1 day ago
NCLT Deadlock Sends Subhash Chandra Debt Plan To Five-Member Bench
Subhash Chandra has a personal insolvency case involving more than Rs 22,000 crore in creditor claims.
His proposed plan would pay about Rs 6.5 crore.
One tribunal member supported the plan, but the two original members disagreed about how it should affect creditors.
One member wanted only supporters of the plan to be bound by it.
The other member rejected the plan.
The third member approved it but said the claims of all creditors, including those who disagreed, would end against Chandra.
Because there was no majority decision, the tribunal could not issue a final order.
The tribunal president then created a five-member bench to consider the dispute.
Some lenders also asked the appeals tribunal to intervene.
The NCLT issued no final order on Subhash Chandra’s personal insolvency repayment plan involving claims of about Rs 22,006.57 crore.
A third member backed a Rs 6.5 crore plan, implying a nearly 99.97 percent reduction in admitted claims.
The original division bench said the third member’s independent opinion prevented a majority verdict and referred the matter to the NCLT President.
The President formed a five-member NCLT bench, reportedly the first of its kind in the tribunal’s history, to hear the case.
Dissenting lenders, including LIC Housing Finance, challenged the plan before the NCLAT, which listed the matter for Tuesday.
- Who
- Essel Group Chairman Subhash Chandra, his creditors and lenders, the National Company Law Tribunal, and the National Company Law Appellate Tribunal.
- What
- A deadlock over Chandra’s proposed Rs 6.5 crore personal insolvency repayment plan led the NCLT President to form a five-member bench.
- Where
- The case is before the Principal Bench of the National Company Law Tribunal in India; lenders also approached the NCLAT.
- When
- The division bench referred the matter back on Monday; the five-member bench was scheduled to begin hearing on Tuesday. The third member’s order was dated August 25 in one report and August 26 in another.
- Why
- The tribunal members differed over the interpretation of Insolvency and Bankruptcy Code Sections 79(2)(g) and 115(1), including whether dissenting creditors could continue debt recovery.
Repayment Plan Supporters
Dissenting Creditors
Whether the plan should be approved
Repayment Plan Supporters
The third member approved the plan, relying on a valuation that reportedly showed Chandra’s personal estate was worth significantly less than the proposed payment and that bankruptcy might produce lower recoveries.
Dissenting Creditors
Lenders led by LIC Housing Finance argued that paying about Rs 6.5 crore against claims of roughly Rs 22,006.57 crore was unviable and unlawful.
Effect on dissenting creditors
Repayment Plan Supporters
The third member applied Section 115(1) uniformly and extinguished the claims of all creditors, including dissenting banks and financial institutions, against Chandra as personal guarantor.
Dissenting Creditors
The original judicial-member view would have limited the plan to creditors who approved it and allowed dissenting lenders to pursue debt recovery independently.
Tribunal decision
Repayment Plan Supporters
The third member issued an independent order backing the repayment plan.
Dissenting Creditors
The original division bench said the independent opinion created no majority because its members had taken different positions, preventing a final order.
Key facts
- Admitted creditor claims
- Approximately Rs 22,006.57 crore.
- Proposed creditor payment
- Rs 6.25 crore to creditors, plus Rs 25 lakh in process costs, totaling about Rs 6.5 crore.
- Proposed reduction
- Nearly 99.97 percent of the admitted claims.
- Plan support
- About 80.8 percent of creditors reportedly voted in favor of the plan.
- Dissenting creditors
- Banks and financial institutions representing roughly 19.2 percent opposed or did not support the plan.
- New NCLT bench
- A five-member bench led by President Justice Anupinder Singh Grewal was formed to hear the matter.
- NCLAT hearing
- The appellate tribunal listed the lenders’ challenge for Tuesday at 10:30 am.
Quotes
Solicitor General Tushar Mehta
Solicitor General representing LIC Housing Finance, Canara Bank and Union Bank
“All said and done, no majority view has emerged in the matter. In the wake, no order can be passed at this stage. Resultantly, we have no option but to make fresh reference to the President in terms of the provisions of Section 419(5) of the Code”
NDTV
“Third Member consciously passed an independent order. Thus, no majority view emerges”
telegraphindia.com
NDTV
Sources
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