Zee Group founder Subhash Chandra’s personal insolvency case has taken a dramatic turn, with the National Company Law Tribunal (NCLT) approving a repayment plan that offers creditors around ₹6.5 crore against admitted claims worth ₹22,006.57 crore.
The approval translates into a recovery of roughly three paise for every ₹100 owed, representing a haircut of nearly 99.97 per cent.
The decision followed a split verdict by two NCLT members and was ultimately resolved by a third member appointed by the tribunal’s president. The repayment plan was approved under Section 114 of the Insolvency and Bankruptcy Code (IBC).
Why did NCLT approve such a steep haircut?
Several creditors had opposed the repayment proposal, arguing that the amount offered was far too low.
LIC Housing Finance, for instance, had an admitted claim of around ₹1,322.39 crore but was offered only about ₹38 lakh under the plan.
However, creditors representing 80.81 per cent of the voting share backed the proposal. Those opposing it accounted for less than 20 per cent.
The tribunal therefore held that it could not simply replace the commercial decision of the majority of creditors with its own assessment of whether the recovery was sufficient.
The key question was not whether ₹6.5 crore was small compared with ₹22,006 crore. Rather, the tribunal considered whether rejecting the plan could realistically result in creditors recovering more.
What happens to the remaining ₹22,000 crore?
The NCLT’s approval does not mean that the remaining amount will subsequently be recovered under the same repayment plan.
The tribunal considered an assessment of Chandra’s personal assets and found their value to be considerably lower than the amount proposed under the plan.
It also considered the possible outcome if the repayment plan were rejected and Chandra were instead pushed into bankruptcy.
According to the tribunal’s reasoning, creditors could potentially recover even less from his available financial assets in that scenario.
The approved plan therefore represents the amount creditors are expected to recover through the insolvency process rather than a promise to repay the outstanding ₹22,000 crore at a later stage.
How did Subhash Chandra’s insolvency case begin?
The case traces back to a ₹170-crore loan taken by Vivek Infracon, for which Chandra had provided a personal guarantee.
After the loan went into default, Indiabulls Housing Finance initiated insolvency proceedings against Chandra in 2022.
The NCLT admitted the personal insolvency proceedings in April 2024.
Indiabulls Housing Finance was subsequently renamed Sammaan Capital in 2024.
The case had also seen an earlier attempt at settlement, but the proposed settlement did not ultimately materialise.
Following the Supreme Court’s November 2023 ruling upholding relevant provisions of the IBC, the insolvency proceedings were revived in February 2024.
LIC Housing Finance called proposal ‘unviable’
LIC Housing Finance strongly objected to the repayment plan.
According to the NCLT proceedings, the lender described the proposal as “unviable and unlawful”, pointing to the extremely small recovery compared with its admitted claim of more than ₹1,322 crore.
Other creditors also raised concerns about the proposed ₹6.5 crore payout, including the fact that the amount was described in the plan as indicative rather than final.
However, the tribunal gave significant weight to the decision of the majority of creditors who voted in favour of the proposal.
What did the NCLT say about creditors’ commercial wisdom?
The ruling highlights the importance of commercial wisdom under the IBC framework.
The NCLT said its role was primarily supervisory and that it could not substitute its own commercial assessment for that of creditors when their decision complied with the legal framework.
The tribunal can intervene in cases where a decision is legally impermissible or ex-facie arbitrary, but it does not ordinarily determine what recovery amount would be commercially preferable for creditors.
The case will now return to the original division bench, which is expected to issue the formal order reflecting the majority view.
What the decision means
For Subhash Chandra, the NCLT’s approval represents a significant development in his personal insolvency proceedings.
For creditors, however, the outcome is stark: ₹22,006.57 crore in admitted claims versus an approved repayment of around ₹6.5 crore.
The case also puts the spotlight on the limits of recovery in personal insolvency proceedings and the weight given to creditors’ collective commercial decisions under the IBC.
Whether the ruling becomes a reference point for future personal insolvency cases will depend on how courts and tribunals assess similar repayment plans involving exceptionally large haircuts.
