In a practical relief for lenders, the Bombay High Court has ruled that IL&FS Financial Services can move forward with its recovery suit against the main company that borrowed ₹203.66 crore, even though the guarantors — including the troubled real estate firm HDIL and its promoters — are protected under insolvency laws.
Justice Gauri Godse pronounced the order on 6th April 2026 in the commercial summary suit filed by IL&FS. The court made it clear that insolvency moratoriums protecting guarantors do not stop the lender from pursuing the principal borrower.
Simple Breakdown of the Case
- Lender: IL&FS Financial Services Limited
- Main Borrower (Defendant 1): Serveall Constructions Private Limited – the company that actually took the term loan.
- Corporate Guarantor (Defendant 2): Housing Development and Infrastructure Limited (HDIL) – the well-known real estate developer currently under insolvency.
- Personal Guarantors (Defendants 3 & 4): Rakesh Wadhawan and Sarang Wadhawan (promoters of HDIL).
The total amount claimed is ₹203,66,31,506 (roughly ₹204 crore).
HDIL has been under Corporate Insolvency Resolution Process (CIRP) since 20 August 2019, with a moratorium under Section 14 of the Insolvency and Bankruptcy Code (IBC) in place. The two Wadhawans also face personal insolvency proceedings under Section 95, triggering an interim moratorium under Section 96.
IL&FS told the court it wants to proceed only against Serveall Constructions right now and will wait for the moratoriums on HDIL and the Wadhawans to end before going after them.
What the Judge Decided
Justice Godse held that:
- The moratorium protecting HDIL (as corporate guarantor) does not give any shield to the actual borrower — Serveall Constructions.
- The interim moratorium on the personal guarantors (Wadhawans) also does not extend to the principal borrower.
- Lenders can continue recovery action against the main borrower even if guarantors are under IBC protection.
The court distinguished this from earlier cases and relied on Supreme Court rulings to explain that the protection under IBC is for the specific debtor under insolvency, not for everyone connected to the debt.
Final Order: The summary suit will now proceed only against Serveall Constructions Private Limited. Proceedings against HDIL and the two Wadhawans remain stayed until their moratoriums end. IL&FS can revive claims against the guarantors later.
This ruling is seen as helpful for banks and financial institutions, as it prevents borrowers from indirectly escaping liability just because their guarantors have filed for insolvency.
Also Read: Further Trouble For HDIL Builders.
