NCLAT will hear challenge to Subhash Chandra's repayment plan tomorrow
What's the story
The National Company Law Appellate Tribunal (NCLAT) has agreed to hear an urgent plea from several creditors, challenging the approval of Subhash Chandra's repayment plan by the National Company Law Tribunal (NCLT). Solicitor General Tushar Mehta, representing the creditors, requested the appellate tribunal take up this matter on an urgent basis. The NCLAT has scheduled a hearing for tomorrow at 10:00am.
Legal challenge
'Complete loss of intent and purpose of IBC'
Mehta raised concerns over the findings in Chandra's case, saying if they're correct, it could lead to a complete loss of intent and purpose of the Insolvency and Bankruptcy Code (IBC).
The creditors are challenging Chandra's repayment plan as they feel it doesn't sufficiently address their claims.
They expect to recover only a fraction of their dues under this plan, which would lead to huge losses under the IBC.
Plan justification
Repayment plan prepared by court-appointed resolution professional
In his defense, Chandra said the repayment plan was formulated by a court-appointed Resolution Professional. However, creditors shouldn't expect full recovery from this plan as it only proposes a small fraction of their total claims, about 3p for every ₹100 owed.
Potential impact
NCLAT hearing gives creditors opportunity to challenge repayment plan
The NCLAT's hearing gives creditors a chance to challenge the NCLT's approval of Chandra's repayment plan.
This could result in a revision of the terms, allowing for better recovery of their outstanding claims.
The challenge comes after the NCLT approved Chandra's plan, under which he will pay ₹6.5 crore: ₹6.25 crore to creditors and ₹25 lakh for insolvency process costs.
Opposition
HDFC, Axis, Canara Bank, RBL, Union Bank among creditors
HDFC Bank, Axis Bank, Canara Bank, RBL Bank, and Union Bank of India are among the creditors who opposed Chandra's repayment plan.
HDFC had voted against it and expects to recover about 3.2% of its total claim under this scheme.
Government sources said to Mint that the insolvency case is against Chandra because he had given personal guarantees for loans taken by several Essel and Zee-linked companies.