Tag: Rajkumar Dhoot

The business tycoons whose bankrupt companies have been sold for a small fraction of the loans they owed may not be let off easily.

Lenders are in the process of appointing advisors to arrive at a fair value of their assets following the Supreme Court’s order on invoking personal guarantees of defaulting promoters.

Banks are assessing the value of assets held by promoters of at least 40 companies that are under the insolvency process, according to a report.

The promoters whose value of assets is being determined include Kapil and Dheeraj Wadhwan of DHFL; Videocon promoters Venugopal and Rajkumar Dhoot; Lanco Infratech’s Madhusudhan Rao and family, IVRCL’s Sudhir Reddy and Jatin Mehta of Winsome Diamonds.

Armed with the Supreme Court go-ahead to seize assets of personal guarantors, banks are looking to recover money parked in family trusts.

Many of the family trusts created by businesspeople are meant primarily to protect their assets from potential claims related to their companies, such as in bankruptcies. Neither lenders nor agencies such as the Enforcement Directorate or income tax department have been able to penetrate these asset protection trusts.

The SC verdict

The Supreme Court had upheld the validity of the Centre’s notification allowing banks to proceed against personal guarantors for recovery of loans given to a company under the Insolvency and Bankruptcy Code (IBC).

A bench comprising justices L Nageswara Rao and S Ravindra Bhat held that approval of resolution plan under the IBC does not discharge personal guarantors of their liability towards the banks.

“In the judgment, we have upheld the notification,” Justice Bhat said while reading out the conclusion of the judgement which decided as many as 75 petitions pertaining to the validity of the notification.

Petitioners had challenged the November 15, 2019 notification issued under the IBC and other provisions in as far as they relate to personal guarantors to corporate debtors.

Upholding the validity of the notification, the top court ruled that initiation of an insolvency resolution plan for a company does not absolve corporate guarantees given by individuals from paying up the dues to financial institutions.

The IBC law

Under the IBC law, banks can go after the family trusts formed by promoters or those who have given personal guarantees, provided there is a fraud or siphoning of money involved as per provisions of the IBC.

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

SBI action

SBI was one of the respondents to the 74 petitions and challenges by promoters on invocation of personal guarantees. It has been in the forefront of invoking guarantees of promoters of defaulting companies. It had invoked Rs 1200 crore of guarantees given by Ambani for defaulting companies Reliance Communications and Reliance Infratel.

In January SBI had also approached the Mumbai bench of the NCLT to initiate invoking guarantees by the Videocon Industries Dhoot brothers totalling Rs 11,500 crore.

It had also taken Bhushan Power & Steel promoter Sanjay Singal to court to recover Rs 12,276 crore dues to the bank for which he was a guarantor. All these promoters had challenged these actions in court.