Some VG Siddhartha loans may not burden family

A significant part of the personal borrowings of deceased Coffee Day founder V G Siddhartha is unlikely to devolve on the family as these were done with private financiers on the basis of the trust they had on Siddhartha, people with knowledge of the matter said.

The transactions between Siddhartha and these financiers are said to have been collateral-free and unsecured. Experts believe the family would be liable only for any debt that they have co-guaranteed.

Siddhartha is said to have had personal loans of over Rs 3,500 crore, much of it taken through private holding companies of his. Some part of these loans were from organised financial entities such as Standard Chartered PE, and came with stringent conditions. But the remaining were from friends and associates, with no collateral offered.


Shailesh Haribhakti, founder and chief mentor of auditing firm Baker Tilly DHC, said the law in India is very clear that unless there is a joint obligation, it ceases with the person who took on the obligation and who is no more. This is the reason why organised financial players often take collateral security from various other people, he said. If assets have been pledged against loans, then those assets can be used to recover the value of the pending loan.

Advocate A V Amarnathan said if the borrower had a guarantor or joint debtor for the loans obtained by him, that individual becomes responsible for the full loan balance if the borrower passes away.

He added that under the Hindu Succession Act, 2005, a son is not liable to pay back his father’s debt out of anything that he had made out of his own income or savings. However, a son is liable to pay out of what he has inherited from his father’s property, provided those had been pledged. The same rules are applicable to a spouse also, said advocate G R Mohan.

Siddhartha’s family is said to own 12,000 acres of coffee plantations, acreage that expanded significantly in the last 15 years, largely through borrowings from financiers who lent him on the basis of their trust in him.