Delhi High Court, on August 27, stayed the IBC proceedings launched by the State Bank of India (SBI) seeking to enforce personal guarantees of Anil Ambani worth Rs 1,200 crore. The court restrained Ambani from selling and transferring personal assets.
Arguing against the stay order, Ministry of Corporate Affairs (MCA), Insolvency and Bankruptcy Board of India (IBBI) and SBI said that it would open the floodgates for similar cases where promoters try to escape personal guarantee.
SBI's counsel further said that Ambani was looking to derail proceedings.
"A stay on the recovery proceedings allows the guarantor to fritter away assets to avoid recovery," SBI told HC.
Ambani moved the Delhi High Court against the appointment of a resolution professional (RP) on the personal guarantee given by him against a loan taken by Reliance Communications Ltd (RCom) and Reliance Infratel Ltd (RITL) from SBI.
On August 20, the National Company Law Tribunal (NCLT) in Mumbai had allowed the appointment of an interim resolution professional (RP) in a case filed by State Bank of India against the chairman of Reliance Communications over the company's Rs 1,200 crore loan default.
Ambani furnished his personal guarantee along with other collateral to avail the loan. The lender moved NCLT after the company had failed to pay up its dues even after invoking the personal guarantee.
"Sec 60(2) clearly provides for proceedings to be launched against personal guarantors, running parallel to CIRP. Fallacious to assume that no action can be taken against guarantors until Resolution Plan is accepted," the order issued on August 20 said.
The HC issued notices to SBI and Ministry of Corporate Affairs. The matter will be next heard on October 6.
In August 2016, SBI had issued loans of Rs 565 crore and Rs 635 crore to Reliance Communications and RTIL, respectively. In September 2016, Anil Ambani provided a personal guarantee for availing the credit facility.
Also read: Rs 1200-crore loan default case: NCLT allows appointment of RP in SBI’s case against Anil Ambani
Later in 2017, accounts of R.Comm and RITL were held to be in default, retrospectively, since Aug 2016. In January 2018, SBI invoked the personal guarantee issued by Anil Ambani.
Subsequently, in February 2020, SBI issued a demand notice to Anil Ambani seeking recovery of dues to which there was no response received.
Recently, Chinese Banks had secured an order from the UK courts to recover Rs 5,447 crore loans given to Reliance Communications. SBI fears that upon non-payment of Rs 5,447 crore to Chinese banks, they are likely to invoke similar personal guarantees issued by Anil Ambani to them.
According to the SBI, recovery proceedings, or invocation of personal guarantees of Anil Ambani by the Chinese would adversely affect recovery proceedings in India under IBC.