Subhash Chandra’s Insolvency Plan Approved Amidst Controversy

The National Company Law Tribunal (NCLT) has approved Essel Group founder Subhash Chandra’s personal insolvency resolution plan, which proposes a repayment of only Rs 6.5 crore. This decision comes despite objections from dissenting lenders, who highlighted that this amount is against admitted creditor claims totaling approximately Rs 22,006.57 crore.

Dissenting lenders raised concerns that five entities connected to Chandra’s family held a dominant 61.78% of the voting share. These entities were crucial in securing an 80.814% approval for the plan within the committee of creditors (CoC), as detailed in a 144-page NCLT order.

The Contested Vote and Legal Argument

Lenders argued that these five entities qualify as ‘associates’ or ‘related parties’ under the Insolvency and Bankruptcy Code (IBC). Consequently, they contended that these entities should have been disqualified from voting on the repayment proposal due to their alleged connection to Chandra’s family.

The five entities identified are:

• Veena Investments Pvt Ltd
• Direct Media Distribution Ventures Pvt Ltd
• World Crest Advisors LLP
• Lemonade Capital Advisors LLP
• Corpcall Capital Advisors LLP

Despite these objections, the NCLT bench delivered a split verdict. Nilesh Sharma, the third member of the bench, ultimately ruled in favor of the repayment plan, rejecting the lenders’ arguments.

Subhash Chandra’s Clarification on Guarantees

Following recent social media discussions, Subhash Chandra issued a statement to clarify the situation regarding his personal guarantees and lender claims. He acknowledged signing personal guarantees for Rs 22,000 crore, accepting responsibility for those executed before defaults occurred.

Chandra’s statement further clarified the financial specifics:

• Against a payable amount of Rs 998 crore.
• Claims initially filed were Rs 5311 crore.
• Claims reduced to Rs 4262 crore after settling or paying Rs 1049 crore.

He expressed hope that lenders would reconcile outstanding accounts with borrowers, who have assured him of settling the Rs 4,262 crore balance. Chandra also noted that substantial borrowings from other sources, including foreign and domestic funds, NBFCs, and corporates, are either being settled or are backed by adequate assets.

Lenders Plan Appeal

Both HDFC Bank, which holds 3.2% of the total claim amount, and Canara Bank have indicated their intention to appeal the NCLT’s order. They plan to challenge the decision before the National Company Law Appellate Tribunal (NCLAT), signaling a continuation of the legal dispute over the insolvency plan.