The National Company Law Tribunal (NCLT) has referred the personal insolvency case of media baron Subhash Chandra back to its chairperson after the adjudicating benches failed to reach a majority consensus on his proposed repayment plan. This development marks another legal hurdle in a case where Chandra offers a mere Rs 6.5 crore against admitted claims exceeding Rs 22,000 crore from various creditors.
Deadlock Over Repayment Plan
The contentious repayment plan, which implies an extraordinary 99.97% haircut for lenders, has been met with strong opposition. Dissenting creditors, including major financial institutions like LIC Housing Finance, Canara Bank, and Union Bank, have already approached the National Company Law Appellate Tribunal (NCLAT) to challenge any potential approval of the plan.
The NCLT's Mumbai bench, comprising Judicial Member Ashok Kumar Bhardwaj and Technical Member Reena Sinha Puri, initially delivered a split verdict on the plan. This led the matter to be referred to a Third Member, Justice Sharad Kumar Sharma, for a decisive opinion. Justice Sharma subsequently issued an independent order approving the Rs 6.5 crore plan and, crucially, applied Section 115(1) of the Insolvency and Bankruptcy Code (IBC) uniformly to all creditors, effectively extinguishing the claims of even those who dissented.
Conflicting Interpretations
Upon the Third Member's order being sent back to the original division bench for formalization, the bench declared on Monday that "no majority view emerges" despite reconsideration. The Judicial Member, Bhardwaj, had previously advocated for confining the plan's approval only to the 80.8% of creditors who voted in its favor, allowing the remaining 19.2% of dissenting creditors to pursue independent debt recovery. In contrast, the Technical Member, Puri, had outright rejected the plan.
The core of the legal dispute centers on the interpretation of Section 79(2)(g) of the IBC and its interplay with Section 115(1). Dissenting lenders, represented by Solicitor General Tushar Mehta, argued that Justice Sharma's application of Section 115(1) to extinguish all creditor rights, including those of dissenting parties, would defeat the fundamental purpose of the Insolvency & Bankruptcy Code. They contend the payout is unviable and unlawful, especially given the vast disparity between the offer and the admitted debt.
Lenders Seek NCLAT Intervention
As a precautionary measure, dissenting lenders had already moved the NCLAT, seeking an urgent hearing against the Third Member's order. The appellate tribunal has agreed to list the matter for further hearing, indicating a prolonged legal battle ahead. The Resolution Professional's valuation report reportedly indicated that Mr. Chandra's personal estate was valued significantly lower than the proposed repayment, suggesting that creditors might not recover more even if the plan were rejected and he faced bankruptcy.