1 hr ago
IBBI Proposes Tighter Safeguards for Personal Guarantor Insolvency
India’s insolvency regulator wants to change how debt repayment plans for personal guarantors are reviewed.
A personal guarantor is someone who promises to repay a company’s loan if the company cannot.
The proposed rules would stop related people from voting on such plans.
They would also require an independent expert to value the guarantor’s property and other assets.
Creditors would receive this information before deciding whether to accept a plan.
The professional handling the case would also look for suspicious transactions.
The reasons behind the creditors’ decision would have to be written down.
The proposals follow a dispute involving Subhash Chandra, who says the largest debt figure includes company loans rather than money he personally borrowed.
The Insolvency and Bankruptcy Board of India proposed excluding guarantors’ related parties from voting on repayment plans.
The proposals would require valuation of personal guarantors’ assets and disclosure of fair and realisable values to creditors.
Resolution professionals would have to identify possible preferential, undervalued, fraudulent and extortionate credit transactions.
Creditors’ discussions and commercial reasons for approving sharply discounted plans would need to be recorded.
The proposals follow the Subhash Chandra case, involving a Rs 6.5 crore plan against claims cited at Rs 22,006 crore, though Chandra disputes that figure.
- Who
- The Insolvency and Bankruptcy Board of India, resolution professionals, creditors and Subhash Chandra are central to the matter.
- What
- The IBBI proposed amendments to rules governing insolvency resolution and repayment plans for personal guarantors to corporate debtors.
- Where
- The proposals concern India’s insolvency process; the related tribunal proceedings involve the National Company Law Tribunal and the National Company Law Appellate Tribunal in New Delhi.
- When
- The discussion paper was issued on September 12; comments were invited until October 3, while the National Company Law Tribunal acted in the Chandra case on September 1.
- Why
- The IBBI said the changes would strengthen safeguards, improve creditor decision-making and ensure greater scrutiny of guarantors’ assets and transactions.
IBBI and Creditors Seeking Greater Scrutiny
Subhash Chandra’s Position
Scale of the claims
IBBI and Creditors Seeking Greater Scrutiny
The IBBI’s proposals respond to concerns over repayment plans that could recover substantially less than admitted claims or the estimated value of a guarantor’s assets.
Subhash Chandra’s Position
Chandra argues that the widely cited Rs 22,006-crore amount does not represent money he personally borrowed, but claims arising from guarantees for loans raised by Essel Group companies.
Repayment plan
IBBI and Creditors Seeking Greater Scrutiny
Creditors would need asset valuations, information on possible avoidance transactions and a recorded commercial rationale before approving a significantly discounted repayment plan.
Subhash Chandra’s Position
A repayment plan involving about Rs 6.5 crore was proposed in Chandra’s case, while dissenting lenders challenged the plan before the National Company Law Appellate Tribunal.
Legal proceedings
IBBI and Creditors Seeking Greater Scrutiny
The National Company Law Tribunal barred Chandra from alienating his properties and issued notices to parties in the case.
Subhash Chandra’s Position
Chandra’s case remains under challenge and review, with the dispute focused on the claims covered by his personal guarantees and the proposed settlement.
Key facts
- Regulator
- Insolvency and Bankruptcy Board of India (IBBI)
- Proposed voting rule
- Related parties of a personal guarantor would receive a nil voting share and be separately identified in the creditors’ list.
- Asset valuation
- A registered valuer would determine the guarantor’s fair value and realisable value of assets.
- Creditor records
- Resolution professionals would record creditors’ deliberations and reasons for decisions on repayment plans.
- Case at issue
- A proposed settlement for Subhash Chandra would recover about Rs 6.5 crore against claims cited at roughly Rs 22,006 crore.
- Chandra’s position
- Chandra says the Rs 22,006-crore figure includes claims tied to Essel Group companies and estimates his personal guarantee claims at about Rs 3,990 crore.
- Public consultation
- Stakeholders were invited to submit comments on the proposed amendments by October 3.
Quotes
Insolvency and Bankruptcy Board of India
India’s insolvency regulator proposing amendments to resolution process regulations
“A related party of the guarantor shall be assigned a ‘nil’ voting share and the list of creditors prepared by the resolution professional shall separately indicate whether a creditor is a related party of the guarantor”
deccanchronicle.com
“The fair value, the realisable value and the valuation report should be placed before the creditors, along with the repayment plan, for their consideration”
deccanchronicle.com
Sources
Related news
Banks Challenge Subhash Chandra’s Rs 6.25-Crore Insolvency Payout
NCLT Stays Subhash Chandra’s Repayment Plan, Bars Asset Sales
Subhash Chandra repayment case: why the massive haircut isn't scandal
NCLT Stays Subhash Chandra Repayment Plan, Orders Fresh Hearing
Sources Clarify Subhash Chandra’s NCLT Claims, Reject ₹22,000 Crore Write-Off
NCLT Approval Exposes Huge Subhash Chandra Creditor Recovery Gap
IBBI Warns Against Misuse of Bankruptcy Resolution Process
Subhash Chandra Insolvency Case Faces Huge Haircut and NCLT Freeze
Subhash Chandra Insolvency Deal Intensifies Debate Over India’s IBC
IBC resolution plans jump 92% in Q1, ticket size falls
