Synopsis: SBI initiates the sale of personal guarantees provided by Nikhil Gandhi, the former promoter of Reliance Naval, despite the challenges in recovering outstanding debts. The reserve price, considerably lower than the principal claim, reflects the complexities of debt recovery.
In a notice on its website, the bank reported principal outstanding dues of Rs. 1,160 crore and total dues of Rs. 3,512 crore as of May 31, 2024.
The bank is seeking to assign the residual debt along with the guarantees provided by Nikhil Gandhi and his brother Bhavesh Gandhi, who offered personal guarantees, while SKIL Infrastructure provided corporate guarantees.
State Bank of India (SBI) has begun the process of selling the personal guarantees given by Nikhil Gandhi, the former promoter of Reliance Naval and Engineering.
The reserve price is set at Rs. 3.48 crore, which is less than 1% of the Rs. 1,160 crore principal claim on the personal guarantee.
This would be the largest secondary market trade in terms of outstanding dues for personal guarantees by any lender.
A senior official from the distressed loan industry noted that the recovery under the personal guarantee could be minimal compared to the claim amount.
In a notice on its website, the bank reported principal outstanding dues of Rs. 1,160 crore and total dues of Rs. 3,512 crore as of May 31, 2024.
The bank is seeking to assign the residual debt along with the guarantees provided by Nikhil Gandhi and his brother Bhavesh Gandhi, who offered personal guarantees, while SKIL Infrastructure provided corporate guarantees.
Despite repeated attempts by ET, Nikhil Gandhi could not be reached via email or mobile phone.
Reliance Naval, formerly owned by Anil Ambani, was sold for a staggered payment of Rs. 2,108 crore under the Insolvency and Bankruptcy Code (IBC) last year.
Swan Energy partnered with resolution applicant Hazel Mercantile through its special purpose vehicle Hazel Infra to acquire Reliance Naval.
Last December, the Supreme Court upheld the constitutional validity of an IBC provision allowing lenders to recover overdue money from personal guarantors of corporate debtors.
Lenders can invoke this provision if they fail to recover the full debt even after selling the company under IBC, provided the promoter of the defaulting company has given a personal guarantee against the loan.
In the case of Reliance Naval, the resolution professional admitted Rs. 12,429 crore claims from financial creditors, with lenders recovering about 17%.
This grants lenders the right to recover the residual debt by invoking personal insolvency provisions. The residual debt is the difference between the claim and recovery from the company's sale under IBC.
SBI has invited expressions of interest by May 31 and scheduled an auction on June 25.
In conclusion, SBI's move to sell the personal guarantees of Reliance Naval's former promoter, Nikhil Gandhi, highlights the challenges in recovering outstanding debts.
Despite setting a reserve price significantly lower than the principal claim, this action underscores the difficulties lenders face in maximizing recoveries.
The case also illustrates the broader implications of the Supreme Court's validation of IBC provisions, allowing lenders to pursue personal guarantors for corporate debts.
With the auction set for June 25, the outcome will be closely watched by industry stakeholders for its impact on future distressed asset recoveries.
Related Questions
1. What are the outstanding dues reported by the bank as of May 31, 2024?
In a notice on its website, the bank reported principal outstanding dues of Rs. 1,160 crore and total dues of Rs. 3,512 crore as of May 31, 2024.
2. What guarantees were provided by Nikhil Gandhi and his brother Bhavesh Gandhi?
The bank is seeking to assign the residual debt along with the guarantees provided by Nikhil Gandhi and his brother Bhavesh Gandhi, who offered personal guarantees, while SKIL Infrastructure provided corporate guarantees.
3. What is the reserve price set for selling the personal guarantees given by Nikhil Gandhi?
The reserve price is set at Rs. 3.48 crore, which is less than 1% of the Rs. 1,160 crore principal claim on the personal guarantee.
4. What is notable about the secondary market trade in terms of outstanding dues for personal guarantees?
This would be the largest secondary market trade in terms of outstanding dues for personal guarantees by any lender.
5. What implications does the Supreme Court's validation of IBC provisions have in this case?
Last December, the Supreme Court upheld the constitutional validity of an IBC provision allowing lenders to recover overdue money from personal guarantors of corporate debtors.
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