Creditors have recovered just Rs 235 crore — roughly 1% of admitted claims — from personal guarantees invoked under the Insolvency & Bankruptcy Code (IBC), Business-Today reported, citing the latest data released by the Insolvency and Bankruptcy Board of India (IBBI). The figure contrasts sharply with the 31% recovery rate achieved in corporate insolvency cases under the same law.
The recovery funnel
The IBBI data, covering 5,186 applications filed by creditors and companies since December 2019, shows resolution professionals have been appointed in only 2,137 cases — about 41% — including 51 by the debt recovery tribunals. Within that pool, just 64 cases have so far yielded approval of a repayment plan, with creditors realising Rs 235 crore, or around 1% of the admitted claims. That translates into an average realisation of Rs 3.7 crore per approved case.
| Stage | Number of cases |
|---|---|
| Applications filed since Dec 2019 | 5,186 |
| Resolution professionals appointed | 2,137 (~41%) |
| — including by debt recovery tribunals | 51 |
| Cases with approved repayment plan | 64 |
| Amount realised | Rs 235 crore |
Promoters behind the guarantees
A majority of personal guarantees were offered by promoters of companies to secure loans or loan restructuring for entities they once controlled but failed to repay, according to the report. Named in the data are:
- The Ruias of Essar
- The Bhushans of Bhushan Steel
- Dhoot of Videocon
The IBC was drafted in a way that allowed banks and other creditors to invoke its provisions to recover dues from guarantors in case the claims were not fully realised through the corporate insolvency resolution process.
Legal design vs. actual recovery
In the case of personal guarantees, the law provides for a repayment schedule to be agreed upon. Admission itself is taking a lot of time, the report noted, with fewer than half of the applications reaching the stage of a resolution professional being appointed.
Including the repayment from the guarantors, the amount realised by the creditors will be less than a third of the overall claims.
Avoidance transactions and the deterrent effect
Separately, a bunch of avoidance claims have been filed by resolution professionals based on forensic audits of companies taken up for resolution under the IBC, though IBBI did not share details of amounts realised. The released data showed avoidance transactions, including diversion, of over Rs 4.6 lakh crore in 2,132 cases.
In its first decade, the law has emerged as a deterrent for promoters of companies who default on payments to banks and suppliers, the report said. Fearing loss of control, over 30,000 cases filed before the National Company Law Tribunal (NCLT) were resolved at the pre-admission stage through withdrawals, involving amounts estimated at nearly Rs 14 lakh crore.
What this means for creditors
The gap between the 31% recovery in corporate insolvency and the 1% realisation from personal guarantees highlights the practical limits of the guarantee mechanism for lenders and trade creditors. Even when guarantees are invoked, the slow admission process — only 41% of applications have reached the appointment of a resolution professional — and the thin pool of approved plans mean the expected return on such claims remains marginal. For finance executives and credit officers, the data reinforces the need to underwrite personal guarantees with the expectation of recoveries well below face value, while the deterrent effect of the IBC has already pushed a large volume of cases to pre-admission settlement.
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