Banks Challenge NCLT’s 0.03% Recovery Plan for Subhash Chandra

Canara Bank and Union Bank of India are set to appeal the National Company Law Tribunal’s (NCLT) decision to approve Zee group founder Subhash Chandra’s repayment plan. This plan proposes a recovery of only 0.03% for creditors on their admitted claims, signifying a substantial 99.9% haircut.

The appeal arises from significant opposition by public-sector lenders, including Canara Bank and Union Bank of India, who challenged the resolution plan’s terms. The matter is now before the National Company Law Appellate Tribunal (NCLAT).

The Disputed Repayment Proposal

The repayment plan was initiated following insolvency proceedings brought by Indiabulls Housing Finance. Despite the vast admitted claims, the proposed payout to creditors is notably small.

• Total admitted claims against Subhash Chandra: Rs 22,006 crore
• Proposed total repayment: Rs 6.5 crore
• Amount for creditors: Rs 6.3 crore
• Amount for process costs: Rs 25 lakh
• Creditor recovery rate: 0.03%
• Creditor haircut: 99.9%

Lenders’ Opposition and NCLT Approval

Public-sector lenders actively opposed the resolution plan, citing the massive haircut. Their collective voting power, however, proved insufficient to block the plan at the NCLT level.

• Canara Bank voting share: 1.6%
• Union Bank of India voting share: 0.76%
• LIC Housing Finance voting share: 6.1%
• Private creditors voting share (in support): 80.8%

The NCLT ultimately approved the plan due to the strong support from private creditors. HDFC Bank, with an admitted claim of Rs 697.59 crore, approximately 3.17% of total claims, has also confirmed its intention to appeal the NCLT order.

Subhash Chandra’s Defense

Subhash Chandra has contested the Rs 22,000 crore liability, asserting that it reflects historical claims from 2022. He clarified his role as a personal guarantor, not the direct borrower of the funds.

• Claims from objecting creditors: Rs 3,992 crore
• Amount already settled: Rs 620 crore
• Additional amount offered by borrowing entities: Rs 1,063-1,113 crore
• Remaining Rs 16,201 crore from supporting creditors: Being addressed by principal borrowers

Lenders have also expressed dissatisfaction with the finding that Chandra possesses only about Rs 6 crore in personal assets. This concern is amplified by the fact that his house is reportedly mortgaged, raising questions about the valuation of his personal wealth.

The ongoing appeals before the NCLAT indicate a continued legal battle over the terms of this significant insolvency resolution. The outcome will be closely watched by the banking sector and other creditors.