The insolvency court’s approval of Zee Group founder and chairman emeritus Subhash Chandra’s ₹6.5 crore repayment plan has raised questions about how much banks can recover from personal guarantors when company loans go bad.
Mint explains what personal guarantor insolvency means, why recovery can still be low, and the nuances in the recent Subhash Chandra case.
A personal guarantor is someone who vouches for a borrower, guaranteeing repayment of the loan in case of a default. Under the Insolvency and Bankruptcy Code (IBC), personal guarantors can face separate insolvency proceedings. The IBC lays down the definition of a personal guarantor, how creditors can start the process and prepare the repayment plan, and how it is binding upon approval by the National Company Law Tribunal (NCLT).
In simple terms, a guarantor can be held personally responsible, but the actual recovery depends on the assets available with the guarantor.
Amendments introduced in 2026 have strengthened disclosure requirements. Guarantors must now provide details of assets held directly or indirectly, including beneficial interests and digital assets. The aim is to give creditors and the resolution professional a clear picture of the guarantor’s assets.
Banks typically seek personal guarantees from promoters as an additional layer of protection when lending to companies. It helps the bank to attach assets of the guarantor through a court.
But a guarantee does not replace the lender’s primary assessment of the borrower’s ability to repay, which in a company's instance is based on its assets and its ability to generate cash flows.
A promoter guarantee should be viewed as a “second way out” for a lender, a senior private sector banker said on condition of anonymity. “We don’t give a loan just based on a guarantee. Ultimately, it is the cash flow that pays the bill.”
Even then, the guarantee does not necessarily mean the promoter has sufficient wealth to make good the company’s liabilities.
The value of a promoter’s guarantee can vary over time, depending on the promoter’s personal wealth and the changes in the group’s businesses and assets.
Data from the Insolvency and Bankruptcy Board of India showed that, as of June, creditors have got about 1% of their admitted claims against personal guarantors since fiscal year 2020 (FY20). Of the 2,137 proceedings against personal guarantors where resolution professionals were appointed, 64 have led to an approved repayment plan. In other words, for every ₹100 loan that went bad and was backed by personal guarantees, just ₹1 was recovered.
According to lawyers, the main problem is that personal-guarantor insolvency can establish liability but does not guarantee recovery.
“The purpose of personal guarantor insolvency under the IBC is not to guarantee a particular recovery but to bring the guarantor’s assets and financial position within a transparent and enforceable process,” said Dikshat Mehra, a partner at Rajani Associates. “Accountability is distinct from recovery.”
Somdutta Bhattacharyya, a partner at Argus Partners, said the NCLT’s role is limited to checking statutory compliance and legality once creditors approve a plan and does not extend to questioning the commercial wisdom of the committee of creditors or the reduction in recoveries agreed upon.
Chandra was admitted into insolvency in April 2024 on a plea by Indiabulls Housing Finance, now Sammaan Capital, after he had given a personal guarantee for a ₹170 crore loan to Vivek Infracon that turned bad.
