Personal Insolvency: The Last Straw

When the banks took Su-Kam, I told myself the worst was behind me. I was wrong. What came next was personal insolvency — and it is the chapter I am still living through, even as I write this.

I want to set down exactly what happened, because almost no one talks about this part honestly. Losing the company is one tragedy. Being pursued, personally, for years afterwards is another — and it is the one that breaks you quietly, away from the headlines.

There is no system here either

When the lenders moved against me as Su-Kam’s personal guarantor — an application under Section 95 of the IBC — I was nervous. I expected that, at least as an individual now, there would be a clear and fair procedure. There was not. Just as with the company, I discovered that personal insolvency runs almost entirely on the will of the lenders. Everything depends on them.

The Adjudicating Authority appointed a Resolution Professional (under Section 97). On paper, his job was to mediate between the banks and me. In practice he was, like so many in this system, a process-oriented man — there to move files and tick boxes, not to find a fair outcome. The process began. They asked me for an offer — a repayment proposal. I gave one. And then they turned to my personal properties and my assets.

Valuers on paper, and a clock that never runs

What followed told me everything about how seriously the law protects an individual in my position. There was no real process to appoint the valuers. Two valuers were named — on paper — and the valuation of my personal assets dragged on for almost nine months. There is no timeline, no deadline, nothing that forces this to end. You simply wait, month after month, while your life is appraised by people you never chose.

A Committee of Creditors was formed, and eventually a combined settlement was reached. Yet even after the CoC existed and had supposedly spoken with one voice, individual banks were still negotiating their own numbers with me on the side. One process, many masters — and the individual at the centre of it has the least say of all.

Why I sold the properties myself

Once the value was settled, I sold my properties to pay. People ask me why I didn’t simply let the process run its course and let the lenders sell the assets. The answer is simple, and bitter: had the RP and the banks sold my properties through the same formal process they used on Su-Kam, they would have destroyed their value exactly as they destroyed the company’s. A forced, mechanical sale at whatever number suited the lenders — the very thing I had already watched happen once. Selling the properties myself was the only way to protect even a fraction of their worth.

And yet, even doing it myself was its own punishment. The moment a buyer hears that you are going through the NCLT, the conversation changes. The name itself frightens people. It scares away honest buyers and it crushes your price. You are forced to sell — and forced to sell low — precisely because the system has already branded you. The shadow of the NCLT followed me to every negotiating table.

Here is the trap inside the trap. The money they take from you is fixed on the valuers’ numbers — a valuation done on paper, in calm and comfortable terms. But the properties themselves can only be sold at distressed values, because an NCLT seller never commands a fair market price. You are charged on one number and made to realise another. The entire gap between the two — the whole cost of the distress, the stigma, the forced timeline — falls on you, and on no one else.

The shame no one writes about

There is a humiliation in all of this that no headline ever captures, and I will name it, because someone should.

I had to sell the house I had lived in for twelve years. Not a line on a balance sheet — a home. The place my family had grown into, where every room held a memory. And I had to open its doors to strangers, walk them through those rooms, and watch them quietly calculate how little they could offer a man they knew was cornered.

Because that is the other thing about negotiating in distress: the person across the table can sense it. They know you are going through the NCLT. They know you have a deadline. They know you cannot say no. So you stand in your own living room and bargain from a position of complete weakness, swallowing your pride with every sentence, because the only alternative is worse.

You learn to keep your face still while you are being stripped bare. You sign the papers. You hand over the keys. And you tell yourself it is only brick and concrete — even as you know that it never was.

₹270 crore becomes ₹650 crore — for an asset they had already taken

But the deepest flaw, the one I cannot make peace with, is the interest.

Interest on my personal liabilities kept running from 2018, year after year, while all of this played out. A figure of around ₹270 crore swelled to nearly ₹650 crore. With barely anything recovered from the sale of Su-Kam itself, the personal recovery demanded from me had grown to ₹650 crore — most of it interest on a debt tied to a company I no longer owned or controlled.

Let me put it plainly, the way I have come to understand it.

That is my biggest question, and no one in this system has ever answered it:

A deadline at last — but only to pay

There is one stage, and only one, where this system suddenly discovers urgency: when it is time for you to pay. Once the settlement number was fixed, I was given a firm timeline to sell my assets and deposit the money. The clock that had refused to run through nine months of valuation now ticked loudly.

I paid. By selling my properties, I deposited around ₹65 crore — which I am told is the highest recovery the lenders have ever achieved from a personal guarantor anywhere in India. Sit with that for a moment: my case is held up as their single biggest personal-guarantee success, and even then it was only a fraction of the ₹650 crore that had been demanded of me. That is how little these proceedings actually recover — and how inflated the demands against us really are.

Settled — but nowhere near free

I thought writing that cheque was the end. It was not. What no one tells you is that settling under the IBC does not lift the rest of the machinery off your back:

• The cases in the DRT do not automatically extinguish. They must be separately withdrawn — and until that happens, they live on.

• My wilful-defaulter tags with different banks continue. The label, attached to my name across institutions, does not fall away because I paid.

• The “fraud” declaration the banks stamped on my account does not lift either — one of the most destructive labels in finance, and the very thing that feeds the criminal proceedings.

• My CBI case continues. A criminal proceeding does not care that the debt has been settled.

• The banks will not update my CIBIL. They carry no obligation to keep my record current — so on paper I remain a defaulter, my score frozen at the worst.

• The Look Out Circular against me is not lifted. Settling the money does nothing to restore my freedom to move like a free citizen.

So I am not out of the legal mess. I sold everything I had, paid the highest personal recovery in the country, and I am still fighting on several fronts at once. The one small mercy is this: no new case can be brought against me for this debt. Everything already running simply keeps running.

This is what “resolution” looks like from the inside.

And then the taxman comes

There is one more cruelty waiting at the end of all this, and it is the one almost nobody sees coming. When I sold my properties to repay the lenders, the Income Tax department treated those sales like any other transaction — as a capital gain. So on top of everything, I now owe capital gains tax on properties I was forced to sell at distressed prices, for money that went straight to the banks, not a single rupee of which stayed with me.

Sit with the absurdity of it. My original properties — including the roof over my own head — are gone. I have no home left. And still I am taxed as though I had made a profit, because the Income Tax Act keeps no provision whatsoever for personal insolvency. The law that forced me to sell everything and the law that taxes the sale do not speak to one another. One hand strips you bare; the other posts you a bill for the privilege. And so this becomes yet another battle — one I will be fighting for years to come.

A fresh start — everywhere but here

I did not always know how other countries handle this. When I learned, it made our own system far harder to forgive.

In the United States, the entire bankruptcy code is built on a single idea — the fresh start. An honest person who files under Chapter 7 is usually discharged of his remaining debts in about four months. Four months, and the slate is wiped clean: the collection stops, and he is free to begin again. For a business, Chapter 11 goes further and does the very thing we refuse to allow — it lets the founder stay at the wheel as a “debtor in possession,” restructuring the company himself instead of being thrown out of it. Their law assumes the entrepreneur is worth saving.

In the United Kingdom, an individual is automatically discharged from bankruptcy after just twelve months. After that year, most of the old debts fall away and the restrictions lift. There is a clear, fixed end — a date on the calendar after which you are allowed to be a full citizen again.

Now set my own case against that. No discharge. Not four months, not twelve — almost nine months merely to value my assets, and then years of proceedings with no end in sight. No protection for the home I had lived in. No question of staying at the wheel; I was removed and barred. And at the end of it all, not a clean slate but a fresh tax bill.

We borrowed the words of the fresh start. We never borrowed the thing itself.

So where is the entrepreneur’s “fresh start”?

The IBC was sold to this country as the law that would finally give the honest entrepreneur a fresh start — a clean break, the dignity of beginning again. I have searched for that fresh start. I cannot find it.

I sold everything I owned. I paid the lenders the highest personal recovery they have ever booked from a guarantor in India. And still the cases linger — the DRT proceedings, the wilful-defaulter labels, the CBI matter, the Look Out Circular, a CIBIL record frozen in default. Each runs on its own track, in its own silo, independent of the others and independent of the one fact that should matter most: that I have already paid.

That is the cruelty of it. This system answers to nothing — not to fairness, not to finality, not even to its own promise. And every one of these laws sits apart from the others — the IBC, the DRT, the RBI’s wilful-defaulter and fraud classifications, the criminal law, the Income Tax Act — each administered by a different authority, in a different forum, on its own timeline. There is no single window, and no shared purpose of putting a man back on his feet. Nowhere in the entire machinery is there one place that can look at it all together and say: he has paid; now let him begin again.

And because there is no such moment, there is no horizon. An entrepreneur can give up his company, his properties, his name and his peace — pay every rupee asked of him — and still die before he ever sees a clear resolution. The “fresh start” the law promised arrives, if it ever arrives, after the man it was meant to save is already gone.

From The IBC Files — a first-person series by Kunwer Sachdev on what the Insolvency & Bankruptcy Code really does to the entrepreneurs it claims to protect.