1 week ago
NCLT Insolvency Approval Faces Scrutiny Over Minimal Recovery
A tribunal approved a plan to repay creditors of a troubled company.
The plan would give creditors Rs 6.25 crore, even though their claims total about Rs 22,006.57 crore.
Most creditors voted for the plan, so it passed the required voting level.
However, the repayment would recover only about 0.03 per cent of the claims.
Several banks and a housing finance company plan to challenge the approval.
Critics want the company’s finances examined more closely.
They also question whether some lenders supporting the plan had connections to Essel Group.
The editorial says the tribunal should be careful so insolvency rules cannot be misused.
NCLT approved a plan offering creditors Rs 6.25 crore against claims of about Rs 22,006.57 crore, with Rs 25 lakh allocated for process costs.
The plan received 80.81 per cent of creditors’ votes, exceeding the statutory approval threshold.
HDFC Bank, Union Bank of India, Canara Bank and LIC Housing Finance are expected to challenge the decision legally.
Critics say the proposed recovery of 0.03 per cent warrants scrutiny, including a possible forensic audit.
The editorial questions the company’s collapse in net worth and alleged links between supporting lenders and Essel Group chairman Subhash Chandra.
- Who
- The National Company Law Tribunal, creditors including HDFC Bank, Union Bank of India, Canara Bank and LIC Housing Finance, and lenders supporting the plan are involved.
- What
- NCLT approved an insolvency recovery plan that offers Rs 6.25 crore to creditors against claims of about Rs 22,006.57 crore.
- Where
- The proceedings are before India’s National Company Law Tribunal, with a possible appeal to the National Company Law Appellate Tribunal.
- When
- The legal challenge was announced after NCLT approved the plan; HDFC Bank announced its appeal one day before the other named lenders joined it.
- Why
- The plan is being challenged because the proposed recovery is exceptionally low and because critics seek scrutiny of the company’s financial collapse and alleged lender connections.
Plan Critics
Plan Supporters
Adequacy of recovery
Plan Critics
The recovery of 0.03 per cent is exceptionally low and requires careful scrutiny rather than approval on technical grounds.
Plan Supporters
The plan secured 80.81 per cent creditor support, exceeding the statutory voting threshold.
Financial investigation
Plan Critics
The company’s decline from previously much higher net-worth figures to about Rs 31.79 crore should be examined, potentially through a forensic audit.
Plan Supporters
The recovery plan was approved through the creditor-voting process, which supporters relied on in backing it.
Lender relationships
Plan Critics
The tribunal should investigate allegations that private lenders supporting the plan had connections with Essel Group chairman Subhash Chandra, including the role of entities linked to Jawahar Goel.
Plan Supporters
The article reports that the supporting lenders voted for the plan but does not present their response to the allegations.
Key facts
- Creditor claims
- About Rs 22,006.57 crore
- Proposed creditor recovery
- Rs 6.25 crore
- Process costs
- Rs 25 lakh
- Creditor vote
- 80.81 per cent in favour
- Stated recovery rate
- 0.03 per cent
- Current net worth cited
- About Rs 31.79 crore
- Named appealing lenders
- HDFC Bank, Union Bank of India, Canara Bank and LIC Housing Finance
Sources
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