NCLAT to hear creditors’ plea against Subhash Chandra’s Rs 6.5 crore plan

MUMBAI: The numbers in Subhash Chandra’s insolvency case have prompted another legal turn. The National Company Law Appellate Tribunal (NCLAT) will on Tuesday, September 1, hear creditors’ challenge to the National Company Law Tribunal’s (NCLT) approval of a Rs 6.5 crore repayment plan for the Essel Group founder.

The appeal was mentioned before the appellate tribunal on Monday, with Solicitor General Tushar Mehta appearing for the creditors and seeking an urgent hearing. NCLAT agreed to list the matter at 10am on Tuesday.

“There are two or three important questions which are to be decided,” Mehta told the tribunal, arguing that if the findings under challenge were allowed to stand, there could be a “complete loss of intent and purpose” of the Insolvency and Bankruptcy Code.

The challenge follows the NCLT’s August 25 approval of Chandra’s repayment plan. Under the proposal, Rs 6.25 crore would be distributed among eligible creditors, while Rs 25 lakh would cover insolvency-process costs.

The striking part is the gap between the payout and the claims. The plan covers admitted claims of approximately Rs 22,006.57 crore, meaning the proposed recovery works out to around 0.03 per cent of the admitted amount.

Several lenders have opposed the repayment plan and questioned how it secured the required creditor support.

The NCLT order recorded that creditors representing 80.814 per cent of the voting share backed the plan. Dissenting lenders, including HDFC Bank and IDBI Trusteeship Services, have argued that five entities should not have been allowed to vote because they were associates or related parties of Chandra.

The entities named by the dissenting lenders are Veena Investments, Direct Media Distribution Ventures, World Crest Advisors, Lemonade Capital Advisors and Corpcall Capital Advisors.

According to the lenders, removing the votes of these entities could change the outcome of the voting process. The question of whether their participation was valid is now among the issues before the NCLAT.

Canara Bank, which held a 1.60 per cent voting share, opposed the plan and sought a forensic audit. The bank said its minority position meant it could not pursue the request through the voting process.

Union Bank of India (UK) also rejected the plan and said it would challenge the NCLT order. LIC Housing Finance has said it would approach the NCLAT along with other public financial institutions, while HDFC Bank has also raised objections to the proposal.

At the heart of the dispute is the enormous difference between the admitted claims and the amount proposed for repayment.

The Rs 6.25 crore creditor payout is against admitted claims of Rs 22,006.57 crore. Another Rs 25 lakh has been set aside for the insolvency process.

Chandra has disputed the characterisation of the Rs 22,000 crore figure as money personally borrowed by him. In a public statement, he said the amount represents claims arising from personal guarantees he provided for corporate borrowings by entities associated with the Essel Group.

He has also said his personal debt was nil despite guarantees worth about Rs 22,000 crore. According to his statement, around Rs 4,800 crore of the guarantees were issued when the underlying loans were taken, while the remaining guarantees were provided after defaults had already occurred.

Chandra has further disputed the scale of the lenders’ claims against him, saying creditors opposing the repayment plan had claims of around Rs 3,992 crore.

The proceedings stem from Chandra’s role as a personal guarantor for loans raised by Essel Group-linked companies.

Sammaan Capital, formerly known as Indiabulls Housing Finance, initiated insolvency proceedings against Chandra in 2022 under Section 95 of the Insolvency and Bankruptcy Code. The case related to a personal guarantee given by Chandra for a Rs 170 crore loan extended to Vivek Infracon after the loan turned bad.

The NCLT subsequently admitted claims totalling about Rs 22,006.57 crore in Chandra’s personal insolvency proceedings.

The repayment plan then became the subject of conflicting views within the NCLT. A third member was brought in after judicial member Ashok Kumar Bhardwaj and technical member Reena Sinha Puri differed over the proposal. Bhardwaj favoured approval, while Puri raised legal and procedural concerns.

Judicial member Nilesh Sharma ultimately approved the plan on August 25, directing the resolution professional to revise the list of eligible creditors and redistribute the Rs 6.25 crore accordingly.

The NCLAT hearing now puts that approval under appellate scrutiny. For creditors, the case is not simply about a Rs 6.5 crore repayment package. It raises wider questions over creditor voting, related-party participation and how the insolvency framework should operate when thousands of crores in admitted claims translate into a recovery measured in mere crores.