A Guarantee That Couldn't Guarantee
It is becoming corporate India’s newest puzzle, and it is hard to digest. The National Company Law Tribunal, in its latest order in the personal insolvency proceedings against Essel Group founder Subhash Chandra, has said that creditors will receive a mere Rs 6.5 crore under an approved repayment plan, even though he stood guarantee for Rs 22,006 crore, the aggregate of claims made against him…
The recent order by the National Company Law Tribunal in Essel Group’s personal insolvency proceedings has left creditors with a paltry Rs 6.5 crore, despite founder Subhash Chandra's guarantee covering Rs 22,006 crore. Chandra maintains he was simply a guarantor, not a borrower, with lenders' claims totaling Rs 3,992 crore. The tribunal's decision raises questions about the true economic value of personal guarantees and the wisdom of lenders accepting such assurances when debts run into thousands of crores.
Additionally, the vote on the repayment plan saw overwhelming support from entities linked to Chandra, leading to concerns over whether those backing the plan adequately represented independent creditor interests.
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