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Business News/ News / NCLT admits Subhash Chandra into personal insolvency on Indiabulls plea
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NCLT admits Subhash Chandra into personal insolvency on Indiabulls plea

The resolution professional will be appointed to process the claims of those seeking to recover money from him.

With Subhash Chandra being admitted to moratorium, no litigation can be initiated against him, and he is prohibited from alienating or selling any of his assets. Premium
With Subhash Chandra being admitted to moratorium, no litigation can be initiated against him, and he is prohibited from alienating or selling any of his assets.

The National Company Law Tribunal (NCLT) on Monday has admitted Zee Entertainment Enterprises Ltd. (ZEEL) chairman emeritus Subhash Chandra into personal insolvency on the plea filed by Indiabulls Housing Finance over guarantees given to a company called Vivek Infracon.

Meanwhile, the tribunal in Delhi also dismissed pleas by IDBI Trusteeship and Axis Bank against Chandra's admission to personal insolvency. 

Consequently, with Chandra being admitted to moratorium, no litigation can be initiated against him, and he is prohibited from alienating or selling any of his assets. The resolution professional (RP) will be appointed to process the claims of those seeking to recover money from him.

Indiabulls Housing Finance (IBHF) had filed a plea in 2022 to commence personal insolvency proceedings against Subhash Chandra after a loan of 170 crore extended to Vivek Infracon turned into non-performing assets.

In response Chandra challenged that NCLT cannot rule on an individual's insolvency. However, on 30 May 2022, the NCLT ruled that it has the power to adjudicate Chandra's insolvency and appointed a resolution professional to consider Indiabulls' application.

Chandra subsequently challenged the NCLT's decision in the National Company Law Appellate Tribunal (NCLAT), which closed the case after Indiabulls announced the settlement of the dispute.

At the same time, the Supreme Court imposed a stay on personal guarantee insolvency, as a series of writ petitions questioned the validity of certain provisions of the Insolvency and Bankruptcy Code (IBC) for not giving guarantors an opportunity to present their case.

In February 2024, Indiabulls Housing Finance decided to revive the case after it had claimed that a settlement with Chandra had been reached, but had not materialized even after months and they were compelled to reinitiate the personal insolvency plea. 

Indiabulls Housing Finance also cited the Supreme Court's November 2023 decision, upholding the validity of these provisions, thereby providing companies with a clear path to reinstate cases against personal guarantors.

A personal guarantor is a person who gives a written assurance to a lender that a company will repay the loan/ credit facility it has obtained. In the event the company does not repay the loan/credit facility, his personal assets can be attached by the lender.

In 2019, the government brought in new provisions in the IBC that enabled a creditor or the RP of a company to move applications under the IBC to enforce personal guarantees. For instance, if a company has been admitted into the insolvency resolution process and its promoter had given a personal guarantee to its lenders, the lenders, either on their own or through the RP, can move an insolvency plea against the promoter.

 

 

 

 

 

 

 

 

 

 

 

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ABOUT THE AUTHOR
Krishna Yadav
Krishna, a lawyer turned journalist, is a key member of Mint's corporate team. He covers major legal battles in Delhi's courtrooms, with a focus on finance, markets, and policy. Additionally, he crafts easy-to-understand explainers for complex stories and holds a PG Diploma from the renowned Asian College of Journalism.
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Published: 22 Apr 2024, 02:36 PM IST
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