Lenders Challenge Subhash Chandra’s Debt Plan Over 99.97% Haircut

Major lenders are challenging the National Company Law Tribunal’s (NCLT) approval of a repayment plan for Zee founder and Essel Group chairman Subhash Chandra. This plan, which received 80.81% of creditor votes, involves a substantial 99.97% haircut on admitted claims related to a significant debt pile.

The Delhi bench of the NCLT sanctioned a proposal where Chandra will pay Rs 6.25 crore to lenders and an additional Rs 25 lakh in legal fees. This settlement aims to resolve his personal insolvency case, which stems from guarantees for a colossal Rs 22,007 crore debt.

Key Terms of the Repayment Plan

• Total payment by Chandra: Rs 6.25 crore to lenders.
• Legal fees: Rs 25 lakh.
• Guaranteed debt: Rs 22,007 crore.
• Haircut on admitted claims: 99.97%.
• Creditor approval: 80.81% voting in favour.

Despite the majority approval, several prominent financial institutions are set to appeal the NCLT’s decision before the National Company Law Appellate Tribunal (NCLAT). HDFC Bank was the first to publicly announce its intention to challenge the order.

Lenders Opposing the Settlement

Public sector lenders Canara Bank and Union Bank of India, alongside LIC Housing Finance (LICHFL), also plan to approach the NCLAT. These entities notably voted against Chandra’s repayment plan during the creditor meeting.

• Canara Bank voting share: 1.60%.
• Union Bank of India voting share: 0.76%.
• LICHFL voting share: 6.09%.
• LICHFL’s admitted claim: Rs 1,322.39 crore, against which the plan offers only Rs 38.09 lakh.

Canara Bank confirmed that it, along with Union Bank and LICHFL, explicitly opposed the repayment plan. The bank had also requested a forensic audit, a demand that could not be pursued due to its minority voting share among creditors.

A spokesperson for Union Bank’s UK subsidiary stated their rejection of the resolution plan, along with other public sector banks, and confirmed they had sought its rejection before the NCLT. They are now challenging the NCLT’s decision immediately before the NCLAT.

LICHFL similarly affirmed its vote against Chandra’s plan. The institution noted that the plan gained approval due to the votes from other financial creditors, which collectively amounted to 80.81%. LICHFL will promptly file an appeal with the NCLAT alongside other public financial institutions.