Banks invoke ~34K-cr personal guarantees in 200 cases so far

Action against 56 accounts in June quarter of FY22

Armed with a favourable Supreme Court (SC) judgment, Indian lenders have started invoking personal guarantees (worth ~8,437 crore) of defaulting promoters by taking action against 56 accounts in the April-june quarter of 2021-22.

In 201 cases so far, lenders have invoked personal guarantees of ~34,000 crore; the total debt default by companies being ~37,861 crore.

This was soon after lenders invoked personal guarantees of 115 accounts after their companies defaulted on ~26,000crore debt in 2020-21.

According to the information received from insolvency professionals, 201 applications have been filed as of June 30. Of these, 17 applications have been filed by debtors and 184 by creditors under Sections 94 and 95 of the Insolvency and Bankruptcy Code (IBC), 2016, respectively, according to the data collated by the Insolvency and Bankruptcy Board of India.

Creditors are now filing more cases in the National Company Law Tribunal (NCLT). Against seven suits filed before the Debt Recovery Tribunal, 194 have been filed before the NCLTS. Lenders say more cases will be filed since the law is now unambiguous after the SC judgment.

In May this year, the SC had upheld a government notification of 2019 to invoke personal guarantees of promoters whose companies defaulted on bank loans.

The court ruling allowed banks to file personal bankruptcies against top Indian promoters whose companies have been sent to the NCLT for debt resolution. Lenders have already invoked the personal guarantees of companies, including Bhushan Steel, Bhushan Power & Steel, Punj Lloyd, and Reliance Communications, sent to the NCLT for defaulting on bank loans.

Promoters of several Indian companies had earlier accused their professional managers of fraud and diverting company funds. But lawyers said they would not get any respite from the IBC since lenders will now invoke their personal guarantees.