Subhash Chandra insolvency: NCLAT to hear creditors' appeal against NCLT approval of ₹6.5 crore payout plan

The National Company Law Appellate Tribunal (NCLAT) will hear on Tuesday (September 1) an appeal by creditors, challenging the National Company Law Tribunal's (NCLT) approval of Zee group founder Subhash Chandra’s repayment plan.

Creditors, including the LIC Housing and several banks, approached NCLAT on Monday. Solicitor General Tushar Mehta, appearing for the creditors, urged the appellate tribunal to hear the matter urgently. The NCLAT agreed to hear the matter at 10 am on Tuesday.

Canara Bank, Union Bank of India (UK) Ltd and LIC Housing Finance Ltd said on Saturday that they will challenge the NCLT order approving a repayment plan proposed by Essel Group founder Subhash Chandra, escalating the legal battle over the settlement of claims arising from his personal guarantees.

On August 25, the NCLT approved Chandra's repayment plan, under which ₹6.25 crore is to be paid to creditors and ₹25 lakh towards insolvency-process costs, against admitted claims of around ₹22,006.57 crore.

The proceedings relate to personal guarantees given by Chandra for borrowings raised by Essel Group-linked companies. The plan was approved despite objections from several lenders, with the tribunal holding that the required majority had supported it.

What did dissenting creditors say?

The lenders contended that the five entities were associates or related parties of Chandra and should have been barred from voting on the repayment plan.

Their votes helped the plan secure an overall 80.814 per cent approval in the committee of creditors (CoC), according to a 144-page order of the National Company Law Tribunal (NCLT), PTI reported.

The five entities are Veena Investments Pvt Ltd, Direct Media Distribution Ventures Pvt Ltd, World Crest Advisors LLP, Lemonade Capital Advisors LLP and Corpcall Capital Advisors LLP.

Dissenting lenders led by HDFC Bank and IDBI Trusteeship Services, representing Edelweiss and Franklin Templeton funds, argued that the five entities fell within the definition of "associates" under the Insolvency and Bankruptcy Code (IBC) and their votes should not have been counted.

HDFC Bank, with 3.2 per cent of the total claim amount, had earlier said it also opposed the plan and was mulling an appeal against the NCLT's order.

Other dissenting lender Canara Bank too stated that it is filing an appeal in NCLAT against the NCLT order.

Canara Bank, which held a 1.60 per cent voting share, said it had against the repayment plan. In a social media post on X, it said it had also sought a forensic audit, but the request could not be allowed because of its minority voting share.

Union Bank of India (UK) also said it had rejected the plan and would immediately challenge the NCLT order before the NCLAT.

LIC Housing Finance said it would file an appeal along with other public financial institutions. The lenders said the plan was approved because other financial creditors holding 80.81 per cent of the voting share backed it.

Lenders said that admitted claims worth ₹22,006.57 crore. The repayment plan offered only ₹6.5 crore.

What did Subhash Chandra say?

Chandra, in a public statement issued on Thursday, rejected the portrayal of the ₹22,000-crore figure as money personally borrowed by him, saying it represents claims arising from guarantees he had provided for corporate borrowings.

Chandra argued that the claims of lenders opposing the repayment plan amount to around ₹3,992 crore, rather than ₹22,000 crore, and said the group remains committed to settling outstanding obligations.

The big haircut

Reports compared claims of more than ₹22,000 crore with around ₹6.25 crore proposed to be recovered from Chandra's personal estate, describing it as a haircut of nearly 99.97 per cent. Government sources said that comparison does not reflect the full picture.

Sources said the ₹22,006 crore figure does not represent money personally borrowed by Chandra. It represents claims admitted against him as a personal guarantor for loans taken by several Essel/Zee-linked companies

"The reported 99.97% haircut is therefore not a 99.97% loss on ₹22,000 crore of bank loans," according to the government note. It said the reduction relates specifically to what can be recovered from Chandra as a personal guarantor.