Summary of this article
Subhash Chandra settles massive debt with a 99.97 per cent haircut.
Lenders face massive losses as NCLT approves repayment plan.
NCLT noted Chandra's personal estate value dropped significantly.
The National Company Law Tribunal (NCLT) has approved a repayment plan on August 27 under which media baron Subhash Chandra will pay just Rs 6.5 crore to settle admitted creditor claims of about Rs 22,006.57 crore in his personal insolvency resolution process. Notably, this translates into a haircut of nearly 99.97 per cent for the lenders.
The NCLT proceedings are related to a 2016 loan agreement executed between Indiabulls Housing Finance and Vivek Infracon. Chandra became a personal guarantor for the loan. Upon default, Indiabulls invoked the guarantee after Vivek Infracon defaulted on the loan.
In 2022, Indiabulls initiated an insolvency resolution process. After initial legal hurdles, the tribunal admitted the petition in April 2024. Notably, the admitted claims spanned major institutional lenders, including Axis Bank, Canara Bank, HDFC Bank, IndusInd Bank, RBL Bank, Union Bank of India, LIC Housing Finance, and IDBI Trusteeship, alongside STCI Finance
Following this, a resolution professional verified the claims, which totalled Rs 22,006.57 crore. Later in October 2024, Chandra submitted a repayment plan offering just Rs 6.5 crore, securing an 80.814 per cent voting majority. However, institutional banks opposed the plan, triggering a split verdict by a two-member bench and leading to a situation in which a final resolution by a third member was required.
What Did NCLT Say In Its Ruling
Nilesh Sharma, the third member, held that the repayment plan satisfied the core statutory requirements under Section 114 of the Insolvency and Bankruptcy Code (IBC). He addressed the objections made by assenting creditors, alleged to be related entities and ultimately the bench ruled that the bench established the legal criteria for such associations.
"The statutory test is therefore based on ownership and legal control, not merely on commercial influence or business proximity," NCLT said.
Additionally, the tribunal clarified its own boundaries when reviewing the commercial decisions made by the committee of creditors.
"Thus, the role of the AA is neither to substitute its commercial wisdom for that of the creditors nor to mechanically endorse their decision," NCLT said.
Why Did NCLT Give A 99.97 Per Cent Haircut
In its order, NCLT mentioned that the haircut was given because the realisable personal estate of the debtor had diminished to an estimated net worth of approximately Rs 31.79 crore. Thus, the tribunal looked at alternative routes of recovery and highlighted the minimal value left in the estate.
"The Personal Guarantor's estate, in the event of bankruptcy, may not be enough even to cover the expenses of the process," NCLT said.
Addressing arguments regarding past net worth certificates reflecting over Rs 40,000 crore, the bench outlined the limits of its investigative mandate.
"The Code does not make a forensic audit or asset-tracing exercise a mandatory precondition for approval of a repayment plan," NCLT said.
What It Means For The Lenders
For lenders, the decision leads to a major shrinkage in the recovery of their debt. The tribunal clarified the universal applicability of the approved plan under Section 115 of the code.
"The approved plan is binding on all the creditors, whether assenting or dissenting," NCLT said.
Consequently, dissenting banks cannot selectively pursue independent recovery actions against Chandra for their full outstanding claims. However, secured creditors will continue to retain the ability to enforce independent security interests over specific mortgaged properties outside the plan.
What Happens Now
Following the order, the matter is expected to move to the regular division bench for formal consequential orders. The resolution professional is set to amend the creditor list to exclude unsupported claims and redistribute the Rs 6.5 crore corpus among eligible lenders. However, creditors still retain legal remedies if new evidence of fraud emerges in the future.
"The affected creditors would also remain at liberty to pursue such other civil or criminal remedies as may be available in accordance with law," NCLT said.
