Indiabulls Housing Finance (IBHF) has reignited its personal insolvency petition against Subhash Chandra, the chairman emeritus of Zee Entertainment Enterprises Limited (ZEEL), concerning guarantees provided to Vivek Infracon.
During a session at the National Company Law Tribunal (NCLT) on February 28, IBHF’s counsel, Sumesh Dhawan, presented arguments for over an hour. The case is slated for further consideration on March 4 as the NCLT evaluates the report submitted by Chandra’s resolution professional, Raj Kamal Sarogi.
IBHF contends that despite Chandra’s assertion of reaching a settlement in the dispute, no resolution has materialized even after several months, prompting them to revive the personal insolvency plea.
Filed under the Insolvency and Bankruptcy Code, 2016 (IBC), the plea initially arose in 2022 when IBHF sought to initiate personal insolvency proceedings against Chandra after a Rs 170 crore loan extended to Vivek Infracon turned into non-performing assets. Chandra had argued against NCLT’s jurisdiction over individual insolvency matters. However, on May 30, 2022, the tribunal affirmed its authority to adjudicate Chandra’s solvency and appointed a resolution professional to review IBHF’s application. Legal proceedings were temporarily halted when provisions regarding personal guarantees under IBC were contested in the Supreme Court. However, in November 2023, the Supreme Court upheld the validity of these provisions, allowing companies to resurrect cases against personal guarantors, thus prompting IBHF to revive the plea.
Personal guarantors are individuals who provide written assurances to lenders regarding a company’s repayment of loans or credit facilities. If the company defaults, the personal guarantor’s personal assets can be seized by the lender.
The IBC, amended in 2019, enables creditors or the resolution professional of a company to initiate proceedings under the IBC to enforce personal guarantees. This provision empowers lenders, either independently or through the resolution professional, to pursue insolvency action against promoters who have given personal guarantees to lenders of a company undergoing insolvency proceedings.
Subsequently, the NCLT appoints a resolution professional to represent the personal guarantor, collate relevant information regarding the loan, default amount, and the guarantor’s involvement. Based on the resolution professional’s findings, the NCLT determines whether to admit the personal guarantor into the insolvency process.
If admitted, the resolution professional seizes the personal guarantor’s assets for loan recovery.
