Subhash Chandra gets big relief from NCLT: Will give only ₹ 6.5 crore instead of loan of ₹ 22,006 crore, banks will have to bear the loss of 99.97%

NCLT has approved the plan to settle the total debt of ₹ 22 thousand crore in the personal insolvency case of Zee Group founder Subhash Chandra for just ₹ 6.5 crore. Due to this, the lending banks and financial institutions will have to bear the loss of 99.97% of their outstanding money.

Every information related to Subhash Chandra’s debt settlement, in 10 questions and answers…

Question 1. What decision has NCLT given in the personal insolvency case of Subhash Chandra?

answer: Insolvency tribunal NCLT has approved the repayment plan of Subhash Chandra under Section 114 of the Insolvency and Bankruptcy Code. Under this, Subhash Chandra will have to pay only ₹ 6.5 crore against the total loan of ₹ 22,006.57 crore. After this, their entire remaining dues of more than ₹22,000 crore will be legally extinguished forever.

Question 2. When and how did this whole matter start?

answer: The case originated in 2022, when Indiabulls Housing Finance Limited filed an insolvency petition under Section 95 of the IBC against Dr. Subhash Chandra as personal guarantor.

The proceedings were halted for some time due to an interim order of the Supreme Court, but later in April 2024, after the Supreme Court lifted the stay, NCLT accepted the personal insolvency resolution process against Subhash Chandra.

Question 3. Who gave this decision and what was the opinion of the tribunal?

answer: Earlier, the two-member bench of NCLT had a divided opinion regarding this matter. After this the NCLT Chairman appointed Judicial Member Nilesh Sharma as the third member. Nilesh Sharma approved the repayment plan in a 144-page order on the basis of majority.

Question 4. Had Subhash Chandra himself taken a personal loan of ₹22,006 crore?

answer: No, this amount is related to the ‘personal guarantee’ given by Subhash Chandra. When banks give a loan to a company or the original borrower, many times the promoter gives his personal guarantee that he will repay it if the company is unable to repay.

Subhash Chandra had given personal guarantee for the loans taken by Essel Group companies. After the companies defaulted, this claim fell on Subhash Chandra. This does not mean that he borrowed all this money personally.

Question 5. Which major bank or institution had opposed this decision?

answer: Some lenders, led by LIC Housing Finance, had raised objections to this repayment plan. LIC Housing had termed this as “impractical and illegal”, saying they were being given only ₹38.09 lakh instead of dues of ₹1,322.39 crore.

Question 6. Why did NCLT reject the objections of dissenting creditors?

answer: NCLT found that the opposing creditors held less than 20% of the voting shares. The repayment plan had received the necessary approval from creditors with 80.81% voting shares. As per law, the tribunal rejected the objections due to majority approval.

Question 7. What argument did NCLT give to justify Chandra’s repayment plan?

answer: The tribunal said that as per the valuation of the resolution professional, the value of personal assets of Subhash Chandra is less than the amount given in the plan. Had this plan been rejected, Chandra would have been declared bankrupt and creditors would have received even less money. With the approval of the plan, Chandra will be able to stand financially again and there will be a possibility of future recovery from the original debtors.

Question 8. Now what will be the further process of this case?

answer: After the approval of the court, the resolution professional will now prepare a final list of all the creditors. After this, the amount of ₹6.5 crore will be distributed among all these banks and creditors as per the rules. Ultimately, the matter will again go before the main bench of the insolvency court. This case will be completely closed as soon as the formal legal seal is given from there.

Question 9. Does this mean that loans worth Rs 22,000 crore of banks were completely lost?

answer: No, the haircut of 99.97% is only applicable on Subhash Chandra’s ‘Personal Guarantee’ claims. The parent companies that had taken the loan still remain debtors.

Banks can continue their recovery from those companies, their properties and other pledged collateral. NCLT has also clarified in its order that creditors will continue to have the right to recover from the original debtors.

Question 10. What impact will this decision have on the Indian banking and corporate sector?

answer: This decision will set a big example for all such cases to come. This gives a clear message that if more than 75% of the lending banks or people agree on a repayment plan, then the court will consider their business decision as supreme. Even if the banks have to give up more than 99% of their money and get only a nominal amount in the name of recovery.

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