HDFC Bank has announced it is exploring an appeal to the National Company Law Appellate Tribunal (NCLAT) regarding a controversial repayment plan for Zee Entertainment Enterprises founder Subhash Chandra. The plan, recently approved by the National Company Law Tribunal (NCLT), mandates Chandra to pay a mere Rs 6.5 crore against substantial creditor claims that total around Rs 22,006 crore.
HDFC Bank's Stance Against the Settlement
The private lender explicitly stated its opposition to the settlement, confirming it had voted against the resolution during creditor proceedings. HDFC Bank clarified that its admitted claim in the insolvency proceedings represented only 3.2% of the total stated amount, a facility it inherited from the erstwhile HDFC Limited.
The bank's move comes amidst widespread concerns from several lenders over the minimal recovery offered by the approved plan. The Rs 6.5 crore payout translates to an approximate 0.03% recovery for creditors, implying a significant haircut of nearly 99.97% on the admitted claims, which are primarily related to Essel Group entities where Chandra acted as a personal guarantor.
Subhash Chandra's Clarification on Claims
In response to the figures cited, Subhash Chandra's office issued a clarification, stating that the total claim against him as a personal guarantor was Rs 3,992 crore, not Rs 22,006 crore. His statement emphasized that he had not personally borrowed any money from lenders and was solely a guarantor.
The clarification also noted that Rs 620 crore of the claims had already been settled, with borrowing entities offering to pay an additional Rs 1,063 crore. Furthermore, it highlighted that out of approximately Rs 45,000 crore outstanding from all companies on January 24, 2019, nearly Rs 43,000 crore had been returned, including payments to many of the lenders involved in this order.
NCLT's Rationale for Approval
The NCLT approved Chandra's repayment plan under Section 114 of the Insolvency and Bankruptcy Code, with the decision made by NCLT Member (Judicial) Nilesh Sharma after a split verdict from the original two-member bench. Despite strong objections from several financial institutions, including LIC Housing Finance, Axis Bank, Canara Bank, RBL Bank, and Union Bank of India, the plan garnered approval from creditors representing 80.81% of the total voting share.
LIC Housing Finance, with an admitted claim of Rs 1,322.39 crore, was slated to receive only Rs 38.09 lakh, representing about 0.028% of its dues, and had argued the payout was “unviable and unlawful.” However, the tribunal considered the valuation of Chandra's personal estate, which was found to be significantly less than the amount offered. The NCLT reasoned that rejecting the plan could push Chandra into bankruptcy, potentially diminishing any prospects of recovery for creditors. The tribunal also clarified its role was not to substitute its commercial judgment for that of the creditors.
Once approved, the repayment plan becomes binding on all creditors, including those who voted against it, preventing them from pursuing separate recovery actions for their full original claims.