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NCLAT to Hear Creditors' Challenge Over Subhash Chandra's ₹6.25 Crore Repayment Plan
The ) is set to hear an urgent appeal by against the 's ( ) approval of Subhash Chandra's . The plan, which offers only ₹6.25 crore to creditors against of over ₹22,000 crore, has sparked a fierce legal battle over the interpretation of voting rights and the scope of under the ).
On
, a bench comprising officiating Chairperson Justice Yogesh Khanna, along with Technical Members Barun Mitra and Ajai Das Mehrotra, agreed to list the matter for hearing on
after
, appearing for
,
, and
, made an
. Mehta argued that if the
order were allowed to stand, it would
"defeat the very purpose of the
."
Background: The Insolvency
The insolvency proceedings against Subhash Chandra, the founder of and chairman of , were initiated in by under . This provision allows creditors to seek against personal guarantors of . Chandra had provided for loans taken by various Essel and Zee-linked companies, and when those corporate borrowers defaulted, creditors turned to Chandra as the guarantor.
The totalling approximately ₹22,006.57 crore. However, the 's valuation of Chandra's personal estate was reportedly significantly lower than even the paltry ₹6.25 crore offered. The proposed ₹6.25 crore for creditors and an additional ₹25 lakh towards — a total recovery of roughly 0.028% of .
The Split Verdict and Third Member's Approval
The New Delhi Bench initially delivered a . Judicial Member Ashok Kumar Bhardwaj favoured approval of the , while Technical Member Reena Sinha Puri opposed it. In accordance with rules, the President appointed a third Member, Judicial Member Nilesh Sharma, to break the deadlock.
Sharma, in a detailed 144-page order, ruled in favour of approving the plan. He observed that the of creditors — 80.814% by — had voted in favour. He held: “The of creditors voted in favour of the . The fact that certain creditors have opposed the Plan or have raised objections regarding the financial affairs of the PG [ ] does not, by itself, render the Plan incapable of approval.”
Sharma also noted lapses in admitting certain claims — specifically those relating to 960 individuals through a representative named Anil Kumar and 300 individuals through Sunil Jain, which were based solely on Chandra's verbal assurances. He found that these should not have been admitted but concluded that the lapse did not vitiate the entire insolvency process.
Creditors' Grounds of Challenge
The , led by , , , and , have raised several objections. Their primary argument is that the was approved only because five entities — , , , , and — were allowed to vote in the CoC. The creditors contend that these entities are " " or of Subhash Chandra and should have been under .
According to the dissenting lenders, these five entities together controlled 61.78% of the and were instrumental in pushing through the plan. and (representing ) argued that the five entities fell within the definition of " " — but Sharma rejected that argument. He observed that an entity is an " " only if the debtor personally holds 51% or more of its share capital or directly controls its board. Since Chandra held no direct shares in any of the five entities — even though a family member (his sister-in-law) allegedly controlled the parent company — the test was not met. Sharma noted that a company remains a from its shareholders, and the law does not extend " " status to a firm controlled by an of the debtor, only to one controlled by the debtor himself.
Another ground of challenge is the meagre recovery.
, whose admitted claim stood at ₹1,322.39 crore, would receive only ₹38,09,294 under the plan — about 0.028% of its dues. The
argued that such a negligible repayment could not receive tribunal approval. However, Sharma held that the tribunal's role was not to substitute its own
for that of the creditors. He observed that if the plan were rejected, Chandra would face bankruptcy, and creditors would likely recover even less from a bankrupt estate.
"If the plan is approved and the debtor's insolvency is resolved, putting him back on his feet, the objectors would ultimately stand a better chance of recovering their debts directly from the
,"
the tribunal noted.
Chandra's Defense
Subhash Chandra, through his office, issued a statement rejecting the portrayal of the ₹22,000 crore figure as money personally borrowed by him. He clarified that the amount represents claims arising from guarantees he provided for corporate borrowings. Chandra argued that the claims of lenders opposing the amount to around ₹3,992 crore, not ₹22,000 crore, and that the group remains committed to settling outstanding obligations. Government officials, speaking on condition of anonymity, echoed this view, stating that only about ₹2,574 crore of the claims relate to loans for which Chandra gave a personal guarantee at the time the loans were originally taken; most other guarantees were given later as additional security.
The Hearing
The
bench adjourned the matter for
, after Solicitor General Mehta urged that the appeal be heard urgently. Mehta indicated that there were
"two or three important questions"
that had been decided, and if those findings were correct,
"possibly we will be having a complete loss of intent and purpose of
."
The appellate tribunal's decision could have far-reaching implications for
insolvencies under the
, particularly regarding the treatment of
entity votes and the threshold for
with
.
Legal Implications
The case raises critical questions about the efficacy of the 's framework. The vast disparity between and the approved — a of over 99.9% — has prompted concerns that the insolvency process may be exploited by debtors with limited personal assets but large . The ruling on voting rights will also be closely watched, as it could set a precedent for how are treated in personal insolvency committees of creditors.
Furthermore, the 's approach to the " " of creditors — declining to substitute its judgment for that of the majority — reinforces the principle that courts and tribunals should not second-guess the economic decisions of creditors, even when the recovery is minimal. However, the argue that the majority was itself illegitimate due to the improper inclusion of votes.
Conclusion
As the prepares to hear the challenge, the outcome will not only determine Subhash Chandra's personal liability but also shape the contours of insolvency law in India. For legal practitioners, the case is a critical test of the boundaries of , the definition of " " under the , and the role of tribunals in approving repayment plans that appear . A ruling in favour of the could lead to a re-evaluation of the entire voting process in similar cases, while a confirmation of the order would underscore the , however stark the .
