New Delhi: The National Company Law Tribunal (NCLT) has approved media baron Subhash Chandra’s Rs 6.5 crore repayment plan to settle admitted claims of about Rs 22,006 crore in his personal insolvency case, meaning creditors will take a 99.97 percent haircut.
The case revolved around the insolvency proceedings initiated against Chandra, the founder of Zee Television and head of the Essel group, as he had stood as a personal guarantor (PG) for loans advanced to several Essel entities.
The tribunal noted that the plan secured 81.8 percent creditor vote share, meeting the statutory threshold under the Insolvency and Bankruptcy Code (IBC). The New Delhi bench directed that the Rs 6.5 crore repayment amount be redistributed among eligible creditors, clarifying that once approved, the plan is binding on all creditors under the Code
This ruling was delivered 25 August by the third judge, appointed after a split in opinion between the judicial and technical members of the tribunal.
The case
Several Essel Group companies defaulted on loans beginning around 2016, despite repeated demands from lenders. The principal guarantees at origination were about Rs 2,000 crore. With subsequent guarantees and accrued interest, the admitted claims swelled to Rs 22,006 crore.
Indiabulls Housing Finance Limited’s claim was central to the case, as they were the main applicant creditor. Other lenders like IndusInd, RBL, Canara, HDFC, IDBI Trusteeship, STCI Finance, Axis Bank, and Union Bank of India (UBI) later joined in opposing or scrutinising the plan.
The proceedings began in 2022, when Indiabulls filed a petition under Section 95, which deals with insolvency of personal guarantors to corporate debtors, of the IBC against Chandra.
Under the IBC, insolvency proceedings against a personal guarantor can begin when a company defaults on its loans and the guarantor has given an unconditional personal guarantee. Creditors can then invoke the guarantee and file a petition before the tribunal.
In 2024, the Resolution Professional (RP) was appointed by the two-member bench tribunal to oversee Chandra’s insolvency resolution process.
The RP presented Chandra’s repayment plan, which offered Rs 6.5 crore against admitted claims of about Rs 22,006 crore, including the principal and accrued interest on the loans. The amount, according to Chandra, reflected his limited assets and ability to generate income.
The proposal was a sharp contrast to Chandra’s earlier financial position. Net-worth certificates submitted to banks in 2017-18 valued his wealth at Rs 45,888 crore and Rs 40,562 crore, respectively. Creditors cited these figures to highlight the difference between his earlier declared wealth and current financial disclosures.
Despite opposition from major lenders including UBI, Canara Bank, RBL Bank, HDFC Bank, and Axis Bank, the plan was carried with 81.8 percent creditor vote share in October 2024, with the support from Indiabulls Housing Finance and trustee entities like Veena Investments, World Crest Advisors, Direct Media Distribution Ventures Pvt. Ltd., Lemonade Capital Advisors, and Corpcall Capital Advisors LLP.
IndusInd and Axis Trusteeship Limited did not participate in the voting.
The opposing creditors objected to the negligible repayment amount, alleged concealment of assets and unfair binding of dissenting creditors.
Related party voting
Before the NCLT, UBI and LIC Housing Finance alleged that several entities were not genuine creditors but Chandra’s associates, created through collusive guarantees and artificial debt structures.
They argued that these entities were controlled by what qualifies as a “relative” under IBC, making these creditors and its subsidiaries the associates of Chandra.
The main entity was Veena Investments, allegedly managed through Chandra’s relatives, particularly his brother’s wife who held controlling stakes in the company, thereby qualifying as a “relative”.
Furthermore, World Crest Advisors LLP, Direct Media Distribution Ventures Pvt. Ltd., Lemonade Capital Advisors, and Corpcall Capital Advisors LLP were subsidiaries of Veena Investments, making all of them related to Chandra.
The defence countered that a company is an associate only if the debtor directly owns 51 percent or more shares or controls its board. Since Chandra held no shares in these entities, they could not be classified as associates. It also relied on the Securities Appellate Tribunal (SAT) orders quashing SEBI’s findings of family control on a related case of Essel group.
SEBI had alleged that Chandra and his family exercised “family control” over connected entities such as Lemonade Capital Advisors and Corpcall Capital Advisors LLP. However, SAT quashed both SEBI orders, holding that the findings were based on extraneous material and lacked evidentiary foundation.
The NCLT’s judicial member rejected the creditor’s objections, saying the disputed creditors could not be treated as associates because Chandra did not own shares or directly control them. He stressed that these companies are separate legal entities.
The dissenting technical member observed that accepting such an interpretation would mean that the wife of Chandra’s brother could be treated as an “associate”, but a company in which she holds a majority stake could not be treated as one simply because Chandra owns no shares in it.
“Such an interpretation would lead to an anomalous and absurd consequence, whereby a person who admittedly qualifies as an associate in his or her individual capacity could effectively evade the statutory consequences attached to such status merely by routing transactions and dealings through a corporate entity,” the NCLT member, said, adding that such an outcome could never have been the intention of the legislature.
Financial viability of repayment plan
The tribunal had addressed the objection of whether the repayment plan could be approved without a forensic audit or deeper investigation under IBC.
The judicial member stated that the insolvency process for a personal guarantor insolvency is fundamentally different from that of a corporate debtor insolvency.
In corporate insolvency, the debtor is the company itself, and once proceedings are admitted, the RP assumes control of its management and assets, with powers to investigate transactions and order forensic audits.
When it comes to personal guarantor insolvency, the debtor is the guarantor himself. The RP’s role is confined to verifying creditor claims, convening meetings and placing the repayment plan before creditors. Because the RP does not take custody of the guarantor’s estate, it has no statutory authority to conduct forensic audits, or asset tracing at this stage. Such investigative powers are reserved for the Bankruptcy Trustee only if bankruptcy is formally declared.
But the technical member criticised the RP for admitting collusive claims with objections, holding that the “RP conducted the process in a hurried and opaque manner, admitted disputed claims without adequate scrutiny, failed to properly examine objections regarding associated creditors, denied creditors sufficient opportunity to consider the Repayment Plan and did not undertake an independent investigation into the financial affairs of the PG”.
The matter was referred to a third member due to this divergence. This member upheld the judicial member’s view and approved the repayment plan with compliance directions, allowing Chandra to proceed with resolution.
The third member did not reopen voting but instead relied on the record of the two‑member tribunal.
“The RP is not an adjudicating authority. His functions are administrative and facilitative in nature. He is required to collect and verify claims, obtain relevant financial information, convene meetings of creditors, facilitate preparation of the repayment plan, maintain neutrality among stakeholders and submit the statutory report to the Authority,” the final order held.
“The Code does not contemplate the RP acting as an investigating agency with unrestricted powers or as an adjudicator deciding disputed questions of fraud, title or complex commercial relationships.”
Significantly, neither the Code nor the regulations prescribe that a forensic audit is a mandatory precondition for approval of every repayment plan, it added.
The tribunal, however, clarified that if fraud or concealment is discovered, creditors can seek remedies such as recalling the order or taking penal action. Until then, the plan must be assessed based on the information available on record.
Opposition by creditors
The dissenting creditors such as RBL Bank, Canara Bank, STCI Finance, and UBI opposed the repayment plan on several grounds: they argued that the plan was grossly inadequate and claimed that voting in favour of the plan was dominated by related-party creditors, making the process collusive and unfair.
They insisted that dissenting creditors should not be bound by the plan, but should retain the right to pursue full recovery of debts independently.
Canara Bank, another dissenter, claimed that according to media reports, Chandra sold a prime Lutyens’ Delhi property for about Rs 1,260 crore, far higher than the Rs 25 crore value shown in his statement.
It argued this huge gap showed suppression of assets and the need for deeper investigation. But the tribunal concluded that this allegation that Chandra had concealed assets by undervaluing or failing to disclose the Delhi property was unsupported by evidence.
The NCLT had to decide whether the repayment plan, if approved, would bind all creditors, including dissenters. It explained that in this case, the plan was duly placed before creditors, objections heard, and the requisite majority voted in favour.
While some creditors raised concerns about the debtor’s financial affairs, the tribunal found no statutory infirmity, fraud or concealment that would justify rejection of the plan.
The tribunal clarified that once approved, the plan becomes binding on all creditors under the Code and that dissenters cannot pursue independent recovery, as that would defeat the statutory scheme and create unequal treatment.
Alfreza Ahmed is an alum of ThePrint School of Journalism, currently interning with ThePrint.
(Edited by Tony Rai)
Also Read: SC reiterates IBC can’t be used as tool for coercion, debt recovery in breach of contract cases