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Subhash Chandra Challenges 5-Member NCLT Bench, Claims Vilification Over ₹6.5 Crore Plan
The of founder Subhash Chandra took a dramatic turn before the on Wednesday, as his counsel argued that a proposed of ₹6.5 crore against of ₹22,006 crore had triggered a “ ” that unfairly tarnished his client’s reputation. Simultaneously, the appellate tribunal heard challenges to the formation of a five-member bench of the that had stayed a favourable opinion on the plan.
A three-member NCLAT bench comprising Officiating Chairperson Justice Yogesh Khanna and Technical Members Barun Mitra and Ajai Das Mehrotra was hearing appeals filed by , , and against the opinion of NCLT Judicial Member Nilesh Sharma, which had approved Chandra’s . The lenders argued that the plan was grossly inadequate, and the NCLT’s opinion suffered from .
Background: The Repayment Plan Dispute
The insolvency proceedings against Subhash Chandra arose from he had provided for borrowings by companies. A division bench of the NCLT initially delivered a on the proposed by Chandra. Judicial Member Ashok Kumar Bhardwaj favoured approval of the plan, but with a condition that it would bind only assenting creditors, leaving dissenting lenders free to pursue other . Judicial Member Nilesh Sharma, brought in as a third member, held that the plan would bind all creditors under , whether they consented or not.
The dissenting lenders — , , and — challenged Sharma’s opinion before the NCLAT. However, before the appellate tribunal could adjudicate, the NCLT’s President constituted a five-member bench to reconsider the entire matter. On , that bench stayed the operation of Sharma’s opinion and issued notice to all parties, listing the case for further hearing on . This unprecedented move prompted Chandra to oppose the very constitution of the .
The 5-Member Bench Controversy
Appearing for Subhash Chandra, argued that the NCLT lacked the power to form a five-member bench under , which is the provision governing references to larger benches. “The scope of Section 419(5) is very limited. If there is a , then that has to be taken up by another member or other members. It does not empower the NCLT under the IBC or company law to form a five-member bench,” Patra submitted.
He questioned the authority under which the five-member bench had stayed only Sharma’s opinion and not the earlier . “Under which power? When did this five-member bench sit together? What were the proceedings conducted that led to this five-member bench staying only one order?” he asked. Patra also disputed the lenders’ characterization that the three NCLT members had delivered completely divergent opinions. He pointed out that both Bhardwaj and Sharma had found Chandra eligible under , differing only on the treatment of . “Both are equally on the same page as far as Section 79 is concerned on . Therefore, to say all these issues have to be re-litigated is completely wrong,” he argued.
, appearing for the appellant lenders, countered that the case had thrown up “three views” that were “divergent to each other,” making it fit for a to examine the issue. He initially sought to withdraw the lenders’ appeals with liberty to revive them, contending that the five-member bench’s stay order had rendered the appeals unnecessary. However, Patra opposed the withdrawal, arguing that Sharma’s opinion had never crystallised into a final NCLT order, making the appeals defective from the start.
The NCLAT observed that the validity of the five-member bench’s constitution was not under challenge in the lenders’ appeals. It noted that Chandra could independently challenge the order if he was aggrieved. After Mehta decided not to press the withdrawal applications, the NCLAT agreed to keep the appeals pending and listed them for .
Allegations of Vilification and Media Trial
A significant portion of the hearing was devoted to Chandra’s claim that he had been unfairly vilified in the media over the proposed . Advocate Patra submitted that despite the absence of any final order approving the plan, news reports had portrayed Chandra as attempting to settle claims worth ₹22,006 crore for a mere ₹6.5 crore. “The fact is that there is no order today standing in this matter. But for the last 15 days, the , Dr Subhash Chandra, has been vilified across this country, saying that he has done ₹6.5 crore into ₹22,000 crore,” Patra told the bench.
Solicitor General Mehta objected strongly to this line of argument, stating that the NCLAT proceedings should not be used as a platform for statements intended for media consumption. “This forum cannot be used for saying something outside the court… this forum is being used to say something which will be printed tomorrow in the media. This is not the forum,” Mehta submitted.
The NCLAT declined to pass any order on Chandra’s grievance, instead directing him to raise the issue before the NCLT where the insolvency proceedings are pending. “If you have any grievances, the matter is pending before NCLT; you raise grievance right there,” Justice Khanna observed.
Legal Analysis: Larger Bench Powers and Eligibility
The dispute raises important questions about the scope of the NCLT’s power to constitute larger benches. Section 419(5) of the Companies Act, which governs the NCLT’s procedure, allows for a reference to another member or members when there is a difference of opinion among the members hearing a matter. However, it does not explicitly authorise the formation of a five-member bench to rehear the entire case from scratch. Legal experts note that while the NCLT President may have to ensure uniformity of decisions, such powers must be exercised sparingly and within the framework of the statute.
The issue under is another critical aspect. Both Bhardwaj and Sharma agreed that Chandra was eligible to propose a , a finding that the lenders have challenged. If the five-member bench ultimately upholds that , the core dispute will shift to the of the plan on —a question that directly implicates the interpretation of Section 115 of the IBC.
Implications for Insolvency Practice
The case has broader implications for under the IBC. The use of a five-member bench to revisit a could set a precedent for how split verdicts and contentious issues are handled. If the NCLAT or higher courts eventually rule that such a bench was improperly constituted, it may lead to in pending insolvency matters. Conversely, if the is upheld, it could embolden tribunals to refer more cases to larger benches, potentially delaying resolution.
The allegations of a also highlight the tension between public scrutiny and the in insolvency cases. High-profile personal guarantors often face reputational damage, but the IBC’s framework is designed to balance creditor rights with the debtor’s opportunity for . The NCLAT’s reluctance to intervene on the vilification claim underscores that such grievances are best addressed before the adjudicating authority itself.
Conclusion
As the legal battle continues, all eyes are on the hearing before the NCLAT, where the lenders’ appeals will be taken up again. Meanwhile, the five-member NCLT bench is scheduled to hear the matter on . Subhash Chandra’s opposition to the and his claims of vilification add layers of complexity to an already contentious insolvency process. The outcome will likely influence how tribunals handle similar disputes in the future, particularly when repayment plans involve a stark disparity between the offer and the admitted claims.
