Supreme Court Ruling Spurs Promoters To Swiftly Settle Bank Dues

The recent ruling by the Supreme Court is poised to significantly impact company promoters with substantial unpaid bank dues, increasing the risk of personal property loss. Following the court's directive, there is an anticipated rise in these promoters promptly settling their considerable bank liabilities. Initially, promoters had urged banks to recover their dues by selling company assets, a process known for its time-consuming nature. However, the Supreme Court's latest order enables banks to swiftly recoup their dues by liquidating the personal assets of the promoters.

In response to the Supreme Court's ruling, reports suggest that promoters undergoing insolvency proceedings are likely to expedite the settlement of their outstanding dues with banks, driven by the fear of losing their personal assets. The court's decision empowers banks to sell residential properties, personal assets such as shares and bonds, as well as gold and jewellery owned by these promoters. Experts opine that this legal development will compel promoters and directors to proactively come forward for debt repayment, fostering the recovery of non-performing assets.

Last week, the Supreme Court affirmed the constitutionality of provisions in the Insolvency and Bankruptcy Code (IBC) pertaining to personal guarantors within the insolvency resolution process, providing relief to banks. This decision is anticipated to have far-reaching implications for various high-profile cases where banks are in legal disputes with notable figures like Anil Ambani, Venugopal Dhoot, Kishore Biyani, Kapil and Dheeraj Wadhawan in their pursuit of recovering outstanding dues.

As per the Insolvency and Bankruptcy Board of India, a considerable 2,289 cases related to personal guarantees associated with corporate loans, totaling Rs 1.64 trillion, have been filed in the National Company Law Tribunal. Personal guarantors are now compelled to engage in negotiations and settlements with creditors. Analysts posit that with the court's decision removing ambiguity from this matter, promoters are left with fewer alternatives. The Supreme Court's directives are expected to facilitate prompt settlements between individual guarantors and banks, providing clarity on the legal stance and deterring prolonged legal battles, thus expediting the resolution of outstanding loans.