Related parties of a personal guarantor would be assigned zero voting share on the repayment plan and creditors would have to record their deliberations and reasons for approving or rejecting a payment plan, as per an Insolvency and Bankruptcy Board of India’s (IBBI) Discussion Paper.
The Paper has been floated for public comments for strengthening safeguards in the Insolvency Resolution Process for Personal Guarantors to Corporate Debtors.
The IBBI is contemplating the aforementioned measures in the wake of a NCLT (New Delhi Bench) late August order that okayed a repayment plan presented by Essel Group founder Subhash Chandra, whereby creditors were to receive ₹6.25 crore against admitted claims totalling about ₹22,000 crore.
However, this repayment plan was subsequently stayed by a larger NCLT Bench on lenders plea.
In the wake of the aforementioned development, IBBI has planned four amendments, including exclusion of related parties of the guarantor from voting on the repayment plan; and recording of creditors’ deliberations on the repayment plan.
The other amendments that IBBI is seeking to make are — identification and reporting of avoidance transactions (preferential, undervalued, fraudulent, and extortionate credit transactions) in the insolvency resolution process of the debtor; and valuation of assets of the personal guarantor in the resolution process.
Related party
The IBBI has proposed that a related party of the guarantor shall be assigned a “Nil” voting share. It is further proposed that the list of creditors prepared by the resolution professional separately indicate whether a creditor is a related party of the guarantor.
The Insolvency regulator noted that a party connected to the debtor should not be permitted to influence a vote on a matter from which its connected debtor stands to benefit. This proposal seeks to rectify this anomaly.
Where the amount proposed to be paid to creditors under the repayment plan is significantly lower than the amount of their admitted claims or the estimated realisable value of the assets of the guarantor, the creditors should specifically record the commercial rationale for considering approval of the repayment plan as a better alternative to the decision of initiation of a bankruptcy process, per the Paper.
IBBI said this requirement would promote transparency, accountability and informed decision-making by creditors, and would ensure that approval of a repayment plan rests on an objective assessment of the recovery prospects reasonably available to them.
Published on September 13, 2026
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