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.

The post Bombay HC Lets IL&FS Chase HDIL’s ₹204 Crore Loan from Main Borrower Despite Insolvency Shield appeared first on Square Feat India.

This coordinated step — between the ED and the Insolvency and Bankruptcy Board of India (IBBI) — aims to unlock the value of assets earlier frozen during money laundering probes, ensuring creditors, banks, and homebuyers get maximum recovery through the insolvency process.

Why This Matters

Until now, if a company under insolvency had its assets attached by ED under PMLA, those properties could not be sold or used by the Resolution Professional — even when a resolution plan was ready.
This created long delays and value erosion for creditors and homebuyers stuck in stalled projects or bankrupt real estate companies.

Now, ED has introduced a standard mechanism for restitution (release) of such assets, allowing them to be used in the Corporate Insolvency Resolution Process (CIRP) or liquidation — with strict safeguards.

How It Works

1. Resolution Professionals (RPs) can now file applications before the PMLA Special Court under Sections 8(7) or 8(8) of the Act to request release of attached assets.
2. A standard undertaking — finalised jointly by ED and IBBI and circulated on November 4, 2025 — must be submitted by the Insolvency Professional.
3. The undertaking ensures that:
   • Released assets are used only for creditors’ benefit, not for promoters or accused persons.
   • Full reporting and compliance continue until the insolvency resolution is complete.
   • Quarterly reports are submitted to the Special Court showing how restituted assets are being used or monetised.

Safeguards Built In

To prevent any misuse:

• Restituted assets cannot be sold to any ineligible promoter or related party (under Section 29A or 32A of IBC).
• Insolvency Professionals must disclose all attached properties in the Information Memorandum or Auction Notice.
• ED will continue to receive cooperation and updates on:
  • PUFE (Preferential, Undervalued, Fraudulent, Extortionate) transactions,
  • Committee of Creditors’ structure, and
  • Details of the successful bidder or resolution applicant.

The undertaking remains valid until the resolution plan or dissolution order is approved by the NCLT.

Why It’s a Big Policy Shift

This marks a turning point in India’s enforcement and insolvency coordination.
Previously, strict PMLA attachments often clashed with IBC resolution efforts — leaving projects stuck and creditors helpless.

Now, ED and IBBI have clarified that “enforcement and value recovery are not conflicting goals.”
Instead, when aligned, they ensure that:

• Economic offenders are prosecuted, and
• Public and creditor interests are protected through lawful recovery.

Impact on Real Estate & Homebuyers

Many stalled housing projects — where developer companies face both PMLA probes and insolvency — can now move forward under this framework.
Attached lands or unfinished towers may now be legally restored to the insolvency process, paving the way for homebuyer refunds or possession through resolution plans.

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