Banks Move NCLAT Against Approval of Subhash Chandra’s 0.03% Repayment Plan
State-run lenders and private financiers are challenging the National Company Law Tribunal’s (NCLT) approval of a debt repayment plan submitted by Zee group founder Subhash Chandra. Under the tribunal-approved proposal, lenders are slated to recover roughly 0.03% of their total admitted claims regarding Chandra’s liabilities as a personal guarantor, translating to a 99.9% haircut.
What Happened
The personal insolvency process against Chandra was initiated by Indiabulls Housing Finance. Following the proceedings, a resolution plan was approved by the NCLT after securing the backing of private creditors holding an 80.8% voting share.
Public-sector lenders and select financial institutions opposed the resolution. Canara Bank, holding a 1.6% voting share, and Union Bank of India, with 0.76%, formally rejected the plan and pushed for its dismissal. LIC Housing Finance, which holds a 6.1% voting share, likewise cast its vote against the proposal. Despite their resistance, the majority voting threshold achieved by private lenders allowed the plan to pass.
Consequently, Canara Bank and Union Bank of India (UK) are taking the dispute to the National Company Law Appellate Tribunal (NCLAT). Private lender HDFC Bank, with an admitted claim of Rs 697.59 crore representing roughly 3.17% to 3.2% of total claims, has also confirmed plans to appeal the tribunal’s order before the appellate body.
Key Highlights
- Recovery Rate: The approved plan proposes paying Rs 6.5 crore out of total admitted claims amounting to Rs 22,006 crore. This includes Rs 6.3 crore distributed among creditors and Rs 25 lakh allocated for insolvency process costs.
- Voting Breakdown: The plan passed with an 80.8% majority from private creditors. Dissenting lenders included LIC Housing Finance (6.1%), Canara Bank (1.6%), and Union Bank of India (0.76%).
- Appeals Filed: Canara Bank, Union Bank of India (UK), and HDFC Bank are challenging the NCLT decision before the NCLAT.
- Audit Request Denied: Canara Bank previously sought a forensic audit, but the measure could not move forward due to its minority voting stake.
- Asset Concerns: Creditors have expressed dissatisfaction over findings indicating Chandra held only about Rs 6 crore in personal assets, noting that his residence was already mortgaged.
Why This Matters
The case underscores disputes between majority private creditors and minority public lenders regarding personal guarantee resolutions under insolvency law. Chandra has disputed the Rs 22,000 crore liability figure, asserting that it stems from historical claims filed in 2022. According to Chandra, he acted only as a personal guarantor rather than the primary borrower. He maintained that claims from dissenting lenders stood at Rs 3,992 crore, with Rs 620 crore already settled and an additional Rs 1,063 crore to Rs 1,113 crore offered by borrowing entities. He added that the remaining Rs 16,201 crore associated with supporting creditors was being handled directly by the principal borrowers.
What to Watch Next
The legal battle moves to the NCLAT, where appeals brought by Canara Bank, Union Bank of India (UK), and HDFC Bank will be heard to review the validity of the NCLT’s approval.
Frequently Asked Questions
Why are Canara Bank and Union Bank appealing the NCLT ruling?
The banks opposed the repayment plan because it delivers only a 0.03% recovery on admitted claims, amounting to a 99.9% haircut, and was approved despite resistance from public-sector lenders.
What is Subhash Chandra’s stance on the Rs 22,006 crore claim?
Chandra disputed the liability figure, describing it as historical claims from 2022. He stated that he did not borrow the funds directly and functioned solely as a personal guarantor, adding that principal borrowers are addressing the underlying claims.
Source: timesofindia.indiatimes.com