Various creditors stand to recover only about 0.028% of their origin claims from Essel Group founder Subhash Chandra under a repayment plan backed by a majority of the National Company Law Tribunal (NCLT). This translates into a haircut of approximately 99.97%, or nearly ₹22,000 crore. [India Bulls Vs Subhash Chandra]
Since 2022, Chandra has been the subject of insolvency proceedings filed by Indiabulls Housing Finance Limited (Indiabulls/ IBHF), which is now known as Sammaan Capital.
Chandra had stood as a personal guarantor for a ₹170 crore loan given to Vivek Infracon. After the loan turned bad, Indiabulls moved the NCLT in 2022 under Section 95 of the Insolvency and Bankruptcy Code (IBC) for proceedings against Chandra.
The plea was admitted in 2024.
Earlier this year, the NCLT appointed a third member to decide the case after Judicial Member Ashok Kumar Bhardwaj and Technical Member Reena Sinha Puri delivered conflicting opinions on a repayment plan.
While Bhardwaj favoured approval of the repayment plan, Puri concluded that it suffered from serious legal and procedural defects.
On August 25, Judicial Member Nilesh Sharma favoured approval of the plan. The plan allocates ₹6.25 crore to creditors against admitted claims of approximately ₹22,006.57 crore. A further ₹25 lakh has been earmarked towards insolvency resolution process costs.
The final recovery figure may change after the exclusion of certain unsupported claims from the creditors’ list.
“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," Sharma said.
He directed the Resolution Professional (RP) to exclude claims filed by creditor Anil Kumar on behalf of 960 individuals and creditor Sunil Jain on behalf of 300 individuals. The ₹6.25 crore will be redistributed among the remaining eligible creditors after a revised list is prepared.
Several banks and financial institutions had opposed the plan. They questioned the negligible recovery, the verification of claims and the participation of entities allegedly associated with Chandra in the voting process.
LIC Housing Finance argued that it would receive only ₹38.09 lakh against its admitted claim of ₹1,322.39 crore. It also contended that even the proposed ₹6.5 crore was described in the plan as indicative and uncertain.
The objecting creditors further relied on net-worth certificates purportedly showing Chandra’s net worth at approximately ₹45,888 crore in 2017 and ₹40,562 crore in 2018. His present net worth was stated to be about ₹31.79 crore.
These objections resulted in a difference of opinion between Judicial Member and Technical Member. The NCLT President consequently referred the points of difference to another NCLT Member as the third member under Section 419(5) of the Companies Act, 2013.
While answering those points, NCLT Member Sharma found that the claims presented through creditors Anil Kumar and Sunil Jain had been admitted without supporting documents.
The admission amounted to a lapse by the RP but was not serious enough to invalidate the entire repayment plan, the NCLT member held.
He did not accept the argument that Veena Investments Private Limited, Direct Media Distribution Ventures Private Limited, World Crest Advisors LLP, Lemonade Capital Advisors LLP and Corpcall Capital Advisors LLP had been established as Chandra’s “associates” under Section 79(2)(g) of the IBC.
The statutory definition could not be expanded merely because the entities were alleged to have family, business or commercial proximity with Chandra, he ruled. Their votes could not, therefore, be excluded on that ground, the third member's ruling said.
He also concluded that the plan would bind all creditors, including those who voted against it or abstained, under Section 115 of the IBC.
The matter will now be placed before the original bench for a formal order to give effect to the majority opinion.
Subhash Chandra was represented by advocates GP Madaan, Aditya Madaan and Rahul Narula.
The Resolution Professional was represented by advocate Sajeve Deora.
World Crest Advisors LLP, Veena Investments Private Limited and Direct Media Distribution Ventures Private Limited were represented by advocates Bishwajit Dubey, Prateek Mishra and Sumit Singh Bagri.
Canara Bank was represented by Senior Advocate Ritin Rai and advocates Anju Jain, Hitesh Sachar, Rifat Touhid, Bhawna Prajapati and Viney Pradhan.
[Read Judgment]