Tribunal stays repayment order

The National Company Law Tribunal (NCLT) has put on hold its earlier order that allowed Zee Group founder Subhash Chandra to settle his personal insolvency proceedings by paying Rs 6.25 crore against admitted claims of Rs 22,006.57 crore. A five-member special bench of the tribunal on Tuesday stayed the operation of the August 25 order and directed Chandra, in his capacity as guarantor, not to alienate any of his properties, either directly or indirectly. The tribunal also issued notices to all parties and decided to hear the matter afresh after finding that no clear majority view had emerged from the earlier proceedings.

The latest development puts the repayment plan, which had appeared to clear the way for the conclusion of Chandra's personal insolvency proceedings, on hold for now. The tribunal's order does not finally decide whether the repayment plan will be approved.

Background of the case

The matter was initially heard by a two-member NCLT bench, whose members delivered differing opinions on Chandra's repayment plan. One member had favoured approving the plan only for creditors who had supported it, while allowing dissenting creditors, including banks and financial institutions, to pursue independent remedies for recovery. The other member rejected the plan, citing what the tribunal found to be serious defects in the process followed by the resolution professional.

Because of the difference of opinion, the matter was referred to a third member under Section 419(5) of the Companies Act, 2013. On August 25, the third member held that the repayment plan should be approved. However, the order excluded claims submitted through Anil Kumar on behalf of 960 individuals and those submitted through Sunil Jain on behalf of 300 individuals. The amount allocated to those claims was instead directed to be redistributed among the remaining eligible creditors. The third member also held that the approved plan would bind all creditors, including those who had voted against it, under Section 115 of the Insolvency and Bankruptcy Code (IBC).

The case then returned to the original two-member bench, which found on August 31 that no majority view had emerged from the three opinions. The matter was subsequently referred to the NCLT President, who constituted a five-member special bench that has now taken up the case.

Chandra's response

In response to the NCLT order, Chandra's office issued a statement explaining his personal guarantees and the distinction between his own borrowing and loans to Essel Group companies. Chandra has maintained that he was acting as a personal guarantor for loans raised by companies associated with the Essel Group, with his total personal guarantees around Rs 22,000 crore. He has claimed that approximately Rs 43,000 crore of the Essel Group's liabilities had been repaid since the financial crisis emerged in 2019, when the group's liabilities were around Rs 45,000 crore.

The insolvency proceedings against Chandra were initiated by Indiabulls Housing Finance under Section 95 of the IBC. The large gap between admitted claims and the proposed payment would have resulted in creditors receiving only a small fraction of their claims.

The five-member NCLT bench will hear the insolvency matter afresh, and the stay on the August 25 order remains in effect.