THE IBC FILES: AN ENTREPRENEUR’S PERSPECTIVE

Article 5 of 8 | When Business Failure Becomes a Death Sentence in India

← Previous: Article 4 — Inside the CIRP: 180 Days of Helplessness

In the previous article, I told you what happens inside the CIRP — how the Resolution Professional, the COC, and the banking system turned Su-Kam from a ₹600 crore running company into scrap. But the CIRP is only the beginning of the nightmare for the entrepreneur.

What comes after is far worse.

After your company is taken, you are not allowed to grieve, recover, or start afresh. Instead, the entire machinery of the state — CBI, ED, banks, courts — turns against you. You are treated not as someone whose business failed, but as someone who committed a crime. And for the rest of your life, you carry that label.

In India, 7 people die by suicide every day because of bankruptcy and business failure. Not because they committed fraud. Because the system told them they were criminals — and the shame was too much to bear.

The Day They Called Me a Wilful Defaulter

After the NCLT admitted Su-Kam, the banks didn’t stop at taking my company. They went after me personally. The process of declaring an entrepreneur a “Wilful Defaulter” is perhaps the most devastating weapon in the Indian banking system’s arsenal.

As of March 2025, 1,629 corporate borrowers owe approximately ₹1.62 trillion and are listed as wilful defaulters by public-sector banks. I became one of that number. Not because I had committed fraud. Not because I had siphoned money. But because the system makes no distinction between an entrepreneur who failed and one who cheated.

The RBI’s Master Direction on Wilful Defaulters imposes a five-year bar on financing any new ventures promoted by such persons. Five years. For an entrepreneur, that is a lifetime. Your best ideas, your peak energy, your accumulated experience — all frozen. By the time the bar lifts, the world has moved on and so has your spirit.

The IBC equates all promoters as the same. The man who built Su-Kam from nothing, created an industry, filed 77 patents, employed ~5,000 people, and kept Chinese products out of India for two decades — he is put in the same category as someone who deliberately defrauded his creditors. There is no nuance. No investigation into intent. No recognition of decades of honest work.

CBI, ED, and the Triple Attack That Never Ends

Once your account is declared a fraud by the bank, the matter goes to the CBI and the Enforcement Directorate. This is where the real destruction of the entrepreneur begins.

The investigating agencies don’t come to help. They come to find fault. Multiple forensic audits. Transaction audits. Years of records scrutinised not to save the company — which is already dead — but to build a case against the person who built it.

And then they raid your house.

In January 2021, The Hindu reported: CBI books Su-Kam Power Systems for Rs 260.89-cr bank fraud — labelling a business failure as fraud, when it was a raid only, no arrest. This is how media headlines destroy an entrepreneur before any court has even heard the case.

Banks and agencies show up at your door — searching for documents, evidence, anything they can use against you. Here is the absurdity: the documents they want are at the company. The company that is no longer in your control. The company where you are not even allowed to enter without the RP’s permission. The records, the files, the papers — they are all there. But the agencies come to your home, demand what you don’t have, and treat your inability to produce them as evidence of guilt.

For the same alleged offence, multiple agencies ask you the same questions. CBI asks. ED asks. The bank’s forensic auditors ask. Each agency operates independently, as if the others don’t exist. You answer the same questions, produce the same explanations, defend the same decisions — again and again and again. And each time, you are treated as a suspect, not as a witness to your own life’s work.

FROM MY LETTER TO THE PRIME MINISTER (2020)

“My only aim is to highlight the mistreatment of the law where all entrepreneurs are treated as fraudsters and all or any of their good work is put aside. The only purpose of the law seems to be a mission of faultfinding by way of multiple forensic audits, transaction audits etc. by multiple agencies. I have suffered immensely financially and mentally.”

The agencies don’t stop with you. They call your distributors, your suppliers, your former employees — people who are already tormented by the loss of their jobs, their money, their livelihoods. These people have no desire to be dragged into an investigation. But they have no choice. They are summoned, questioned, harassed — collateral damage in the system’s mission to build a case against the man who once gave them their livelihoods.

And the agencies have unlimited power. They can call you any time they want. They can summon you with a threatening attitude. There is no schedule, no courtesy, no limit. You are at their mercy, every hour of every day, with no end date in sight.

The Cat-and-Mouse Game: When Every Bank Becomes Your Enemy

Here is the cruel irony: while the company gets a moratorium — protection from all legal proceedings — the promoter gets none. The Supreme Court has upheld that personal guarantors are NOT covered by the moratorium. So while your company is protected, you are thrown to the wolves.

And every wolf hunts independently.

Each bank in the consortium files its own cases. Not one complaint for the consortium — individual complaints from each bank. One bank sends you a wilful defaulter notice. Months later, the same bank issues a fraud declaration. Another bank does the same. A third bank goes to the CBI. A fourth goes to the Economic Offences Wing (EOW) of the state police. All for the same matter. The same company. The same loans.

Cases against the company — moratorium, protected.
Cases against the entrepreneur — welcome, file as many as you want.

Banks that were sleeping for months before NCLT suddenly become active after admission. They file cases to save their own skin — not to recover money, but to show their superiors that they “took action.” The entrepreneur faces a flood of litigation from every direction — financial creditors, operational creditors, investigating agencies, CBI, ED, EOW — all at once, with no means to defend himself because his assets are frozen and his income is zero.

For each wilful defaulter notice, you go to the High Court to get a stay. For each fraud declaration, another High Court petition. The cases multiply. The legal fees pile up. You are fighting wars on ten fronts simultaneously with no army and no ammunition. The cat-and-mouse game between the entrepreneur and the system has no rules, no referee, and no finish line.

The Look Out Circular: Trapped in Your Own Country

As if the raids, the cases, and the investigations were not enough, the banks issue Look Out Circulars (LOCs) against you. A Look Out Circular means you cannot leave the country. You are flagged at every airport, every border.

And here is the madness: every bank issues its own LOC. Not one for the consortium. Each bank files separately, as though one LOC is not sufficient to stop a man at the airport. The Supreme Court has since struck down the power of banks to issue LOCs independently — but the LOCs already issued continue to stand. The damage is done. The cage is built.

You cannot travel for business. You cannot explore opportunities abroad. You cannot even visit family. The system that took your company, your income, and your reputation now takes your freedom of movement. You are a prisoner in your own country — not because you were convicted of a crime, but because banks needed to show they were “doing something.”

The Personal Guarantee Trap: How the Meter Keeps Running

Perhaps the most unjust aspect of the entire IBC framework is the treatment of personal guarantees.

When a company is admitted into NCLT, the entrepreneur’s personal guarantees are activated. Fair enough — he signed them. But here is what is not fair: the interest on the loan keeps adding even after the company has been taken over by the NCLT.

Think about this. The company is no longer in your control. You have been removed. The RP runs it. The COC makes decisions. You cannot earn from it. You cannot manage it. Yet the interest meter on your personal guarantee keeps ticking. Every day, your liability grows for a company someone else is running into the ground.

My proposal: The personal guarantee should be capped at the amount of the valuation report at the time of NCLT admission. That should be considered the baseline. Whatever is recovered should be deducted, and the promoter is liable only for the remaining amount — without any additional interest.

How can you charge interest on a guarantee for a company that has been taken away from you? The entrepreneur didn’t choose to stop running the company. The court took it. The liability should freeze the day control is lost.

My Cars Were Taken. My Home Will Be Next.

FROM MY LETTER TO THE PRIME MINISTER (2020)

“I was left destitute so much so that my cars, which were under company registration, were recalled; all I requested was enough notice so I could make other arrangements. My home where I am staying with my family, covered under personal guarantees, now that will be taken by the banks in the next step under the law. This harassment does not stop here — I have been burdened by numerous cases which I have to contest for which I do not have the financial means and don’t know when they will end so that I can start afresh.”

Read that again. An entrepreneur who built an industry, who was featured in 3 books and multiple TV series for inspiring others, who put India on the world map in his industry — is now unable to pay for his own legal defence. His cars are gone. His home is next. He cannot start a new business for five years. He is fighting cases with no money, no income, and no end in sight.

And the law considers this justice.

In the West, You Go Bankrupt. In India, You Die of Shame.

In America, Europe, or the UK, bankruptcy is treated as a normal business event. Steve Jobs was fired from Apple. Henry Ford failed five times. Walt Disney went bankrupt. They all came back. The system let them.

In India, it’s different. Bankruptcy is not a business event. It is a social death sentence.

According to NCRB data, India sees 7 bankruptcy-related suicides every day. Not 7 a month. Not 7 a year. Seven. Every. Single. Day.

“Business loss has a lot of stigma, and it’s not shared very easily by the family,” says psychiatrist Dr. Harish Shetty. The shame associated with failure — magnified by the criminal label that the IBC attaches — pushes entrepreneurs to the edge. Many don’t come back.

The IBC was supposed to change this. It has a “Fresh Start Process” on paper — Chapter II of Part III — designed to give individuals a second chance. But it has remained completely dormant and unused since it was introduced. The mechanism exists in the law but not in practice. Like so much of the IBC, the intention is good but the implementation is non-existent.

Thirty Years of Experience, Destroyed by One Order

Entrepreneurs are a national asset. Like IAS officers, politicians, and bankers, they accumulate experience over decades that cannot be replicated. A first-generation entrepreneur who has built a company over 25-30 years has knowledge that no MBA program can teach — about markets, people, technology, customers, and survival.

That experience is destroyed by the stroke of one NCLT order.

Has anyone done a study on:

How many entrepreneurs have been affected by IBC proceedings?
What is their average age?
How many years did they invest in building their organisations?
How many had clean track records before IBC?
How many have been able to start again?
How many are still fighting cases with no resolution in sight?

The answer is: nobody has done this study. Because the system doesn’t care about the entrepreneur. It only cares about the recovery rate.

I started selling pens on a bicycle as a 10th-class student from a lower middle-class family. I built Su-Kam over 25 years. I created an entire industry. I trained thousands of people. I filed 77 patents. I exported to 90+ countries. I kept Chinese products out of India.

Today I am a “wilful defaulter” fighting cases I cannot afford, living in a home the bank will take, with no income, no company, and no path forward that the law allows.

The Law That Punishes the Builder and Protects the Destroyer

FROM MY LETTER TO THE PRIME MINISTER (2020)

“The entrepreneur is put under pressure by putting legal cases in NCLT as the focus of the banks and courts is to find the faults of previous management and serving them with the notices of Wilful defaulter and Fraud Account declaration. Not only does the entrepreneur get branded as criminal, his family life also gets totally disturbed. The legal cases filed against the entrepreneurs take so many years to conclude that the spirit of the entrepreneur to start afresh gets lost.”

When people build businesses, decisions are taken to keep the business going. These decisions can be right or wrong in hindsight. But the entire focus of the system is to find what went wrong — not to acknowledge what went right. This kills the spirit of entrepreneurship.

Meanwhile, the COC — which sold companies at scrap value, which refused to invest a single rupee, which attended meetings through junior officers who couldn’t make decisions — walks free. No investigation. No accountability. No cases.

The promoter is liable for everything he did while running the company.
The COC is liable for nothing it did while destroying the company.

Tell me — who is the real criminal here?

The Other Entrepreneurs Are Watching

Every entrepreneur in India is watching what happens to people like me. And the message they’re receiving is clear: if your business fails, the state will destroy you.

This has created a chilling effect across the entire entrepreneurial community. Business owners are becoming extra cautious. Not in a good way — in a fearful way. They are avoiding risk, avoiding growth, avoiding the bold decisions that create jobs and industries. Because they’ve seen what happens when it doesn’t work out.

The government talks about “Make in India” and “Startup India.” It celebrates entrepreneurship in speeches and summits. But the same government’s insolvency law tells entrepreneurs: if you fail, we will take your company, your home, your reputation, and your future. We will brand you a criminal, and we will not let you start again for five years.

How do you build a nation of entrepreneurs when the punishment for failure is a life sentence?

What Must Change: Give the Entrepreneur a Second Life

REFORM 1: Distinguish Between Fraud and Failure

The IBC must create separate tracks for entrepreneurs who failed honestly and those who defrauded creditors. A first-generation entrepreneur with a clean track record cannot be treated the same as a habitual offender. Until the entrepreneur has a history of wrongdoing, he should be given the benefit of doubt.

REFORM 2: Extend Moratorium to the Entrepreneur

If the company gets protection from legal proceedings during CIRP, the promoter should too. During the IBC process, the entrepreneur should be given immunity from new cases. Banks should not be allowed to file personal cases while the company matter is pending. This one change would prevent the crushing pile-up of litigation that destroys the entrepreneur’s ability to recover.

REFORM 3: Cap Personal Guarantee at Valuation

The personal guarantee liability should be frozen at the valuation report amount on the date of NCLT admission. No further interest. Whatever the company recovers is deducted. The promoter is liable for the gap only — without interest accruing for a company he no longer controls.

REFORM 4: Time-Bound Resolution of Entrepreneur Cases

The IBC mandates that a company’s CIRP must be resolved within 330 days (extended to 370 days in some cases). If the company’s fate must be decided within a defined timeline, why is there no such limit for the entrepreneur? Cases against the promoter drag on for 5, 7, 10 years — with no deadline and no resolution. A defined timeline must be set: if no wrongdoing is proved within that period, the cases must be closed and the entrepreneur freed to start again. Either put him in jail or set him free — but do not leave him in limbo for a lifetime.

REFORM 5: One Case, Not Ten

Individual banks must not be allowed to file separate complaints for the same matter. If there is a consortium of lenders, there should be one consolidated complaint, one investigation, one proceeding. The current system where each bank independently declares wilful defaulter, then fraud, then files with CBI, then files with EOW — all for the same loan — is not justice. It is organised harassment. One complaint should be sufficient. One agency should investigate. One court should decide.

REFORM 6: Activate the Fresh Start Process

The IBC already has a Fresh Start Process on paper. It must be activated, properly funded, and made accessible. Entrepreneurs who have been through insolvency need institutional support — debt counselling, rehabilitation guidance, and a clear path to re-enter business.

REFORM 7: The Shame Must Stop

India needs a cultural shift around business failure. The government should actively work to destigmatise honest business failure — through public messaging, through reform of the wilful defaulter framework that separates fraud from failure, and through stories of entrepreneurs who failed and rebuilt. In a developing economy, failure is the cost of ambition. Punishing it is punishing progress.

A Letter That Was Never Answered

In 2020, while my company was bleeding and my life was falling apart, I wrote to the Prime Minister. I told him everything you’ve read in these five articles. I described how the IBC’s implementation is destroying what it claims to save. I asked for intervention.

FROM MY LETTER TO THE PRIME MINISTER (2020)

“Sir, the IBC has equated good and bad promoters as same. The entrepreneur should be given a fresh lease of life rather than bogging him down with all the legal cases and criminal actions initiated against him. The ‘Make in India’ campaign will only be successful if the spirit of entrepreneurship is saved — which IBC in its present form does not seem to be doing.”

I wrote that I was ready to meet any higher officials to make them aware of facts I would not put in writing. I hoped the letter would reach him directly.

It has been six years. I am still waiting.

But I am no longer waiting in silence. These articles are my answer — not just for myself, but for every entrepreneur who has been broken by this system and doesn’t have a voice to tell their story.

The system counts money recovered. It doesn’t count lives destroyed.

7 suicides a day. 1,629 wilful defaulters. 2,950 companies liquidated. Thousands of entrepreneurs silenced.

The IBC was meant to give stressed companies a second chance. Instead, it gave entrepreneurs a death sentence.

It’s time to change the sentence.

Next: Article 6 — Personal Insolvency: The Final Punishment

Kunwer Sachdev
Founder, Su-Kam Power Systems Ltd.
A first-generation entrepreneur who built India’s largest power backup brand — present in 90+ countries, ₹600 crore revenue, 77 patents, ~5,000 employees — before the IBC took it all away.

← Article 4: Inside the CIRP | Article 6: Personal Insolvency → Coming Soon