From Rs 22,000 Cr To Just Rs 6.5 Cr: Why NCLT Clears Subhash Chandra’s Insolvency Deal With 99% Haircut

Media baron Subhash Chandra will pay only Rs 6.5 crore after the insolvency tribunal NCLT approved a repayment plan, settling admitted creditor claims of about Rs 22,006.57 crore in Chandra’s personal insolvency resolution process. The verdict translates to a pay haircut of nearly 99.97 per cent for lenders.

NCLT Member (Judicial) Nilesh Sharma, who delivered the judgment as the third member, on Tuesday approved the scheme under Section 114 of the Insolvency and Bankruptcy Code, overruling the creditors' objection that the recovery was meagre and unapprovable.

Earlier, two members of the National Company Law Tribunal had delivered a split verdict, following which the forum president appointed Sharma as the third member amid differing opinions.

Sharma rejected the claims of opposing creditors, led by LIC Housing Finance, who argued that the payment was "unaffordable and illegal."

It said that against the admitted claim of approximately ₹22,006.57 crore, the repayment plan offered only ₹6.25 crore to the creditors and ₹25 lakh for processing costs.

"In the case of LICHFL, whose admitted claim stood at Rs 1,322.39 crore, the proposed repayment was merely Rs 38,09,294, amounting to approximately 0.028 per cent of its admitted dues. It was contended that such a negligible repayment could not receive the approval of this tribunal," said the NCLT order recording its submission.

Rs 6.5 Crore Is Indicative, Not Certain: Why NCLT Favours Chandra 

Furthermore, the reimbursement plan itself, which proposed a sum of Rs 6.5 crore (approximately $1.5 billion), was considered merely indicative and not guaranteed, rendering the plan tentative, uncertain, and unapprovable.

However, the NCLT ruled that the opposing creditors collectively held less than 20 per cent of the voting shares, while the plan had received the required voting share – 80.81 per cent – to approve it.

Sharma stated in the 144-page order that the resolution professional's assessment revealed that Chandra's personal assets were significantly lower than the value promised under the plan, and that the opposing creditors were unlikely to reject it and recover more, as they would then face bankruptcy rather than receiving the money from financial recovery.

"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 Principal Debtors," the NCLT observed.

The tribunal held that its role was not to substitute its own commercial wisdom for that of the creditors or to assess whether the settlement amount was adequate.

It also noted that "the commercial decision of the creditors operates within, and not outside, the statutory framework".

"The AA (NCLT) neither substitutes its own commercial wisdom for that of the creditors nor does it conduct a wide-ranging investigation into allegations that are unsupported by reliable material. Its role is supervisory, corrective and judicial, not investigative unless the statute so requires," the NCLT said.

It also said that once approved, the plan would be applicable to all creditors under Section 115 of the IBC, whether they voted in favour or against it, and could not be implemented only on those who had agreed to it.

"Once the Repayment Plan is approved under Section 114, its binding effect is governed by Section 115 of the Code. The Adjudicating Authority (NCLT) cannot make the plan binding only on the creditors who voted in its favour while allowing dissenting creditors to independently pursue recovery of their full original debt," it added.

The order further said section 115 does not contemplate selective application of an approved repayment plan.

"Accordingly, the approved plan is binding on all creditors covered by it, whether assenting or dissenting. Granting dissenting creditors liberty to recover the full debt outside the plan would defeat the statutory scheme and result in unequal treatment of creditors," it said.

Disclaimer: This story is written with inputs from agency feed (PTI), with no changes made in quotes and several paragraphs.