Read before you outrage about Subhash Chandra's NCLT resolution of 6.5 cr.
Much has been said about the NCLT order that goes like this: only 6.5 cr. recovered against 22,000 cr. of admitted claims - against Subhash Chandra.
You have to look at the details. Chandra was not a primary borrower in the loans - he was a guarantor to these loans. Banks and bondholders often insist on "personal guarantees" on loans, where a loan is given to an entity and a promoter or an external party is asked to provide a guarantee that if the entity doesn't pay, the lender can go after the guarantor for repayment.
And they don't actually ring fence the assets of the guarantor - they just get a statement saying this is my net worth today and I will pay. But the person can transfer out his assets without the lenders being able to do anything about it- because they don't put a lien against those assets.
In corporate loans this is a particularly vicious thing because, instead of going after the corporate or taking it through insolvency/resolution, the lenders go right after the guarantor, even if the corporate might eventually pay back the loans.
In this case, Chandra was dragged to insolvency court by Indiabulls housing finance (Now Sammaan) for a loan taken by a company called Vivek Infracon, guaranteed by Chandra. This company defaulted so the guarantee was invoked - but apparently, later the company paid back and shares held as collateral was sold
But the insolvency proceedings continued. A bunch of other Essel companies had borrowed a huge sum of money, some guaranteed by Chandra. Some of those Essel companies had also defaulted on borrowing - and those lenders came to the insolvency court saying hello we are also there in line.
Regardless of those companies having paid back or otherwise, Chandra was being asked to pay back the entire loans - an act I would call fraudulent because how can you ask a guarantor for money that you have already recovered, but that's my opinion and people will go to court for anything. But I digress.
The resolution professional admitted some 22,000 cr. worth of claims against Chandra. But some 76% of that amount was from companies related to the Essel group and Chandra's family, who said wait he has guaranteed some of our loans too, so we are also getting in line.
The arguments were technical - a personal guarantee means the money can only be recovered from the person himself, not from his family. He was not a 50% shareholder in any of these entities, so they were not his to control, and therefore NCLT said hello, it's fine, they can also participate.
Chandra demonstrated that he only had 32 cr of assets - 25 cr of which was his Mumbai house (which is also mortgaged) and the rest beyond that. The lenders said wait he's worth more, but they haven't been able to prove it (and if they find proof, they can go after him in a different court)
In the end, the resolution was for 6.5 cr. - and here's the thing: there was a vote. 80% voted for the resolution (including Indiabulls!) and 20% dissented. However 4% of votes - you can read the order for who they were - didn't vote, even though they complained later that it was unfair. (Then vote no?)
But even if they did vote, the resolution would go through (it needs only 75%). This is fair - it's the voting process, and even if you don't vote for the resolution, you have to respect it if 75% of votes are for.
The NCLT has thus ruled that guys, you all said let's hit Chandra for personal guarantee. You demanded 22,000 cr. He said I'll pay 6 cr.
80% of you voted yes. The court ruled there's there's nothing unfair about the process, and it was a collective decision. Interestingly if they rejected it, they would then take Chandra into insolvency - meaning find his assets and sell them, which could take years more. Resolution is better - after this, no other personal guarantee will be invokable against him (for the past) - so he gets to move on. (this is what the court said)
This is how a court should work (but too often, courts step beyond boundaries and hurt borrowers a lot more, like in a case where they decided they wanted to overturn a 5-year-ago resolution in NCLT, which is such a huge step back in resolution)
Anyhow, TLDR is that this was not Chandra borrowing money himself, it was him guaranteeing money borrowed by some of the group companies, with his personal money that it turns out he doesn't have in his own name. Instead of finishing the recovery with the companies, the lenders chose to take Chandra to bankruptcy court. He offered them 6.5 cr. and they took it, as a group, and some of the complainers didn't even bother to vote.
Sure, we could debate on the specifics, but it's better to be outraged after understanding this better.
My view is: I don't have a bias on either side here, but I think this judgement is fine. If the lenders think Chandra has misstated assets, there are other legal remedies for that. If they have already recovered money from the underlying companies and have still claimed money from him, I personally think it's unfair and they should not be allowed to. (Banks have apparently done this with Vijay Mallya too, and I think that's unfair to him as well)
I think the concept of a personal guarantee without actually taking lien on assets is a downright unworkable idea and I hope this judgement helps reduce the demand for personal guarantees (though if you give one, please ensure you have money to fight through the courts).
The full order is here: https://efiling.nclt.gov.in/nclt/public/order_view.php?path=L0VmaWxlX0RvY3VtZW50L25jbHRkb2MvY2FzZWRvYy8wNzEwMTAyMDE3MzMyMDIyLzA0L09yZGVyLUNoYWxsZW5nZS8wNF9vcmRlci1DaGFsbGFuZ2VfMDA0XzE3ODc2NTc1ODY0ODA1OTk4NDU2YThkN2Q3MjA4ZjViLnBkZg%3D%3D
(Link HT: @_RituSingh)
Update: 1/9/2026
The NCLT has stayed this order anyhow, so it will go through another NCLT process. (Read Ajay's post: https://x.com/ajayrotti/status/2094666854153474370?s=20)
Another note: Subhash Chandra was a member of parliament and when he declared his personal assets as every MP is required to do, even that showed around 50 cr. (his term ended in 2022) So it's strange that the lenders didn't flag this at that time, and about how he could anyhow guarantee such loans independently.