The National Company Law Appellate Tribunal (NCLAT) is set to hear on Tuesday an appeal challenging the National Company Law Tribunal’s approval of a repayment plan under which Essel Group chairman emeritus Subhash Chandra would contribute ₹6.25 crore towards claims admitted at approximately ₹22,006 crore in his personal insolvency proceedings.
The appeal comes from creditors who have objected to the resolution plan, arguing that the NCLT’s approval warrants appellate scrutiny. Solicitor General Tushar Mehta, appearing for one of the creditors, sought urgent listing of the challenge before the NCLAT, contending that allowing the impugned order to operate could undermine the objectives of the Insolvency and Bankruptcy Code (IBC).
The controversy stems from the NCLT’s approval of Chandra’s repayment arrangement in proceedings concerning his liabilities as a personal guarantor. Under the approved plan, ₹6.25 crore is proposed to be paid to creditors, while a further ₹25 lakh is earmarked towards insolvency-process expenses. The plan also contemplates payments of around ₹1,494 crore from the principal borrowing entities.
The figures have triggered sharp debate because the admitted claims in the proceedings are understood to be around ₹22,006 crore. On a simple comparison, the ₹6.25-crore contribution represents only a fraction of the total admitted claims, resulting in what has been described as an exceptionally steep haircut.
However, the ₹22,000-crore figure does not represent money personally borrowed by Chandra in the conventional sense. The insolvency proceedings relate to personal guarantees furnished by him in connection with borrowings by companies associated with the Essel Group. This distinction is legally significant because the liabilities of the principal borrowers and the obligations arising from a personal guarantee operate within different legal frameworks.
Several lenders have opposed the repayment arrangement. Canara Bank, Union Bank of India and LIC Housing Finance have indicated that they intend to challenge the NCLT’s decision before the appellate tribunal. Other financial institutions, including HDFC Bank, have also raised objections to the settlement.
The lenders’ opposition centres not merely on the quantum of Chandra’s proposed contribution but also on issues surrounding the assessment of claims, recoverability and the overall viability of the repayment arrangement. Some creditors had also sought a forensic examination during the insolvency proceedings, a request that did not find acceptance.
The NCLT’s decision had itself emerged against the backdrop of disagreement among members of the tribunal, before the matter was ultimately resolved in favour of approving the repayment plan. The plan had secured the requisite support among creditors despite opposition from a number of lenders.
Chandra, meanwhile, has disputed the characterisation of the ₹22,000-crore figure as his personal debt and has maintained that the actual claims attributable to him are substantially lower. Reports have also noted that the repayment structure does not extinguish the liabilities of the underlying corporate borrowers or necessarily foreclose creditors’ remedies against them.
The NCLAT hearing will therefore assume significance beyond the immediate dispute over the ₹6.25-crore contribution. The appellate proceedings could examine the legality of the NCLT’s approval, the treatment of creditor claims and the manner in which the repayment plan was evaluated under the insolvency framework.
With several institutional creditors contesting the NCLT’s order, the appellate tribunal’s scrutiny is now poised to determine whether the approved arrangement can withstand the challenges mounted against it.
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