiny of promoter net worth, asset tracing, and actual recoverability during credit sanctioning and strategy formulation.

Similar proceedings continue across the financial sector. In June, the NCLT Mumbai admitted State Bank of India's personal insolvency proceedings against Anil Ambani to recover ₹1,200 crore related to personal guarantees for loans extended to Reliance Communications, which entered insolvency in 2019. In April, an SBI-led consortium initiated personal insolvency proceedings against Venugopal Dhoot over an estimated ₹61,000-crore exposure linked to the erstwhile Videocon Group.

Legal professionals point out that the legal battles are far from finished. Kaushal Parsekar, Partner at King Stubb & Kasiva, highlighted that HDFC Bank opposed the Chandra settlement and is considering an appeal. He stated that an appellate court will examine specific facts, the statutory framework, creditor and guarantor conduct, and the correct application of the insolvency process rather than letting the magnitude of the haircut solely determine validity.

Amit Kumar Nag, Partner at AQUILAW, noted that future contentions will likely center on whether a substantial decline in net worth should trigger mandatory independent valuation or verification before a creditor vote, rather than after. He added that creditors will likely place greater emphasis on forensic asset tracing and verification prior to voting on proposed plans.

"The recent NCLT verdict involving personal guarantees highlights the growing challenges lenders face in recovering dues from high-profile legacy cases. With low recovery rates coming to light, financial institutions are naturally rethinking their risk assessment frameworks. Moving forward, we can expect lenders to implement stricter forensic asset tracing and deeper net-worth evaluations before sanctioning credit or relying heavily on personal guarantees as a safety net." — Dr. Shishir Gupta, Founder & CEO, StartupLanes