HDFC Bank Challenges Chandra’s Debt Plan Over 99.97% Haircut

HDFC Bank is reportedly preparing to challenge a National Company Law Tribunal (NCLT) order that approved a debt repayment plan for Essel Group founder Subhash Chandra. The bank intends to appeal to the National Company Law Appellate Tribunal (NCLAT) against a plan that entails a significant 99.97% debt haircut for creditors.

Key Figures in the Debt Resolution

• Proposed distribution to creditors: Rs 6.25 crore
• Total admitted creditor claims: Approximately Rs 22,006.57 crore
• Effective recovery rate for creditors: Around 0.028%
• HDFC Bank’s admitted claim: 3.2% of the total

Despite HDFC Bank’s opposition and vote against the resolution, the NCLT-approved plan for Mr. Chandra has moved forward. The loan facility in question was acquired by HDFC Bank through its merger with HDFC Limited, and the bank had already provisioned for this facility.

Creditor Concerns and Tribunal Mechanics

Several financial institutions also voiced their opposition to the plan, citing concerns beyond just the low recovery rate. Issues included doubts over claim verification processes and the alleged participation of entities associated with Mr. Chandra in the voting.

The NCLT’s approval came after a third member was appointed to break a deadlock between two existing members. Under Section 115 of the Insolvency and Bankruptcy Code (IBC), once a repayment plan is approved, it becomes legally binding on all creditors, irrespective of their individual votes.

Genesis of the Personal Guarantor Proceedings

The insolvency proceedings against Subhash Chandra originated from his role as a personal guarantor for a Rs 170 crore loan extended to Vivek Infracon. Indiabulls Housing Finance initiated these NCLT proceedings in 2022, leading to the admission of the insolvency plea against Mr. Chandra in April 2024.

It is important to understand that these specific proceedings address Mr. Chandra’s liability solely as a personal guarantor. They do not encompass the broader insolvency status of the entire Essel Group.

Subhash Chandra’s Disputed Figures

Subhash Chandra has publicly countered the claims of a massive debt haircut, asserting that the total claim against him as a personal guarantor is significantly lower. He stated that this figure stands at Rs 3992 crore, not the widely reported Rs 22,000 crore.

Mr. Chandra further noted that Rs 620 crore has already been settled. Additionally, an offer of Rs 1063 crore has been made by the borrower entities to address outstanding amounts.