The National Company Law Tribunal (NCLT) has approved a repayment plan for Zee Group founder Subhash Chandra. Under the plan, creditors will receive around Rs 6.5 crore against admitted claims of Rs 22,006.57 crore.
The decision means lenders will face a massive 99.97% haircut on their claims. In simple terms, creditors will recover only about three paise for every Rs 100 they are owed.
The ruling has drawn attention because of the size of the claims and the extremely low recovery offered to creditors. It also highlights the challenges involved in personal insolvency cases involving high-profile business figures.
"The NCLT order sets a wrong precedent. A resolution plan with a haircut in excess of 99 per cent cannot be termed as a "commercial wisdom". Any decision taken in exercise of commercial wisdom has to be at least make commercial sense," Abhishek Swaroop, Partner at Saraf and Partners, told NDTV.
Why NCLT Approved Rs 6.5 Crore Repayment
The tribunal reached its decision after its two-member bench delivered a split verdict. The matter then went to Nilesh Sharma, a third member appointed by the NCLT president.
Sharma approved the repayment plan under Section 114 of the Insolvency and Bankruptcy Code (IBC). Several creditors opposed the proposal. LIC Housing Finance was among them. The lender argued that the amount offered to it was far too low compared with its admitted claim.
LIC Housing Finance had an admitted claim of around Rs 1,322.39 crore. However, the repayment plan offered it only about Rs 38 lakh.
Despite objections from some lenders, creditors representing 80.81% of the voting share supported the plan. Those opposing it represented less than 20% of the voting share.
The tribunal therefore held that it could not simply replace the commercial decision of the majority of creditors with its own view on whether the recovery was sufficient.
Why Creditors May Recover Only Three Paise Per Rs 100
The approval does not mean creditors will eventually receive the remaining Rs 22,000 crore through another payment under the same plan. Instead, the approved settlement determines the amount that creditors can recover through the insolvency process.
The NCLT examined Chandra’s personal assets before approving the proposal. It found that the value of those assets was considerably lower than the amount offered under the repayment plan. The tribunal also considered the possible outcome if it rejected the proposal and pushed Chandra into bankruptcy.
In that situation, creditors could potentially recover even less from his available assets. Therefore, the tribunal did not look only at the huge difference between the Rs 22,006.57 crore claims and the Rs 6.5 crore payout. It also considered whether rejecting the plan would give creditors a better recovery. The tribunal concluded that this was unlikely.
How Subhash Chandra’s Insolvency Case Started
The case began with a loan taken by Vivek Infracon. Subhash Chandra had provided a personal guarantee for a Rs 170 crore loan. The loan later turned into a bad debt. Indiabulls Housing Finance then initiated insolvency proceedings against Chandra. The lender filed the case in 2022.
The NCLT admitted the personal insolvency proceedings against Chandra in April 2024. Indiabulls Housing Finance was renamed Sammaan Capital in 2024.
An earlier attempt to settle the dispute did not succeed. The proceedings were later revived in February 2024 after the Supreme Court upheld the relevant provisions of the IBC in November 2023.
LIC Housing Finance Opposes Repayment Plan
The repayment proposal faced strong opposition from LIC Housing Finance. According to the NCLT order, LIC Housing Finance described the proposal as "unviable and unlawful".
Its admitted claim stood at around Rs 1,322 crore, but the plan offered only about Rs 38 lakh. The lender argued that such a recovery was almost negligible compared with the amount it was owed.
Other creditors also raised concerns. They questioned the Rs 6.5 crore figure because the repayment plan described the amount as indicative rather than final. However, the creditors supporting the proposal held a clear majority of the voting share. That majority played an important role in the tribunal’s decision.
NCLT Gives Weight to Creditors’ Commercial Decision
Under the IBC framework, creditors have significant authority to decide whether a repayment plan makes commercial sense. The NCLT said it cannot replace the commercial judgment of creditors with its own assessment as long as their decision remains within the legal framework.
The tribunal’s role is mainly supervisory. It must ensure that the resolution process follows the law. At the same time, legal experts have questioned the wider implications of approving such a steep haircut.
"NCLTs are not powerless to accept any ex-facie arbitrary decision and fully empowered to set aside the same. This will have a ripple effect in other pending resolution in personal insolvency regime," Swaroop said.
What the NCLT Ruling Means
The ruling establishes that the tribunal does not have to decide what recovery amount would be commercially ideal for creditors. Instead, it must examine whether the creditors’ decision complies with the law and the insolvency framework.
Once approved, the repayment plan will apply to all creditors covered by the insolvency proceedings. This includes creditors who opposed the proposal. The case will now return to the original division bench. The bench is expected to issue the formal order reflecting the majority decision.
Massive Haircut Raises Questions
The approval gives Subhash Chandra an important development in his personal insolvency case. For creditors, however, the recovery remains extremely small. The admitted claims total Rs 22,006.57 crore, while the approved repayment stands at only Rs 6.5 crore.
That translates into a recovery of roughly three paise for every Rs 100 claimed. The case is therefore likely to remain closely watched as India’s personal insolvency framework develops and tribunals continue to determine how creditor recovery should be balanced against the available assets of an individual debtor.