NCLT approves Subhash Chandra’s ₹6.5 crore repayment plan against ₹22,006 crore claims

National Company Law Tribunal allowed Zee Group Founder and Chairman Subhash Chandra’s revision plan to pay just ₹6.5 crore against admitted claims of ₹22,006.57 crore. The decision gives creditors a recovery of around 0.03 per cent of their admitted dues.

The order, passed by NCLT Member (Judicial) Nilesh Sharma on Tuesday as the third member of the tribunal, clears the way for implementation of the repayment plan under Section 114 of the Insolvency and Bankruptcy Code (IBC).

The decision comes after a split verdict by the original two-member bench. Following the difference of opinion, the president of the NCLT appointed Sharma as the third member to adjudicate the disputed issues.

The case is significant as the tribunal has approved a resolution despite objections from lenders over the exceptionally low recovery proposed under the plan. The order also reinforces the limited role of the adjudicating authority in reviewing a repayment plan once it has secured the requisite creditor approval under the IBC.

Lenders challenge ₹6.5 crore payout

LIC Housing Finance (LICHFL), which led the objections against the plan, had argued that the proposed recovery was "unviable and unlawful".

According to the submissions recorded in the NCLT order, the admitted claims against Chandra stood at approximately ₹22,006.57 crore. Against this, the repayment plan proposed ₹6.25 crore for creditors and ₹25 lakh towards process costs, taking the total proposed amount to ₹6.5 crore.

For LICHFL, the gap between the admitted claim and proposed recovery was particularly stark. Its admitted claim stood at ₹1,322.39 crore, while the proposed repayment was only ₹38.09 lakh, equivalent to around 0.028% of its admitted dues.

LICHFL argued that such a negligible recovery could not justify approval of the plan.

The lender also questioned the certainty of the proposed ₹6.5 crore payout, pointing out that the repayment plan itself described the amount as indicative rather than final. According to the creditor, this made the proposal tentative and non-definitive and therefore incapable of being approved by the tribunal.

NCLT backs creditors' commercial decision

The third-member bench, however, rejected the objections and placed significant weight on the voting outcome of the creditors.

The dissenting creditors collectively held less than 20% of the voting share, while the repayment plan received approval from creditors representing 80.81% of the voting share.

The tribunal held that its role was not to replace the commercial judgment of creditors with its own assessment of whether the settlement amount was adequate.

"The commercial decision of the creditors operates within, and not outside, the statutory framework," the NCLT said.

The 144-page order also emphasised that the adjudicating authority's role in an insolvency resolution process is supervisory, corrective and judicial rather than investigative, unless the statute specifically requires otherwise.

"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 tribunal said.

Personal insolvency and value of Chandra's estate

The tribunal also considered the valuation of Chandra's personal estate while determining whether creditors were likely to benefit from the proposed resolution.

According to the order, the resolution professional's valuation indicated that Chandra's personal estate was worth substantially less than the amount being offered under the repayment plan.

The tribunal reasoned that rejecting the repayment plan would not necessarily result in better recovery for dissenting creditors. Instead, Chandra could be pushed into bankruptcy, limiting his ability to repay creditors from a position of financial recovery.

The tribunal observed that if the repayment plan is approved and Chandra's insolvency is resolved, allowing him to return to financial stability, creditors could ultimately have a better chance of recovering their dues from the principal debtors.

"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.

The reasoning effectively weighs the immediate recovery available under the plan against the possibility of a lower or uncertain recovery through bankruptcy proceedings.

Approved plan will bind dissenting creditors

A key aspect of the order is the tribunal's interpretation of the binding effect of an approved repayment plan under Section 115 of the IBC.

The NCLT said the plan, once approved, would bind all creditors covered by it, including those who voted against it.

This means dissenting lenders cannot reject the approved repayment terms and separately pursue recovery of their entire original claims outside the plan.

"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," the tribunal said.

The order further noted that Section 115 does not provide for 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.

The ruling therefore provides lenders with a relatively clear message on the consequences of voting against a repayment plan that has secured the statutory threshold: once approved by the tribunal, the plan applies uniformly to creditors covered by it.

Revised creditor list to be prepared

While approving the plan, the tribunal directed the resolution professional to prepare and place on record a revised and final list of creditors after giving effect to exclusions specified in the order.

The resolution professional will also have to take consequential steps for redistribution of the approved repayment-plan value.

"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 NCLT said.

The tribunal reiterated that the approved plan would be binding on all creditors, whether assenting or dissenting, in accordance with Section 115 of the IBC.

The matter will now return to the original division bench for issuance of the formal order in accordance with the majority view, as required under Section 419(5) of the Companies Act, 2013.

The Subhash Chandra ruling comes against the broader backdrop of India's evolving personal insolvency and bankruptcy framework, particularly its application to promoters and personal guarantors of corporate debt. The decision highlights the tension between lenders' expectations of recovery and the IBC's emphasis on collective creditor decision-making and resolution where liquidation or bankruptcy may offer little additional value.

For creditors in Chandra's case, however, the immediate recovery remains a fraction of the admitted claims: ₹6.5 crore against ₹22,006.57 crore, translating into a recovery of roughly 0.03% and a haircut of approximately 99.97%.