NCLT forms five-member bench to hear Subhash Chandra insolvency after low recovery concerns
The National Company Law Tribunal (NCLT) has constituted a five-member special bench to hear the personal insolvency case of Subhash Chandra afresh, after creditors raised objections over a repayment plan that offered only a fraction of the guarantees involved. The special bench has been directed to sit at 10:15 am on September 1, according to The Indian Express.
The development follows the NCLT's earlier order approving a repayment plan under which creditors would receive only about Rs 6.25 crore against guarantees of around Rs 22,000 crore signed by Chandra, as reported by The Indian Express. The case has drawn attention because of the exceptionally large gap between the claims and the amount proposed to be paid to creditors.
On August 31, the original bench noted there was no clear majority consensus, and on September 1, a newly constituted five-member special NCLT bench officially stayed the August 25 approval order to hear the personal insolvency case afresh, according to Times Now.
The personal insolvency proceedings against Chandra were initiated in 2024 following a petition by Indiabulls Housing Finance, as reported by The Indian Express. The proceedings relate to personal guarantees given by Chandra for borrowings of Essel Group-linked companies and are separate from corporate insolvency proceedings involving group companies and regulatory proceedings concerning Zee Entertainment Enterprises.
The NCLT's August 25 order approving the repayment plan came after a split verdict by a two-member bench was resolved by a third member, according to The Indian Express. The plan received 80.814 per cent of the voting share, while banks opposing it accounted for only 19.186 per cent.
Banks and other creditors had raised objections over the exceptionally low recovery and questioned whether Chandra's financial position and assets had been examined sufficiently, as reported by The Indian Express. They had also questioned whether a forensic investigation was warranted.
On August 30, Subhash Chandra said borrowers associated with his personal guarantees had assured him that they would reconcile the accounts with lenders and settle the balance of Rs 4,262 crore, according to The Indian Express.
In a statement posted on X on August 30, Chandra addressed social media discussions surrounding his personal insolvency proceedings, as reported by Times Now. According to Chandra's statement, he did not personally borrow the funds in question but had provided personal guarantees in connection with certain borrowings. He also referred to the claims filed by creditors and the repayment plan prepared during the insolvency proceedings. Chandra stated the plan was prepared after assessing the assets and funds available to him, while also providing figures relating to the amounts disbursed, repayments made by borrowers and outstanding claims. The statement came after social media posts on the matter, including posts carrying the hashtag #PaiseVapasKaro.
The tribunal, however, concluded that the repayment plan could provide a better outcome for creditors than pushing the matter into bankruptcy, as reported by The Indian Express. It also held that where creditors had approved a plan in accordance with the Insolvency and Bankruptcy Code, the tribunal would not ordinarily substitute its own commercial assessment for that of the creditors.
The August 25 order has nevertheless triggered further questions over the effectiveness of personal guarantees, according to The Indian Express.