NEW DELHI: The government and the Insolvency & Bankruptcy Board of India (IBBI) are set to challenge the position taken by Anil
Ambani and former
Bhushan Power and Steel
chairman Sanjay Singhal, questioning the invocation of their personal guarantee. Singhal, who has now been ousted from his company, and Ambani had questioned the validity of the provisions.
The government is of the view that the law had been approved by
Parliament
and the provisions were contained in it. Besides, sources said, the promoters had offered personal guarantees to cover the risk of default and just as corporate guarantees are invoked in case of loan defaults, so is the personal guarantee. “You can’t have different rules,” said a government source, who did not wish to be identified.
The sources also said that absence of the power to invoke personal guarantee will make it difficult for lenders to extend credit and will change the entire terms of the contract.
Singhal was the first to challenge the provisions in the Delhi high court after SBI invoked the provisions and set a demand notice of over Rs 12,000 crore. Ambani, who is battling creditors in India as well as in the UK, was next to rush to the Delhi HC after SBI decided to invoke guarantees related to Rs 1,200-crore loans extended to two of his companies,
Reliance Communications and Reliance Infratel
.
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