The repayment proposed by Subhash Chandra of slightly over 6 crore rupees against recognized claims exceeding 22,000 crore rupees amounted to less than 0.03%, which appears extremely insignificant. However, this low level of recovery is characteristic of personal guarantee bankruptcy cases in general.
According to data from the bankruptcy regulator, since the process began in 2019-2020, nearly 5,200 applications have been filed against individual guarantors. Of these, only about 64 concluded with repayment plans approved by creditors and the tribunal. In these instances, creditors managed to recover just under 235 crore rupees, which constitutes approximately 1% of their recognized claims.
Thus, the problem is not unique to Chandra; nevertheless, on September 1st, a specially formed five-member NCLT bench suspended the decision to approve the plan. The main difficulty lies in the fact that the amount an individual guarantees can differ significantly from the actual availability of assets when creditors attempt to enforce them.
A personal guarantee creates a debt obligation, but it does not preserve the state behind that obligation itself. When creditors accept a guarantee, they can examine the guarantor's assets, liabilities, credit history, and other provided assurances. But if specific property is not pledged or mortgaged, these assets do not remain under the creditor's control.
Furthermore, years can pass between the issuance of the loan and the activation of the guarantee. During this time, assets may depreciate, be sold, pledged elsewhere, or used to cover other obligations. The Chandra case demonstrates how large this time gap can become. Certificates of net worth presented to banks in 2017 and 2018 valued his worth at over 40,000 crore rupees. During the bankruptcy proceedings, he stated that his assets were worth just under 32 crore rupees, most of which were already pledged, leaving about 6.5 crore rupees. (Chandra disputes this figure, claiming it does not reflect his personal ownership).
If the issue is that the wealth backing the guarantee can disappear or become inaccessible, one way to make guarantees more useful is to ensure the preservation of some of that wealth. For example, creditors can require the guarantor to maintain a minimum net worth or a certain amount of liquid assets throughout the loan term. Such conditions are also used in other jurisdictions. One guarantee in the US, filed with the securities regulator, required guarantors to maintain a net worth of no less than $90 million and hold $8 million in liquid assets, restricting transfers that could lower these levels.
Another option is securing the guarantee with a specific asset. For instance, a house can be pledged as collateral. India already allows such arrangements, and they provide creditors with more tangible security than just a general promise backed by whatever assets remain later.
There is also the issue of discovering these assets after the start of bankruptcy proceedings. Rules introduced in 2026 expanded the information disclosed that can be requested from individual guarantors, including assets held through nominees, trusts, and companies, as well as assets they manage or benefit from without formal ownership. Another rule allows for the cancellation of certain undervalued transactions aimed at moving assets out of creditors' reach.
None of these measures can guarantee full recovery. The guarantor may still suffer real losses. However, they are capable of narrowing the gap between the presumed value of the guarantee at the time the loan was issued and what creditors discover when attempting to enforce it.
