- The NCLT has approved Subhash Chandra's repayment plan of ₹6.5 crore to settle ₹22,006 crore in dues, despite significant opposition from creditors.
- The NCLT appointed a third member after Judicial Member Ashok Kumar Bhardwaj and Technical Member Reena Sinha Puri delivered conflicting opinions on the repayment plan.
- On August 25, Judicial Member Nilesh Sharma favoured approval of the repayment plan under Section 114 of the Insolvency and Bankruptcy Code, 2016.
- The NCLT's decision has been criticized by the Congress, which stated that this is not just a haircut but a mundan that undermines the IBC.
- The insolvency proceedings against Chandra were initiated by Indiabulls Housing Finance Limited (Indiabulls/ IBHF), now known as Sammaan Capital, after he stood as personal guarantor for a ₹170 crore loan to Vivek Infracon. The plea was admitted in 2024.
- Several banks and financial institutions opposed the plan, with LIC Housing Finance arguing it would receive only ₹38.09 lakh against its admitted claim of ₹1,322.39 crore.
- The NCLT held that the objecting creditors held less than 20% of the voting share, while the plan was approved by 80.81% of vote shares.
- The NCLT observed that approving the plan would put the debtor back on his feet, giving objectors a better chance of recovering debts from principal debtors.
The National Company Law Tribunal (NCLT) has approved a repayment plan for Subhash Chandra, allowing him to pay just ₹6.5 crore against claims of approximately ₹22,006 crore, resulting in a staggering 99.97% haircut for creditors. This decision has sparked significant controversy, particularly from the Congress party, which criticized the ruling as a 'mundan' rather than a mere haircut, suggesting it undermines the Insolvency and Bankruptcy Code, 2016.14
The NCLT's ruling, made by NCLT Member (Judicial) Nilesh Sharma, came after a split verdict among tribunal members. Sharma rejected objections from creditors, including LIC Housing Finance, who argued that the proposed recovery was too minimal to warrant approval. The plan was backed by creditors holding 80.81% of the voting share, despite dissent from those representing less than 20% of the share.67
In his ruling, Sharma noted that the resolution professional's valuation indicated Chandra's personal assets were worth significantly less than the proposed payout. He emphasized that rejecting the plan could lead to Chandra's bankruptcy, further diminishing the chances of creditors recovering their dues. The tribunal stated, "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's decision has raised questions about the effectiveness of the insolvency process, with critics arguing that it sets a dangerous precedent for future cases.
“The NCLT's third member, Nilesh Sharma, approved the plan under Section 114 of the IBC, rejecting objections from LIC Housing Finance, which would recover only ₹38.09 lakh against its ₹1,322.39 crore claim. The plan was approved by 80.81% of vote shares, and the tribunal ruled it binds all creditors under Section 115.”
