Subhash Chandra Case: When Company Debt Becomes a Promoter’s Problem

An August 25 order by the National Company Law Tribunal (NCLT), New Delhi, involving Zee Group founder Subhash Chandra has reignited the debate over India’s insolvency law and its effectiveness. The order approved a ₹6.5 crore repayment plan for creditors of Essel Group companies, the business group founded by Chandra, for which he had provided personal guarantees. 

According to the NCLT order, creditors had filed claims of ₹22,006 crore against the Essel Group companies involved in the proceedings. The approved repayment plan, however, requires ₹6.5 crore to be paid to creditors, implying a 99.9% haircut on the admitted claims.

Chandra has contested the claims, while government sources disputed reports that the order resulted in such a massive haircut. The figure, however, appears in the 144-page order and has been widely reported by the media.

The size of Chandra’s personal liability is disputed. On Thursday, government sources said Chandra had personally guaranteed ₹2,574 crore of the loans. Later, Chandra said his personal guarantees were worth around ₹3,900 crore. It also said guarantees worth around ₹2,000 crore had never been invoked by lenders before the matter went to the tribunal.

Chandra also questioned the resolution professional’s decision to admit certain claims and asked why creditors were pursuing his personal guarantees when several Essel companies had already settled their liabilities or proposed plans to do so.

The dispute raises a broader question: why can creditors pursue a promoter’s personal guarantees while simultaneously pursuing insolvency proceedings against the promoter’s companies?

What does the law say about personal guarantees?

A personal guarantee is essentially a promise by an individual to a lender that they will meet a corporate borrower’s obligations if the company fails to do so, subject to the terms of the guarantee.

For a bank, it provides an additional layer of security. This is why personal guarantees have been particularly common in loans to promoter-led businesses.

A promoter may control a company and its assets, but those assets legally belong to the company. A lender cannot simply treat the promoter’s personal wealth as collateral for a corporate loan. A personal guarantee changes that position.

For a long time, promoters were able to use gaps between different laws to shield their personal assets when their companies became insolvent. This continued even after the Insolvency and Bankruptcy Code (IBC) was introduced in 2016, as its provisions came into force in phases.

A 2018 Supreme Court judgment in State Bank of India v. V. Ramakrishnan changed the position.

The court made it clear that even if a company enters insolvency proceedings and receives protection under Section 14 of the IBC, lenders can continue to pursue a promoter under a personal guarantee.

The position was further strengthened two years later in Lalit Kumar Jain v. Union of India. The Supreme Court ruled that the liability of a guarantor does not disappear merely because a resolution plan has been approved for the corporate debtor.

“The approval of a resolution plan relating to a corporate debtor does not discharge a personal guarantor of her or his liabilities under the contract of guarantee. The liability of the guarantor is distinct, yet co-extensive, and the creditor is not precluded from proceeding against the guarantor,” the court said, according to specialised legal research and reporting platform IBC Laws.

The judgment became a milestone, leading to hundreds of applications being filed by banks and lenders against personal guarantors of corporate debtors.

Data from the Insolvency and Bankruptcy Board of India (IBBI) shows that creditors filed 27 applications against personal guarantors in FY20. The number surged to 282 the following year and reached 1,065 in FY25. 

Why go after both the company and promoter?

The simple answer is to maximise recovery from the debtor, particularly because the value of a company’s assets can deteriorate once it is unable to service its debt.

The issue that has arisen in Chandra’s case is the coordination of IBC proceedings against the principal borrower and its guarantors. 

In 2022, Indiabulls Housing Finance Ltd, now renamed Sammaan Capital Ltd, initiated insolvency resolution proceedings against personal guarantor Subhash Chandra in relation to ₹170 crore borrowed by group firm Vivek Infracon Pvt Ltd in 2016.

Although the dispute between Indiabulls Housing Finance and Vivek Infracon was settled in 2023, the personal guarantee proceedings continued and subsequently included other personal guarantees provided by Chandra for different group companies.

This coordination gap was also highlighted in a 2020 report by the Insolvency and Bankruptcy Board of India, the regulator overseeing insolvency.

An analysis by Aparna Ravi, partner at Samvad Partners, noted that while the IBC requires insolvency proceedings against a corporate or personal guarantor to be handled by the same NCLT bench dealing with the main borrower, courts have faced several ambiguities over how guarantor liabilities and recoveries should be treated after the company’s insolvency is resolved.

“There is currently no guidance on how proceedings against personal or corporate guarantors and their principal borrowers are to proceed in parallel,” Ravi wrote.

She added that, for stakeholders to realise the full potential of allowing IBC proceedings against both the principal borrower and guarantors, and to maximise value for all stakeholders, regulations were needed to coordinate these proceedings.

The Insolvency and Bankruptcy Code (Amendment) Act, 2026, passed in March, is expected to address some of these issues. 

According to Argus Partners, amendments to the Code and the CIRP Regulations ensure that guarantor-linked assets can now be factored into the corporate insolvency resolution process through a formal, Committee of Creditors-approved and disclosure-based process, instead of being dealt with outside the resolution framework.

What assets can be part of recovery?

Under the amended law, applications under Sections 94 and 95 of the IBC are required to be accompanied by a comprehensive statement of the personal guarantor’s assets, supported by relevant evidence.

The disclosure framework covers a wide range of asset classes, including cash, investments, movable and immovable property, digital assets, intellectual property, contingent assets, employee stock options and beneficial interests.

It also covers assets held directly or indirectly, jointly, in a fiduciary capacity or through nominees, trusts or similar arrangements.

“These enhanced disclosures are intended to provide a complete picture of the guarantor’s financial position and facilitate effective conduct of the insolvency resolution process,” the IBBI said in its latest quarterly report.

The new regulations also require the resolution professional appointed for the personal guarantor to coordinate with the resolution professional of the corporate debtor on matters relating to the transfer of guarantor assets under Section 28A of the Code.

The amendments require appropriate creditor approval and disclosure of such transactions in reports submitted under the Code, aimed at promoting coordinated resolution of interconnected insolvency proceedings.

Although it has become common practice for Indian lenders to pursue the personal assets of promoters, some cases have attracted particular attention.

In the case of Vijay Mallya, the SBI-led consortium invoked personal guarantees and sought recovery against his assets after defaults by United Breweries and Kingfisher Airlines. The Supreme Court also ordered Mallya to disclose his personal assets.

Former DHFL promoters Kapil Wadhawan and Dheeraj Wadhawan were declared bankrupt by the Mumbai NCLT over approximately ₹4,546 crore of dues in 2025.

Recently, Sebi issued an order attaching Dheeraj Wadhawan’s bank and demat accounts under a recovery certificate relating to DHFL. Sebi had also issued a demand notice against Kapil Wadhawan under a DHFL recovery certificate earlier in August.

In another prominent bankruptcy case, Bhushan Power & Steel’s former promoter Sanjay Singal’s personal guarantees were invoked after the company defaulted on loans worth around ₹48,000 crore to a consortium of banks in 2020.

In the same year, SBI invoked the personal guarantees of Anil Ambani before the Mumbai NCLT after Reliance Communications was sent to the tribunal for debt resolution.

What happens next in Chandra’s case?

Since the NCLT verdict came out on Tuesday, a group of lenders, including HDFC Bank, Union Bank of India, Canara Bank and LIC Housing Finance, have said they will challenge it.

These lenders had opposed the ₹6.5 crore repayment plan but were defeated by votes representing more than 80% of Chandra’s private creditors.

According to the NCLT order, one of the respondents challenged the resolution professional’s decision to admit claims filed by five entities — Veena Investments, Direct Media Distribution Ventures, World Crest Advisors, Lemonade Capital Advisors and Corpcall Capital Advisors.

Together, the five entities accounted for 61.78% of the voting share and played a key role in the approval of Chandra’s repayment plan. The tribunal, however, found no evidence to establish that the entities were related parties.

Chandra’s office said on Friday that the five companies belonged to his younger brother, Jawahar Goel. It said their business interests had been separated from Chandra’s as part of a family business reorganisation carried out in 2008-09.

The issue is expected to be one of the key points of contention as the case moves to higher appellate forums.