The National Company Law Tribunal (NCLT) has approved a personal insolvency resolution plan for media baron Subhash Chandra, allowing him to settle admitted creditor claims totaling over Rs 22,000 crore by paying a mere Rs 6.5 crore. This settlement represents a substantial haircut of approximately 99.97 per cent for the lenders.
Information was available with The Chenab Times that the approved repayment plan allocates Rs 6.25 crore towards creditors and Rs 25 lakh for process costs. This minimal payout is based on Mr. Chandra’s declared low personal asset value and net worth. The larger sum of Rs 22,006.57 crore represented claims admitted against Mr. Chandra in his capacity as a personal guarantor for loans taken by various Essel Group companies.
Mr. Chandra, the founder of the Essel Group, had contested the total claim against him as a personal guarantor, asserting it was Rs 3,992 crore and not the Rs 22,000 crore cited by objectors to the repayment plan.
The insolvency proceedings against Mr. Chandra were initiated by Indiabulls Housing Finance Limited, now known as Sammaan Capital, in 2022. The case stemmed from a Rs 170 crore loan given to Vivek Infracon, for which Mr. Chandra stood as a personal guarantor. Following the loan defaulting, Indiabulls approached the NCLT under Section 95 of the Insolvency and Bankruptcy Code (IBC), a provision that enables creditors to initiate insolvency resolution processes against personal guarantors or individual debtors.
The repayment plan, proposed by Mr. Chandra, was presented to the creditors for approval. A majority of the creditors voted in favour of the plan, leading to the NCLT’s subsequent review to determine its compliance with the IBC.
In February, the NCLT had witnessed a split verdict from its Judicial Member Ashok Kumar Bhardwaj and Technical Member Reena Sinha Puri. While Mr. Bhardwaj supported the repayment plan, Ms. Puri raised concerns about significant legal and procedural deficiencies. This divergence led to the matter being referred to the NCLT president, who subsequently appointed Nilesh Sharma as a third member to adjudicate the dispute.
In an order issued on Tuesday, NCLT Member (Judicial) Nilesh Sharma approved the plan under Section 114 of the IBC. He dismissed objections from lenders who argued that the recovery amount was too meagre to warrant approval. Mr. Sharma also rejected the contentions of dissenting creditors, led by LIC Housing Finance, who had described the proposed payout as both “unviable and unlawful.”
Justice Sharma’s order stated, “The Repayment Plan submitted by the Personal Guarantor, in my opinion, is required to be approved under Section 114 of the Insolvency and Bankruptcy Code, 2016, subject to exclusion of the claims submitted through Anil Kumar on behalf of 960 individuals and Sunil Jain on behalf of 300 individuals from the final list of creditors and consequential redistribution of the repayment amount amongst the remaining eligible creditors in accordance with the approved Repayment Plan.”
The resolution professional has been directed by Justice Sharma to prepare and submit a revised and final list of creditors, incorporating the exclusions of claims from the specified individuals. This step is necessary for the consequential redistribution of the approved repayment plan’s value among the remaining eligible creditors.
According to the 144-page judgment, the approved repayment plan will be binding on all creditors, regardless of whether they assented to or dissented from it, in line with Section 115 of the Insolvency and Bankruptcy Code, 2016. The order implies that all consequences stipulated under the Code will apply.
The matter is now slated to be presented before the Original Division Bench for the passing of appropriate orders based on the majority opinion reached.
It is anticipated that several banks and financial institutions that had opposed the resolution plan may challenge the NCLT judgment. Their potential grounds for appeal could include the negligible recovery percentage, the verification process of the claims, and allegations regarding the participation of entities associated with Mr. Chandra in the voting procedures for the repayment plan.
The Chenab Times News Desk