Siddhartha is said to have had personal loans of over Rs 3,500 crore, much of it through his private holding companies. A portion of these loans came from organized financial entities such as Standard Chartered PE, and came with strict conditions. But the rest were from friends and associates, with no guarantees offered.
Shailesh Haribhakti, founder and chief mentor of the audit firm Baker Tilly DHC, said Indian law is very clear: unless there is a joint obligation, it ceases with the person who assumed the obligation and no longer. This is the reason why organized financial actors often take collateral guarantees from various other people, he said.
If assets have been pledged against loans, those assets can be used to recover the value of the current loan. Lawyer AV Amarnathan said that if the borrower had a guarantor or co-debtor for the loans obtained by him, that person becomes responsible for the total loan balance if the borrower dies.
He added that under the Hindu Inheritance Act 2005, a son is not required to repay his father’s debt from anything he has earned from his own income or savings. However, a son is required to pay out of what he inherited from his father’s property, provided that these have been pledged. The same rules apply to a spouse as well, lawyer GR Mohan said. Siddhartha’s family is said to own 12,000 acres of coffee plantations, an area that has grown considerably over the past 15 years, largely through borrowing from financiers who loaned him out on the basis of their trust in him.