Subhash Chandra insolvency case: NCLT stays repayment plan approval

The NCLT has stayed its earlier approval of a repayment plan in Essel Group founder Subhash Chandra's personal insolvency proceedings and will hear the matter afresh. The five-member Bench said no clear majority view had emerged on the August 25 verdict

New Delhi: The National Company Law Tribunal (NCLT) on Tuesday stayed the operation of an earlier verdict approving a repayment plan in the personal insolvency proceedings against Essel Group founder Subhash Chandra and decided to hear the matter afresh.

A five-member Bench of the NCLT, headed by President Justice (Retd) Anupinder Singh Grewal, said that no clear majority view had emerged on the August 25 verdict and issued notices to all parties involved.

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The Bench also restrained Chandra from alienating his properties, directly or indirectly, on a request made by Solicitor General Tushar Mehta, who appeared for the creditors.

“We also direct that the guarantor shall not alienate the properties either directly or indirectly,” the insolvency tribunal NCLT said.

The five-member Bench comprised Judicial Members Bachu Venkat Balara Das and Mahendra Khandelwal, and Technical Members Atul Chaturvedi and Ravindra Chaturvedi.

The latest development comes after a series of conflicting orders in the insolvency proceedings, which were initiated against Chandra by Indiabulls Housing Finance Ltd.

Earlier, the original two-member NCLT Bench had delivered a split verdict on the repayment plan, following which the matter was referred to a third member, Judicial Member Nilesh Sharma, under Section 419(5) of the Companies Act, 2013.

On August 25, Sharma approved the repayment plan under Section 114 of the Insolvency and Bankruptcy Code (IBC), while directing the exclusion of claims submitted through Anil Kumar on behalf of 960 individuals and Sunil Jain on behalf of 300 individuals.

He also directed that the amount allocated to these claims be redistributed among the remaining eligible creditors.

Sharma further held that the approved plan would bind all creditors, including those who had opposed it, under the provisions of the IBC.

However, when the matter returned to the original two-member Bench, it observed that the third member’s order had not resolved the difference between the original members and that no majority view had emerged.

The Technical Member had rejected the repayment plan, while the Judicial Member had sought to confine its benefit to supporting creditors.

The third member, meanwhile, had approved the plan and held that it would be binding on all creditors.

Following the lack of consensus, the matter was placed before the NCLT President, who constituted the present five-member Bench to hear the matter afresh.

The insolvency case had attracted considerable attention nationally after the repayment plan provided for payment of only around Rs 6.5 crore against admitted creditor claims of about Rs 22,006.57 crore.

This amounted to a haircut of nearly 99.97 per cent for the lenders. Several creditors, including LIC Housing Finance, Union Bank of India and Canara Bank, had opposed the plan, arguing that the proposed recovery was too meagre.

LIC Housing Finance, whose admitted claim was stated to be Rs 1,322.39 crore, had argued that the proposed repayment of around Rs 38.09 lakh was only about 0.028 per cent of its admitted dues.

Union Bank of India has said it would challenge the NCLT’s approval before the National Company Law Appellate Tribunal (NCLAT), while HDFC Bank has also been exploring an appeal.

However, Chandra has disputed the characterisation of the proceedings as a massive personal debt write-off. He has maintained that he did not personally borrow the money from the lenders and had acted only as a personal guarantor for loans taken by borrowing entities associated with the wider Essel Group.

Chandra has also said that the Rs 22,006 crore figure represented claims filed in the proceedings and should not be treated as his personal outstanding debt.

According to his statement, Rs 21,696 crore of the claims were admitted, while lenders opposing the repayment plan had claims totalling around Rs 3,992 crore.

Of this, claims worth Rs 620 crore had already been settled, leaving around Rs 3,372 crore. He has further said that the borrowing entities had offered to pay around Rs 1,113 crore to multiple objecting lenders and that discussions were continuing.