The National Company Law Tribunal has given its nod to media baron Subhash Chandra’s repayment plan, allowing him to settle a staggering Rs 22,006.57 crore debt with a payment of just Rs 6.5 crore, leading to a significant 99.97 per cent haircut for lenders.
Key Points
- The NCLT has approved Subhash Chandra’s repayment plan of Rs 6.5 crore against admitted creditor claims of Rs 22,006.57 crore, representing a 99.97 per cent haircut.
- NCLT member Nilesh Sharma, acting as a third member, approved the plan despite objections from dissenting creditors, including LIC Housing Finance.
- The tribunal noted that objecting creditors held less than 20 per cent of the voting share, while the plan secured 80.81 per cent approval.
- The NCLT’s role is supervisory, not to substitute its commercial wisdom for creditors or conduct wide-ranging investigations into unsupported allegations.
- Once approved, the repayment plan is binding on all creditors, whether assenting or dissenting, under Section 115 of the IBC.
he insolvency tribunal NCLT has approved a repayment plan under which media baron Subhash Chandra will pay just Rs 6.5 crore to settle admitted creditor claims of about Rs 22,006.57 crore in his personal insolvency resolution process, translating into a haircut of nearly 99.97 per cent for lenders.
NCLT Member (Judicial) Nilesh Sharma, ruling as a third member, on Tuesday approved the plan under Section 114 of the Insolvency and Bankruptcy Code (IBC), rejecting objections by lenders that the recovery was too meagre to merit approval.
NCLT’s Split Verdict and Third Member’s Decision
Earlier, the two members of the National Company Law Tribunal had given a split verdict, after which the president of the forum appointed Sharma as the third member amid the difference of opinion.
Sharma rejected the claims of the dissenting creditors led by LIC Housing Finance, which had argued that the payout was “unviable and unlawful”.
It had contended that against admitted claims of approximately Rs 22,006.57 crore, the repayment plan proposed the payment of only Rs 6.25 crore to creditors and Rs 25 lakhs towards process costs.
“In the case of LICHFL, whose admitted claim stood at Rs 1,322.39 crore, the proposed repayment was merely Rs 38,09,294, amounting to approximately 0.028 per cent of its admitted dues.
“It was contended that such a negligible repayment could not receive the approval of this tribunal,” said the NCLT order recording its submission.
Further, the repayment plan itself treated even the proposed amount of Rs 6.5 crore as merely indicative and not certain, rendering the plan tentative, non-definitive, and incapable of approval.
Creditor Approval and Valuation
However, the NCLT held that the objecting creditors together held less than 20 per cent of the voting share, while the plan had been approved by the required number of vote shares — 80.81 per cent share.
Sharma, in its 144-page-long order, said the resolution professional’s valuation showed Chandra’s personal estate was worth significantly less than the amount offered under the plan, and that dissenting creditors were unlikely to recover more by rejecting it, since he would then face bankruptcy rather than being able to pay from a position of financial recovery.
“If the plan is approved and the debtor’s insolvency is resolved, putting him back on his feet, the objectors would ultimately stand a better chance of recovering their debts directly from the Principal Debtors,” the NCLT observed.
NCLT’s Supervisory Role and Binding Nature of Plan
The tribunal held that its role was not to substitute its own commercial wisdom for that of the creditors or to assess whether the settlement amount was adequate.
It also noted that “the commercial decision of the creditors operates within, and not outside, the statutory framework”.
“The AA (NCLT) neither substitutes its own commercial wisdom for that of the creditors nor does it conduct a wide-ranging investigation into allegations that are unsupported by reliable material.
“Its role is supervisory, corrective and judicial, not investigative unless the statute so requires,” the NCLT said.
It further said once approved, the plan is binding on all creditors under Section 115 of the IBC, whether they voted for or against it, and cannot be selectively enforced only against those who consented.
“Once the Repayment Plan is approved under Section 114, its binding effect is governed by Section 115 of the Code.
“The Adjudicating Authority (NCLT) cannot make the plan binding only on the creditors who voted in its favour while allowing dissenting creditors to independently pursue recovery of their full original debt,” it added.
The order further said section 115 does not contemplate selective application of an approved repayment plan.
“Accordingly, the approved plan is binding on all creditors covered by it, whether assenting or dissenting. Granting dissenting creditors liberty to recover the full debt outside the plan would defeat the statutory scheme and result in unequal treatment of creditors,” it said.
Approving the plan, NCLT said: “In view of the above findings, the Repayment Plan submitted by the Personal Guarantor, in my opinion, is required to be approved under Section 114 of the Insolvency and Bankruptcy Code, 2016…”.
The resolution professional is required to prepare and place on record the revised and final list of creditors after giving effect to the aforesaid exclusions and take necessary consequential steps for redistribution of the approved repayment plan value, it said.
“The approved repayment plan, in my opinion, will be binding upon all the creditors, whether assenting or dissenting to the repayment plan, in accordance with Section 115 of the Insolvency and Bankruptcy Code, 2016,” it said.
The matter will now go back to the original division bench for a formal order in line with the majority opinion, as required under Section 419 (5) of the Companies Act, 2013.
