Lenders rush to invoke personal guarantees of promoters | Business Standard News

Clipped from: https://www.business-standard.com/article/finance/lenders-rush-to-invoke-personal-guarantees-of-promoters-121090701089_1.html

Lenders invoke guarantees worth Rs 34,000 cr

Bank NPAsIllustration: Ajay Mohanty

Armed with a favourable Supreme Court judgement, the Indian lenders have started invoking the personal guarantees of defaulting promoters by taking action against 56 accounts in the June quarter to invoke guarantees amount worth Rs 8,437 crore.

In total, lenders have invoked personal guarantees worth Rs 34,000 crore (see chart) in 201 cases till date. The total debt, which was defaulted by companies, was worth Rs 37,861 crore in these 201 cases.

This was soon after the lenders invoked personal guarantees of 115 accounts after their companies defaulted on debt worth Rs 26,000 crore in the fiscal ending March 2021. As per the information received from the insolvency professionals, 201 applications have been filed as of June 30, 2021. Of this, 17 applications have been filed by the debtors and 184 applications by the creditors under Sections 94 and 95 of the IBC 2016, respectively, as per data collated by the IBBI.

Creditors are now filing more cases in the NCLT as only seven suits have been filed before the Debt Recovery Tribunal (DRT) while 194 have been filed before the National Company Law Tribunals. Lenders said more cases will be filed now as law is very clear after the SC judgement.

In May this year, the Supreme Court had upheld a government notification of 2019 to invoke personal guarantees of promoters whose companies defaulted on bank loans.

The court ruling allowed banks to file personal bankruptcies against top Indian promoters whose companies have been sent to the National Company Law Tribunal (NCLT) for debt resolution. Lenders have already invoked the personal guarantees of companies including Bhushan Steel, Bhushan Power and Steel, Punj Lloyd, and Reliance Communications, which were sent to the NCLT for defaulting on bank loans.

Promoters of several Indian companies had earlier accused their professional managers of fraud and diverting company funds. But lawyers said they would not get any respite from the IBC as lenders will now invoke their personal guarantees.

No of accountsGuarantee Amount
202015Rs 4496 cr
2021128Rs 21,000 cr
June Quarter57Rs 8,587 cr
Total201Rs 34,084 cr

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