HDFC Bank mulls NCLAT appeal against Subhash Chandra insolvency order

HDFC Bank is considering an appeal against an NCLT order approving Subhash Chandra’s repayment plan, under which creditors will receive only Rs 6.5 crore against admitted claims exceeding Rs 22,000 crore. HDFC Bank’s Rs 680-crore claim has 3.2% admitted

Mumbai: Leading private lender HDFC Bank is mulling an appeal against the bankruptcy court NCLT’s order in the case involving Subhash Chandra, the bank said on Thursday. The bank said only 3.2 per cent of the total claim amount has been admitted under the National Company Law Tribunal (NCLT) order in the matter. HDFC Bank’s total claim was Rs 680 crore. “HDFC Bank had opposed and voted against this resolution, which was approved by the majority. The Bank is exploring filing an appeal at the NCLAT (National Company Law Appellate Tribunal),” HDFC Bank said in a statement.

HDFC Bank said it had inherited the loan facility from its parent, HDFC, before the bank’s merger.The bank’s response comes a day after an NCLT ruling in the matter triggered controversy, as lenders had to take steep haircuts and are seen to be getting a negligible sum against their claims.

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In an order on Wednesday, the NCLT approved a repayment plan under which media baron Chandra will pay just Rs 6.5 crore to settle admitted creditor claims of over Rs 22,000 crore, resulting in a haircut of 99.97 per cent for lenders.

NCLT Member (Judicial) Nilesh Sharma, ruling as a third member, on Tuesday approved the plan under Section 114 of the Insolvency and Bankruptcy Code (IBC), rejecting objections by lenders that the recovery was too meagre to merit approval.

The matter stems from the default of an entity called Vivek Infracon on a Rs 170 crore loan taken by the then Indiabulls Housing Finance, which turned sour.

Chandra had given a personal guarantee on the loan and the lender’s move to NCLT to kickstart bankruptcy proceedings led to claims of over Rs 22,000 crore from peers who also owed money.

Two members of the National Company Law Tribunal had given a split verdict, after which the president of the forum appointed member (judicial) Nilesh Sharma as the third member amid the difference of opinion.

Sharma rejected the claims of the dissenting creditors led by LIC Housing Finance, which had argued that the payout was “unviable and unlawful.” It had contended that against admitted claims of approximately Rs 22,006.57 crore, the repayment plan proposed the payment of only Rs 6.25 crore to creditors and Rs 25 lakhs towards process costs.

Sharma, in its 144-page-long order, said the resolution professional’s valuation showed Chandra’s personal estate was worth significantly less than the amount offered under the plan, and that dissenting creditors were unlikely to recover more by rejecting it, since he would then face bankruptcy rather than being able to pay from a position of financial recovery.

“If the plan is approved and the debtor’s insolvency is resolved, putting him back on his feet, the objectors would ultimately stand a better chance of recovering their debts directly from the Principal Debtors,” the NCLT observed.

The tribunal held that its role was not to substitute its own commercial wisdom for that of the creditors or to assess whether the settlement amount was adequate. It also noted that “the commercial decision of the creditors operates within, and not outside, the statutory framework”.