NCLT admits SBI plea for personal insolvency proceedings against Anil Ambani

The Mumbai bench of the National Company Law Tribunal (NCLT) on Thursday admitted State Bank of India’s plea to initiate a personal insolvency resolution process against Reliance Group chairman Anil Ambani.

The state-owned lender had moved the tribunal in 2020 to recover more than Rs 1,200 crore from Ambani under the personal guarantee clause of the bankruptcy law. The admission of the petition paves the way for insolvency proceedings against Ambani in his capacity as a personal guarantor under the Insolvency and Bankruptcy Code (IBC).

The division bench of judicial member Sushil Mahadeorao Kochey and a technical member, Prabhat Kumar, in its order observed that the resolution plan clarifies that while creditors may receive OCDs (optionally convertible debentures) or other instruments under the resolution mechanism, their rights under third-party securities and guarantees are not waived, compromised, or extinguished.


“It is not disputed that no money has so far been realised from the Resolution Plan(s) approved in case of RCOM and RITL by the applicant creditor, and the allocation of money in the resolution plan remains merely a financial proposal entitling the applicant creditor to certain amounts against the outstanding debt. Thus, the debt remains due, and it is in default,” observed the tribunal in its 41-page order.

In the case, senior counsel Zal Andhyarjina, along with Jash Shah of DSK Legal, appeared for the SBI, while senior advocate Prateek Seksaria and counsel Rohit Gupta appeared for Anil Ambani in the tribunal.

SBI argued that Ambani had personally guaranteed loans taken by Reliance Communications and that the state-owned lender was seeking to recover them after the telecom company was admitted under the corporate insolvency resolution process following a default on dues.

A spokesperson for Ambani said in a statement that the order relates to a disputed personal guarantee allegedly extended by him to the SBI in 2016 – that is, ten years ago – even before the promulgation of personal insolvency laws.

“The underlying facility had been availed by Reliance Communications for the repayment of its borrowings from Chinese lenders, and Mr Ambani derived no personal benefit from the said funds,” said the spokesperson. “The order, once available, will be reviewed by the legal team and challenged through appropriate legal remedies, as advised. Mr Ambani remains confident of vindicating his position before the appropriate forums.”

Ashish Pyasi, partner of law firm Aendri Legal, said that with the admission of SBI’s application, a moratorium had kicked in so that there would be no further prosecution against the personal guarantor.

“The resolution professional will be calling for the claims from the creditor and will prepare a list of them,” said Pyasi. “The personal guarantor shall prepare a repayment plan with the resolution professional, which will be placed before the committee of creditors. Once approved, it will be submitted for final approval before the adjudicating authority.”

Following the ruling, the legal proceedings are expected to shift to the National Company Law Appellate Tribunal (NCLAT).

Ashish K Singh, managing partner of law firm Capstone Legal, said the ruling raises a fundamental legal question with implications far beyond this case.

“Can a personal guarantor be subjected to a statutory framework that did not exist when the guarantee was allegedly executed? The answer could shape the outcome of several pending insolvency proceedings involving personal guarantors,” said Singh.

The public sector lender moved the NCLT under Section 95 (1) of IBC which empowers creditors to initiate insolvency resolution proceedings against individuals, such as personal guarantors of corporate debtors, through an appointed resolution professional.

In 2019, Reliance Communications was admitted under the corporate insolvency resolution process. As per the latest available data with the Insolvency and Bankruptcy Board of India, the company’s admitted liabilities stood at more than Rs 94,103 crore.

At the time of approaching the tribunal against Ambani, the lender had approved a resolution plan for Reliance Communications in March 2020 that envisaged lenders recovering around Rs 23,000 crore, entailing a haircut of nearly 50%. At the time of filing the personal insolvency application, the company owed nearly Rs 5,000 crore to SBI.