BT Explainer: How the NCLT order in the Subhash Chandra case exposed gaps in personal guarantor cases and what could be done to improve outcomes
Data from the Insolvency and Bankruptcy Board of India (IBBI) shows, in the 2,137 cases related to insolvency resolution of personal guarantors where resolution professional had been appointed, only 64 cases had yielded approval of repayment plan as of June 2026, with creditors realising Rs 234.56 crore.
- Aug 29, 2026,
- Updated Aug 29, 2026 7:24 PM IST
Earlier this week, the National Company Law Tribunal (NCLT) approved Essel Group founder Subhash Chandra’s repayment plan of Rs 6.5 crore. Admitted creditor claims were around Rs 22,006.57 crore. Seemingly, it would result in a 99.97 per cent haircut to creditors.
Chandra himself later clarified that the actual amount claimed against him as a personal guarantor was only around Rs 3,900 crore. He hadn’t personally guaranteed the entire Rs 22,006.57 crore in claims. Nevertheless, this judgement has raised a crucial question on how much can banks actually recover from personal guarantors when a company goes bankrupt?
A personal guarantor is essentially a borrower who has provided a guarantee or promise to pay in case the borrower fails to repay the loans. Ideally, then, should a company default, the guarantor can be held liable to repay. However, a lot may actually depend on how many assets the guarantor actually has at the time of recovery.
MUST READ: Essel Group debt: Now, LIC Housing Finance, Union Bank to challenge NCLT's repayment plan
According to Akshat Khetan, founder of AU Corporate Advisory and Legal Services, while, corporate insolvency has registered valuers, prescribed methodologies and a fair-value-versus-liquidation-value exercise under the CIRP Regulations, the personal insolvency framework leans heavily on what the debtor discloses to the resolution professional.
In Subhash Chandra’s case, the presently disclosed net worth is around Rs 31.79 crore, significantly lower than older certificates that had shown net worth of Rs 45,888 crore in 2017 and Rs 40,562 crore in 2018.
“Some of that gap is the honest destruction of value that follows a leveraged group unwinding. Some of it may not be,” Khetan opined.
Data from the Insolvency and Bankruptcy Board of India (IBBI) show that, in the 2,137 cases related to insolvency resolution of personal guarantors where a resolution professional had been appointed, only 64 cases had obtained approval of a repayment plan as of June 2026. The creditors have realised Rs 234.56 crore in the cases where repayment plans were approved, which was just 1 per cent of the admitted claims.
At the end of the January-March 2026 quarter, there were 2,069 cases related to insolvency resolution of personal guarantors where a resolution professional had been appointed and out of these in 44 cases repayment plans had been approved. Also, in the cases where repayment plans were approved, the creditors had realised Rs 102.78 crore, which is 2.16 per cent of their admitted claims.
The Insolvency and Bankruptcy Code was amended this year, which aimed to strengthen creditor oversight and improve procedural clarity.
MUST READ | LIC Housing’s Rs 1,322-cr Subhash Chandra claim cut to Rs 38 lakh under NCLT plan: Report
The promoter guarantee
According to Khetan, for almost two decades, the promoter guarantee has functioned as a “comfort document,” rather than a “credit enhancement.” He states that a net-worth certificate collected at sanction is rarely refreshed.
“A guarantee that is not monitored is not security. It is sentiment. Lenders who priced credit on the strength of a promoter's name and did nothing to track that name's balance sheet have been discovering the difference in tribunal after tribunal, and the Chandra order is simply the most legible instance so far,” he pointed.
He stresses that recovery from a guarantor is overwhelmingly a function of how early one moves, and he feels Indian leaders don’t move quickly.
Chandra was taken to the insolvency and bankruptcy court in April 2024 by Indiabulls Housing Finance (now Samman Capital) after a Rs 170 crore loan the lender had given to Vivek Infracon turned bad. Chandra had stood as a personal guarantor to that loan. Subsequently, other lenders filed their own claims and the amount thus swelled to Rs 22,006.57 crore.
After the original two-member NCLT bench differed on the repayment plan, a third member was included by the NCLT and he approved the plan whereby Chandra would have to pay only Rs 6.5 crore.
In his defence, Chandra said on Friday that the Essel Group has already repaid about Rs 43,000 crore of its total Rs 45,000 crore borrowings.
DON'T MISS | 'Essel Group repaid ₹43,000 crore debt': Subhash Chandra seeks independent audit to examine his debt
The repayment plan received 80.81 per cent support from creditors. Several lenders, however, opposed the plan and are now preparing to appeal against it in the appellate tribunal.
LIC Housing Finance said on Saturday that it would immediately file an appeal before the NCLAT. State-owned lender Union Bank of India is also going to appeal against the repayment plan.
“Union Bank of India (UK) Ltd., along with other public sector undertakings like Canara Bank, LIC Housing Finance etc have rejected the resolution plan and pleaded before NCLT for not to approve the same. However, due to majority vote of certain private creditors, the same plan has been approved by NCLT. Now, Union Bank of India (UK) is immediately challenging the decision of NCLT before NCLAT,” it said.
India’s largest private sector lender HDFC Bank had also opposed the settlement and is planning an appeal.
What must change if outcomes are to be improved in future?
Khetan of AU Corporate Advisory calls for periodic and audited net-worth reporting, cross-verification of guarantor disclosures against filings made to other regulators, restrictions on the transfer of identified guarantor assets, and a right of inspection that survives default.
He also calls for a comparator test for repayment plans, so that a dissenting creditor receives no less than its share of the bankruptcy estate. He also feels that an independent valuation of the debtor’s estate by a registered valuer should be mandated, among other things.
Earlier this week, the National Company Law Tribunal (NCLT) approved Essel Group founder Subhash Chandra’s repayment plan of Rs 6.5 crore. Admitted creditor claims were around Rs 22,006.57 crore. Seemingly, it would result in a 99.97 per cent haircut to creditors.
Chandra himself later clarified that the actual amount claimed against him as a personal guarantor was only around Rs 3,900 crore. He hadn’t personally guaranteed the entire Rs 22,006.57 crore in claims. Nevertheless, this judgement has raised a crucial question on how much can banks actually recover from personal guarantors when a company goes bankrupt?
A personal guarantor is essentially a borrower who has provided a guarantee or promise to pay in case the borrower fails to repay the loans. Ideally, then, should a company default, the guarantor can be held liable to repay. However, a lot may actually depend on how many assets the guarantor actually has at the time of recovery.
MUST READ: Essel Group debt: Now, LIC Housing Finance, Union Bank to challenge NCLT's repayment plan
According to Akshat Khetan, founder of AU Corporate Advisory and Legal Services, while, corporate insolvency has registered valuers, prescribed methodologies and a fair-value-versus-liquidation-value exercise under the CIRP Regulations, the personal insolvency framework leans heavily on what the debtor discloses to the resolution professional.
In Subhash Chandra’s case, the presently disclosed net worth is around Rs 31.79 crore, significantly lower than older certificates that had shown net worth of Rs 45,888 crore in 2017 and Rs 40,562 crore in 2018.
“Some of that gap is the honest destruction of value that follows a leveraged group unwinding. Some of it may not be,” Khetan opined.
Data from the Insolvency and Bankruptcy Board of India (IBBI) show that, in the 2,137 cases related to insolvency resolution of personal guarantors where a resolution professional had been appointed, only 64 cases had obtained approval of a repayment plan as of June 2026. The creditors have realised Rs 234.56 crore in the cases where repayment plans were approved, which was just 1 per cent of the admitted claims.
At the end of the January-March 2026 quarter, there were 2,069 cases related to insolvency resolution of personal guarantors where a resolution professional had been appointed and out of these in 44 cases repayment plans had been approved. Also, in the cases where repayment plans were approved, the creditors had realised Rs 102.78 crore, which is 2.16 per cent of their admitted claims.
The Insolvency and Bankruptcy Code was amended this year, which aimed to strengthen creditor oversight and improve procedural clarity.
MUST READ | LIC Housing’s Rs 1,322-cr Subhash Chandra claim cut to Rs 38 lakh under NCLT plan: Report
The promoter guarantee
According to Khetan, for almost two decades, the promoter guarantee has functioned as a “comfort document,” rather than a “credit enhancement.” He states that a net-worth certificate collected at sanction is rarely refreshed.
“A guarantee that is not monitored is not security. It is sentiment. Lenders who priced credit on the strength of a promoter's name and did nothing to track that name's balance sheet have been discovering the difference in tribunal after tribunal, and the Chandra order is simply the most legible instance so far,” he pointed.
He stresses that recovery from a guarantor is overwhelmingly a function of how early one moves, and he feels Indian leaders don’t move quickly.
Chandra was taken to the insolvency and bankruptcy court in April 2024 by Indiabulls Housing Finance (now Samman Capital) after a Rs 170 crore loan the lender had given to Vivek Infracon turned bad. Chandra had stood as a personal guarantor to that loan. Subsequently, other lenders filed their own claims and the amount thus swelled to Rs 22,006.57 crore.
After the original two-member NCLT bench differed on the repayment plan, a third member was included by the NCLT and he approved the plan whereby Chandra would have to pay only Rs 6.5 crore.
In his defence, Chandra said on Friday that the Essel Group has already repaid about Rs 43,000 crore of its total Rs 45,000 crore borrowings.
DON'T MISS | 'Essel Group repaid ₹43,000 crore debt': Subhash Chandra seeks independent audit to examine his debt
The repayment plan received 80.81 per cent support from creditors. Several lenders, however, opposed the plan and are now preparing to appeal against it in the appellate tribunal.
LIC Housing Finance said on Saturday that it would immediately file an appeal before the NCLAT. State-owned lender Union Bank of India is also going to appeal against the repayment plan.
“Union Bank of India (UK) Ltd., along with other public sector undertakings like Canara Bank, LIC Housing Finance etc have rejected the resolution plan and pleaded before NCLT for not to approve the same. However, due to majority vote of certain private creditors, the same plan has been approved by NCLT. Now, Union Bank of India (UK) is immediately challenging the decision of NCLT before NCLAT,” it said.
India’s largest private sector lender HDFC Bank had also opposed the settlement and is planning an appeal.
What must change if outcomes are to be improved in future?
Khetan of AU Corporate Advisory calls for periodic and audited net-worth reporting, cross-verification of guarantor disclosures against filings made to other regulators, restrictions on the transfer of identified guarantor assets, and a right of inspection that survives default.
He also calls for a comparator test for repayment plans, so that a dissenting creditor receives no less than its share of the bankruptcy estate. He also feels that an independent valuation of the debtor’s estate by a registered valuer should be mandated, among other things.