Mint Explainer: What the Subhash Chandra case means for personal guarantors
Mint delves into the case and explains how the Supreme Court judgement allows creditors to take high-profile personal guarantors into insolvency, leading to a rise in such litigations. In 2016, Indiabulls Housing Finance (IHF) entered into four loan agreements totaling ₹726 crore with Vivek Infracon and other entities. Chandra assumed the role of personal guarantor on 5 December 2018, committing to repay the lender ₹726 crore in case the borrowers defaulted.
On 4 February 2019, IHF exercised its right to recall the entire loan amount, prompting the invocation of Chandra's personal guarantee. A formal demand notice was sent to him on 18 January 2022 seeking repayment ofVivek Infracon's ₹178.78-crore loan. IHF initiated insolvency proceedings against Chandra under the IBC on 8 February 2022.
In response, Chandra argued that the NCLT could not rule on an individual's insolvency. However, on 30 May 2022, the NCLT ruled it had the power to adjudicate Chandra's insolvency and appointed a resolution professional to consider Indiabulls's application and investigate Chandra's debt. Chandra challenged the NCLT's decision in the National Company Law Appellate Tribunal (NCLAT), but the case was closed following Indiabulls's announcement of a settlement.
During this time, several petitions challenging the validity of certain provisions of the IBC, including those concerning personal guarantors, were filed in the Supreme Court, which halted all personal-guarantee insolvency proceedings. In November 2023, the court upheld the law allowing creditors to take personal guarantors into insolvency. In February 2024 Indiabulls revived the case after unsuccessful attempts to settle the dispute, ultimately leading to Chandra's admission into
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