Anil Ambani's personal guarantee: where limited liability ends

On 23 September 2016 Anil Ambani, then chairman of the Reliance Group, signed a personal guarantee to State Bank of India (SBI) for two loans dated 29 August 2016: ₹565 crore to Reliance Communications (RCom) and ₹635 crore to Reliance Infratel (RITL). According to SBI, the companies defaulted around January 2017. The loans were later treated as non-performing from 26 August 2016, earlier than both the loans and the guarantee, and the National Company Law Tribunal (NCLT) bench that heard SBI's case in 2020 called that retrospective date "incongruous".

On 11 June 2026 the NCLT's Mumbai Bench-I admitted SBI's petition in State Bank of India v Anil Dhirajlal Ambani, starting an insolvency resolution process against Ambani as personal guarantor on a claimed default of ₹853.25 crore as on 1 March 2019. His spokesperson said that day that "Mr Ambani derived no personal benefit from the said funds", and Ambani has appealed against the order.

Limited liability protects a shareholder from a company's debts. A personal guarantee is a separate contract that makes the person who signs it answerable for those debts, and since 1 December 2019 a lender can take the guarantor of a company's loan to the NCLT just as it takes the company.

Why is Anil Ambani facing personal insolvency?

As of October 2026 Ambani is in a personal insolvency process because RCom and RITL did not repay SBI and the bank called on his guarantee. On 11 June 2026 the NCLT admitted SBI's petition of 12 March 2020 under Section 95 of the Insolvency and Bankruptcy Code 2016. The order dates SBI's invocation of the guarantee, its formal demand that Ambani pay, to 31 January 2019; the 2020 order gives 31 January 2018.

RCom and RITL were themselves admitted to corporate insolvency resolution. In March 2020 RCom's committee of creditors approved UV Asset Reconstruction's resolution plan, while a Jio group company bid for RITL. Insolvency Tracker reported in December 2023 that RCom's plan still awaited the NCLT's approval because of litigation over spectrum. On 13 February 2026 the Supreme Court held in State Bank of India v Union of India that the "IBC cannot be the guiding principle for restructuring the ownership and control of spectrum", and RCom's resolution professional sought a review. The June 2026 order records that "no money has so far been realized" under the two plans, though the paragraph before it mentions SBI "receiving certain amounts". As of October 2026 we have seen no decision on the review.

The NCLT also rejected Ambani's pleas that RCom's plan had discharged him and that the borrowers were in default before he signed. He has appealed to the National Company Law Appellate Tribunal (NCLAT): Company Appeal (AT) (Ins) 1088 of 2026 was adjourned to 10 July 2026 at his request, and LiveLaw Biz's report of 26 June 2026 mentions no stay. As of October 2026 we have found no reported order after that date.

What has happened in Ambani's cases since SBI's petition?

The Delhi High Court stayed SBI's case in August 2020, and the Supreme Court upheld the personal guarantor provisions in May 2021 and again in November 2023. Separately, Ambani lost a case in London in 2020 over another guarantee, and SBI classified RCom's loan account as fraud in 2025.

On 22 May 2020 Justice Nigel Teare of the High Court of England and Wales declared "binding" a separate guarantee, given for a February 2012 loan to RCom from three Chinese banks, that Ambani denied authorising. He ordered Ambani to pay them $716,917,681.51 plus £750,000 in costs, The Week reported.

According to a Lok Sabha reply reported by Moneylife, SBI classified RCom's loan account as fraud on 13 June 2025. On 3 October 2025 the Bombay High Court dismissed Ambani's challenge, finding that SBI had followed the Master Directions issued by the Reserve Bank of India (RBI) in July 2024. ETV Bharat reported that he appealed to the Supreme Court around 1 December 2025; as of October 2026 we have not seen a reported decision. On 16 April 2026 the Supreme Court dismissed his separate challenges to fraud proceedings by Bank of Baroda, IDBI Bank and Indian Overseas Bank.

How common is personal guarantor insolvency in India?

By 30 June 2026, 5,186 insolvency applications concerning personal guarantors to companies had been filed, according to the Insolvency and Bankruptcy Board of India (IBBI): 971 by the guarantors themselves under Section 94 and 4,215 by creditors under Section 95. The IBBI does not publish how many were admitted or the debt involved. Only 64 repayment plans had been approved, realising ₹234.56 crore, which the IBBI puts at around 1 percent of the claims admitted in those cases, against 30.52 percent in corporate insolvency resolution processes. Bankruptcy applications had been filed against 310 guarantors.

SBI has started the same process against Venugopal Dhoot, the Videocon promoter: LiveLaw Biz reported in April 2026 that the NCLT in Mumbai had admitted its petition against him over a ₹6,157 crore default. Moneylife reported in March 2026 that the NCLAT had upheld admission against Rajkumar and Pradeep Dhoot, also Videocon guarantors, over ₹5,353.78 crore. Vijay Mallya, who personally guaranteed Kingfisher's loans, was declared bankrupt in London on 26 July 2021 on an SBI-led consortium's petition for debt of over £1 billion.

What is a personal guarantee, and does it survive resignation?

A personal guarantee is a person's own promise, usually a director's or promoter's, to pay the company's lender if the company does not, and resigning from the board does not by itself end it. The NCLAT held in Subhash Aggarwal v State Bank of India (29 October 2025) that resignation does not end a "continuing" and "irrevocable" guarantee. In Nakul Gupta v State Bank of India (July 2026), where no revocation notice had been given, it held that "the resignation of the Appellant from the Corporate Debtor shall not discharge him".

Under Section 128 of the Indian Contract Act 1872, the surety's (guarantor's) liability "is co-extensive with that of the principal" debtor unless the contract says otherwise. Section 129 covers continuing guarantees, which under Section 130 can be revoked by notice for future transactions only.

Section 133 discharges a guarantor for later transactions if the creditor varies the loan terms without the guarantor's consent, and under Section 134 the creditor's release of the principal debtor discharges the guarantor. In the appeal of Vijaykumar Gilda, a personal guarantor, the NCLAT rejected a Section 133 plea on 17 September 2026 because no variation by the lender was shown and the deed preserved his liability. In Lalit Kumar Jain the Supreme Court held that approval of a company's resolution plan does not by itself discharge a personal guarantor: the company's release is by operation of law, not the creditor's own act, so Section 134 does not apply. The Insolvency and Bankruptcy Code (Amendment) Act 2026 added to Section 31, from 26 May 2026, that a plan does not affect claims against "a guarantor of the corporate debtor".

Can a bank take a director's personal guarantee on a CGTMSE loan?

Yes. The Credit Guarantee Fund Trust for Micro and Small Enterprises (CGTMSE) guarantees loans to such businesses and bars third-party guarantees on them, but its FAQ says "Personal guarantee of directors, where borrower constitution is a company is not treated as third-party guarantee". Our article on Udyam registration explains how CGTMSE cover works and who qualifies.

Paragraph 4.1 of the RBI's Master Direction on MSME lending bars collateral security on loans of up to ₹20 lakh to micro and small enterprises sanctioned or renewed from 1 April 2026. The limit was ₹10 lakh before the amendment of 9 February 2026; banks may raise it to ₹25 lakh on the borrower's track record, and a voluntary pledge of gold or silver is not a breach. Paragraph 4.1 deals with "collateral security" and is silent on personal guarantees. On our reading, a micro or small company borrowing ₹15 lakh on such a loan should not be asked to mortgage the founder's flat, and can still be asked for the founder's guarantee.

How does insolvency work for a personal guarantor?

A creditor applies to the NCLT under Section 95 of the Code, or the guarantor under Section 94, and after a resolution professional's report the tribunal admits or rejects the application. Admission brings a moratorium of up to 180 days in which a repayment plan can be put forward; without one, bankruptcy can follow.

Part III of the Code, which deals with individuals and partnership firms, came into force for personal guarantors to corporate debtors on 1 December 2019, through notification S.O. 4126(E) of 15 November 2019. The resolution professional appointed under Section 97 reports under Section 99 within 21 days, and the tribunal has 14 days under Section 100 to decide. Sections 105 to 114 govern the repayment plan.

From 26 May 2026 a new Section 96(4) says the interim moratorium, a stay on legal action over debts from the date of filing, "shall not apply" to applications against a personal guarantor. A new Section 106(1A) ends the process if no repayment plan is submitted, after which bankruptcy may follow under Section 121 onwards. In Dilip B. Jiwrajka the Supreme Court held that "No judicial adjudication is involved" at the stages up to Section 99, so the guarantor has no right to be heard before the resolution professional is appointed. Natural justice applies when the tribunal decides under Section 100.

When else is a director personally liable for a company's dues?

Even without a guarantee, the directors of a private company can be made to pay its unrecoverable income tax and GST. Directors who run a company can be prosecuted over unpaid TDS, provident fund contributions and bounced cheques, and in an insolvency they can be ordered to contribute for fraudulent or wrongful trading.

Under Section 323 of the Income-tax Act 2025, the old Section 179, the directors of a private company are jointly and severally liable for tax that cannot be recovered from the company, and "tax due" includes penalty, interest and fees. A director escapes liability by showing that the non-recovery is unconnected with their "gross neglect, misfeasance or breach of duty". The Bombay High Court held in Madhavi Kerkar v ACIT (2018) that the liability arises only after recovery from the company fails. Section 89 of the CGST Act applies the same rule and defence to unpaid "tax, interest or penalty".

Unpaid TDS is an offence under Section 476 of the 2025 Act, the old Section 276B, punishable with rigorous imprisonment of three months to seven years and a fine. There is no prosecution where a late deposit is made by the due date of the statement under Section 397(3)(b). In Madhumilan Syntex v Union of India (23 March 2007), decided before that rule, the Supreme Court held that directors treated as principal officers can be prosecuted and that late deposit is still a default.

In Kishore K. Avarsekar v Alok Saksena (11 December 2025), under Section 66 of the Insolvency and Bankruptcy Code, the NCLAT held that the former managing directors of Unity Infraprojects Limited must contribute ₹231.64 crore plus interest at 12 percent. It also held that "direct personal benefits... is not a prerequisite for liability".

What protects a director, and what should founders check before signing?

A director pursued under a statute has the defence that statute writes in, such as due diligence or the absence of gross neglect. A guarantor's defences lie in the deed and in Sections 130 to 134 of the Contract Act.

In Sunita Palita v Panchami Stone Quarry (1 August 2022) the Supreme Court released independent directors from a cheque complaint under Section 141 of the Negotiable Instruments Act. It held that "Liability depends on the role one plays in the affairs of a company and not on designation or status". New India Assurance's published summary of its directors and officers policy covers wrongful-act claims and legal costs but excludes "Personal guarantee" and "Fines, penalties, punitive or exemplary damages".

Check whether the guarantee is continuing and irrevocable, what it covers, and whether it preserves liability, as the deed in Gilda's appeal did, or consents in advance to changes in the loan. When you leave a board, have the deed read first, because a clause making the guarantee irrevocable may defeat a revocation notice. Then write to the lender under Section 130 revoking it for future transactions and ask for a written release; amounts already drawn stay covered. On a loan within the RBI's ₹20 lakh collateral-free limit, decline to offer collateral, and expect a guarantee request even under CGTMSE. Keep TDS, GST and provident fund deposits current, and have any objection you raise at a board meeting minuted, since Section 2(60)(vi) of the Companies Act catches the director who did not object.

Frequently asked questions

Can a bank recover a company loan from a director personally in India?

Only where the director is personally bound, usually by a personal guarantee. A guarantor's liability is co-extensive with the company's under Section 128 of the Indian Contract Act 1872, and since 1 December 2019 a lender can start insolvency proceedings against a personal guarantor under Section 95 of the Insolvency and Bankruptcy Code 2016. Without a guarantee, a director is reached only through specific statutes or by lifting the corporate veil.

Does a personal guarantee end when a director resigns?

No. The NCLAT held in Subhash Aggarwal v State Bank of India (29 October 2025) and Nakul Gupta v State Bank of India (July 2026) that resignation does not discharge a continuing guarantee. A guarantor can revoke it by notice under Section 130 of the Indian Contract Act 1872, for future transactions only, though a clause making it irrevocable may prevent that.

Does a company's resolution plan release the personal guarantor?

No. The Supreme Court held in Lalit Kumar Jain v Union of India (21 May 2021) that approval of a company's resolution plan does not by itself discharge a personal guarantor. Since 26 May 2026 Section 31 of the Insolvency and Bankruptcy Code says a plan does not affect claims against a guarantor of the corporate debtor. On 11 June 2026 the NCLT rejected Anil Ambani's argument that RCom's plan had discharged him, a ruling he has appealed (as of October 2026).

Can a bank take a director's personal guarantee on a CGTMSE-covered loan?

Yes. CGTMSE bars third-party guarantees on covered loans, and its FAQ says a personal guarantee of directors, where the borrower is a company, is not treated as a third-party guarantee. Separately, for loans sanctioned or renewed from 1 April 2026, the RBI bars collateral security on loans of up to ₹20 lakh to micro and small enterprises.

Are directors personally liable for a private company's tax and GST dues?

Yes, where the tax cannot be recovered from the company. Section 323 of the Income-tax Act 2025 (the old Section 179) and Section 89 of the CGST Act make the directors of a private company jointly and severally liable for it. A director escapes liability by showing that the non-recovery is unconnected with their gross neglect, misfeasance or breach of duty. The Bombay High Court held in Madhavi Kerkar v ACIT (2018) that recovery from the company must fail first.

How does a personal guarantor's insolvency work under the IBC?

A creditor applies under Section 95 or the guarantor under Section 94, a resolution professional reports within 21 days, and the NCLT admits or rejects the application within 14 days under Section 100. Admission brings a moratorium of up to 180 days under Section 101 for a repayment plan, and bankruptcy can follow if none is submitted. By 30 June 2026, 5,186 applications had been filed and 64 repayment plans approved.

Sources

NCLT Mumbai orders in State Bank of India v Anil Dhirajlal Ambani of 20 August 2020 (C.P.(IB) 916 and 917/MB/2020) and 11 June 2026; Delhi High Court order of 27 August 2020 (WP(C) 5720/2020) and Supreme Court order of 17 September 2020, as reported by LiveLaw and Bar and Bench; LiveLaw Biz (April and June 2026); IANS (11 June 2026); Lalit Kumar Jain v Union of India (Supreme Court, 21 May 2021); Dilip B. Jiwrajka v Union of India (Supreme Court, 9 November 2023); notification S.O. 4126(E) of 15 November 2019; Insolvency and Bankruptcy Code (Amendment) Act 2026 and notification S.O. 2625(E); IBBI data to 30 June 2026; The Week (22 May 2020 and 26 July 2021); Moneylife's report of the Lok Sabha reply; Bombay High Court judgment of 3 October 2025 and Supreme Court order of 16 April 2026, as reported by Moneylife and Verdictum; ETV Bharat (December 2025); State Bank of India v Union of India (Supreme Court, 13 February 2026); Insolvency Tracker (13 December 2023); Moneylife (March 2026); NCLAT decisions in Subhash Aggarwal v State Bank of India (29 October 2025), Nakul Gupta v State Bank of India (July 2026), Vijaykumar Gilda's appeal (17 September 2026) and Kishore K. Avarsekar v Alok Saksena (11 December 2025); CGTMSE FAQ; RBI Master Direction on lending to the MSME sector, as amended on 9 February 2026; Madhavi Kerkar v ACIT (Bombay High Court, 2018); Madhumilan Syntex v Union of India (Supreme Court, 23 March 2007); Sunita Palita v Panchami Stone Quarry (Supreme Court, 1 August 2022); Balwant Rai Saluja v Air India (Supreme Court, 25 August 2014); New India Assurance's directors and officers policy summary.