The National Company Law Tribunal (NCLT) on Monday issued notices to Ajay Chandra and Ramesh Chandra, former directors of real estate firm Unitech, in personal insolvency proceedings initiated by IDBI Bank. The petitions were filed concerning an unpaid loan taken by QNS Facility Management Private Limited, a subsidiary of Unitech. The case, titled IDBI Bank Vs Ajay Chandra and Ramesh Chandra, seeks recovery of dues through the enforcement of personal guarantees provided by the two individuals.
Tribunal’s Directions
A Bench comprising Judicial Member M Sankariah Shanmuga Sundaram and Technical Member Dr Sanjeev Ranajan issued instructions to serve the notices through all available modes after IDBI Bank’s legal counsel informed the tribunal that previous attempts to serve the plea had been unsuccessful.
The Bench stated, “Issue notice by all modes. Returnable on January 6.”
Background of the Case
IDBI Bank had extended a loan of ₹175 crore to QNS Facility Management Private Limited. As personal guarantors for the loan, Ajay Chandra and Ramesh Chandra were held liable after the company defaulted on repayment in 2017. Following the default, IDBI Bank invoked the personal guarantees and initiated insolvency proceedings against the guarantors under the Insolvency and Bankruptcy Code (IBC).
Role of Personal Guarantors
A personal guarantor is an individual who provides a written assurance to a lender, guaranteeing repayment of a loan taken by a company. In cases of default, the lender has the right to recover the outstanding amount by seizing the guarantor’s personal assets.
The Insolvency and Bankruptcy Code (IBC) was amended in 2019 to empower creditors or Resolution Professionals (RPs) to enforce personal guarantees. This amendment was designed to enhance recovery mechanisms for lenders, especially in cases where corporate borrowers failed to meet their obligations. Several high-profile businesspersons, including Anil Ambani and Subhash Chandra, challenged these amendments in the Supreme Court but were unsuccessful.
Allegations of Bank Fraud
In addition to the insolvency proceedings, Ajay Chandra and Ramesh Chandra are also involved in a separate legal dispute with IDBI Bank over allegations of fraud. The Central Bureau of Investigation (CBI) has registered a case against them and other former Unitech executives for alleged criminal conspiracy, cheating, and violations of the Prevention of Corruption Act.
The allegations relate to a ₹395 crore fraud involving a Vendor Bill Discounting (VBD) credit facility provided by IDBI Bank to Unitech in 2012. The facility was meant to cover legitimate operational expenses, but forensic audits revealed that the funds, including amounts collected from homebuyers, were diverted to offshore tax havens and used for unauthorized purposes.
Unitech’s financial difficulties in the real estate sector led to defaults on payments. To mitigate its liability, the company later availed of a rupee term loan, which was also mismanaged. As of mid-2022, IDBI Bank’s total exposure to Unitech amounted to ₹974.78 crore, triggering the bank’s decision to escalate the matter to the CBI.
CBI Investigation
The CBI is investigating the Chandra brothers and other Unitech officials for their role in the alleged ₹395 crore fraud. The case revolves around the misuse of funds and their diversion to unrelated activities, which led to significant financial losses for IDBI Bank. The agency has filed charges of criminal conspiracy, cheating, and corruption.
Legal Representation
In the NCLT proceedings, IDBI Bank was represented by advocates Praful Jindal and Sidhartha Barua, who presented the case against Ajay and Ramesh Chandra. They emphasized the inability to serve notices to the respondents, which led to the tribunal allowing service by all available modes.
Conclusion
The NCLT’s notice to Ajay and Ramesh Chandra marks a significant step in IDBI Bank’s efforts to recover its dues. The matter will next be heard on January 6, providing time for the notices to be served and for the respondents to file their replies. Meanwhile, the insolvency proceedings and the ongoing fraud investigation reflect the broader challenges faced by lenders in addressing corporate defaults and ensuring accountability among personal guarantors.
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