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NCLT Approves Subhash Chandra Despite 99.97% , Rejects Objections on Vote
In a landmark ruling that resolves a sharp division within the , a third member has approved the of founder Dr. Subhash Chandra, offering creditors just ₹6.25 crore against admitted claims of approximately ₹22,006.57 crore—a staggering 99.97% . The order, delivered by Judicial Member Nilesh Sharma on , also held that five creditors alleged to be associates of Chandra were rightfully allowed to vote, rejecting objections raised by a clutch of public and private sector banks.
The That Nearly Wipes Out ₹22,000 Crore
The insolvency proceedings against Chandra were triggered in by (now ) under . Chandra had stood as a for a ₹170-crore loan extended to Vivek Infracon. After the loan turned sour, Indiabulls moved the NCLT, and the petition was admitted in .
Resolution Professional Shiv Nandan Sharma placed a before creditors in . The plan proposed a total outlay of just ₹6.5 crore (later revised to ₹6.25 crore after deducting process costs), to be distributed among creditors holding admitted claims. Against this, , for instance, was slated to receive a mere ₹38 lakh against its admitted claim of ₹1,322.39 crore.
Despite the microscopic recovery, 80.814% of creditors—by vote share—approved the plan. The approving block included entities such as , , , , and , which collectively commanded nearly 62% of the . Dissenting creditors—including , , , , and —raised immediate objections, arguing that these five entities were associates of Chandra and should have been excluded from voting under .
The Battle Over '' Status
The objecting banks contended that a of required the exclusion of any company in which an of the debtor—such as a brother's wife—held a controlling stake. They pointed to a order that had linked these entities to Chandra's family. The Resolution Professional, however, maintained that the debtor himself held no shares in or its subsidiaries, and that the statutory definition of "" required direct ownership of more than 50% of share capital or control over the board.
The difference of opinion between Judicial Member Ashok Kumar Bhardwaj (who favoured approval) and Technical Member Reena Sinha Puri (who found the process vitiated) led NCLT President to refer the matter to a third member under .
Third Member's Verdict: A Nod to
Justice Nilesh Sharma, the third member, largely sided with the Judicial Member's view. He held that the Adjudicating Authority's role under Section 114 is supervisory—it must ensure the statutory process was followed, but cannot substitute its own commercial judgment for that of the creditors.
"Where the mandatory procedure has been duly complied with, the Adjudicating Authority ought ordinarily to accord due deference to the commercial decision of the creditors,"
he wrote.
On the critical issue of "
" status, Sharma adopted a
. He noted that
requires the debtor, alone or together with his associates, to own more than 50% of the share capital or control the appointment of the board.
"Mere allegations of influence, prior business dealings, commercial proximity or family relationships do not satisfy the statutory requirement,"
he observed. Since Chandra held no direct stake in the disputed entities, they could not be classified as associates. He also noted that the SEBI orders relied upon by the objectors had been quashed by the
.
Sharma further ruled that a
or
is not a mandatory precondition for approving a
. Such intrusive powers, he pointed out, are reserved for the bankruptcy stage under Chapter IV of the IBC.
"The Resolution Professional is not an investigating agency,"
he underscored.
Procedural Lapses but No Fatal Flaw
The third member did, however, flag two procedural irregularities. First, the Resolution Professional admitted claims filed by Mr. Anil Kumar (representing 960 individuals) and Mr. Sunil Jain (representing 300 individuals) without any supporting documents. Sharma termed this a "lapse" but concluded it was not severe enough to vitiate the entire process, especially since the total vote share of those claims was negligible. He directed that these claims be excluded from the creditor list and the ₹6.25 crore be redistributed among remaining eligible creditors.
Second, the meeting of creditors was convened on only 7 days' notice, in violation of the 14-day minimum under . However, because the creditors themselves had unanimously agreed to a shortened notice in their first meeting and no prejudice was demonstrated, Sharma declined to reject the plan on this ground alone.
Key Observations
"The statutory test is ownership exceeding the prescribed threshold or legal control over the governing body. Mere allegations of influence, prior business dealings, commercial proximity or family relationships do not satisfy the statutory requirement."
— On interpretation of
"The Adjudicating Authority is required to examine the , the process followed for its approval and the statutory requirements... while the commercial decision of the creditors, when validly taken, ordinarily commands due deference."
— On the scope of Section 114
"The Plan shall be approved under , subject to exclusion of the unsupported claims and consequential redistribution."
— Final direction
What Happens Next
The approved will now be placed before the original division bench for a formal order. Once approved, the plan will bind all creditors—including those who voted against it—in accordance with . Dissenting creditors retain the right to approach the tribunal for recall if fraud or concealment of assets is later discovered.
For Chandra, the approval represents a pathway to discharge from a ruinous debt burden, restoring his solvency under . For the banks that opposed the plan, it marks a significant—and controversial—erosion of their claims, with the NCLT effectively blessing a recovery of less than one rupee for every ₹3,500 owed.
