Subhash Chandra questions NCLT process before NCLAT

Zee Group founder Subhash Chandra on Wednesday told the National Company Law Appellate Tribunal (NCLAT) that he had been “vilified” across the country over a proposed repayment of just ₹6.5 crore against admitted creditor claims of about ₹22,006 crore, arguing that no final order approving the repayment plan currently exists.

Appearing for Chandra, advocate Sasmit Patra said the intense public scrutiny surrounding the insolvency proceedings had effectively turned the legal dispute into a “media trial” and damaged his client's reputation.

“The fact is that there is no order today standing in this matter. But for the last 15 days, the personal guarantor, Dr Subhash Chandra, has been vilified across this country, saying that he has done ₹6.5 crore into ₹22,000 crore,” Patra told the appellate tribunal.

The remark came during a hearing on appeals filed by Union Bank of India (UK), Canara Bank and LIC Housing Finance against an August 25 opinion of the National Company Law Tribunal (NCLT) concerning Chandra's repayment plan.

The lenders have challenged the proceedings around approval of the plan, which has become the latest flashpoint in the long-running insolvency dispute involving Chandra and his creditors.

Solicitor General Tushar Mehta, appearing for the appellant-lenders, objected to Patra's submission on the alleged media trial. Mehta argued that proceedings before the NCLAT could not be used to make statements intended for publication in the media.

The appellate tribunal did not pass any order on Patra's submission and said Chandra could raise his grievance before the NCLT, where the underlying insolvency proceedings are pending.

Dispute over five-member NCLT bench

A significant part of Wednesday's hearing centred on the constitution and powers of a five-member NCLT bench that has taken up the repayment plan afresh.

Patra questioned the tribunal's authority to constitute such a bench to reconsider the matter, arguing that Section 419(5) of the Companies Act provided only limited scope for dealing with differences between members.

“The scope of Section 419(5) is very limited. If there is a differing view, then that differing view has to be taken up by another member or other members. It does not empower the NCLT under the IBC or company law to form a five-member Bench,” Patra submitted.

He also questioned the circumstances under which the five-member bench had stayed the August 25 opinion of NCLT Judicial Member Nilesh Sharma.

“Under which power? When did this five-member bench sit together? What were the proceedings conducted that led to this five-member bench staying only one order?” Patra asked.

The NCLAT, however, noted that the validity of the five-member bench's constitution was not directly under challenge in the appeals filed by the lenders.

The appellate tribunal said Chandra could independently challenge the September 1 order if he was aggrieved by the constitution or functioning of the larger bench.

Chandra's counsel disputes ‘divergent views’

Patra also challenged the lenders' contention that the three NCLT members who had considered the repayment proposal had delivered completely divergent opinions.

According to Chandra's counsel, Judicial Members Ashok Kumar Bhardwaj and Nilesh Sharma were substantially aligned on the fundamental question of Chandra's eligibility under Section 79 of the Insolvency and Bankruptcy Code (IBC).

Their disagreement, Patra argued, was principally over how the repayment plan should operate against creditors who did not support it.

Bhardwaj had proposed that the plan should operate against creditors who supported it while leaving dissenting lenders free to pursue other recovery remedies.

Sharma, on the other hand, had taken the view that the repayment plan would bind all creditors, including those who dissented, under Section 115 of the IBC.

“Both are equally on the same page as far as Section 79 is concerned on eligibility. Therefore, to say all these issues have to be re-litigated is completely wrong,” Patra submitted.

The distinction is significant because the dispute is not merely about the quantum of repayment but also about whether an approved repayment mechanism can bind creditors who oppose it and what remedies remain available to dissenting lenders.

Lenders keep appeals alive

Solicitor General Mehta initially sought permission to withdraw the lenders' appeals with liberty to revive them at a later stage.

His argument was that immediate consideration of the appeals might no longer be necessary because the five-member NCLT bench had already stayed Sharma's opinion and decided to hear the matter afresh.

Patra opposed the proposal to withdraw the appeals with liberty to revive them. He argued that the appeals themselves were defective because Sharma's opinion had never crystallised into a final order of the NCLT.

Following the exchange, Mehta decided not to press the withdrawal applications and instead requested that the appeals remain pending.

The NCLAT agreed and listed the matter for October 7.

No final repayment order yet

The proceedings underline a key distinction in the case: the August 25 opinion on the repayment plan is not, according to Chandra's counsel, a final and enforceable NCLT order.

That distinction has become central to the legal battle because the proposed ₹6.5 crore repayment has attracted intense scrutiny against the backdrop of admitted creditor claims of ₹22,006 crore.

Chandra's legal team is seeking to prevent the dispute from being characterised simply as a question of paying ₹6.5 crore against ₹22,000 crore of claims. Its argument is that the insolvency process has not yet culminated in a final order approving the plan and that the legal status of the competing NCLT opinions remains unresolved.

For the lenders, meanwhile, the challenge centres on the validity and consequences of the NCLT's handling of the repayment proposal, including the subsequent decision to place the matter before a five-member bench.

The NCLAT's decision to keep the appeals pending means the lenders' challenge remains alive while the larger NCLT bench reconsiders the repayment plan.

The next significant hearing is scheduled for October 7, by which time the NCLT proceedings could determine whether the repayment proposal moves towards a final order or faces another round of legal challenges.