NCLT five-member bench stays Subhash Chandra's 99.97 percent haircut

A five-member National Company Law Tribunal bench on 1 September stayed the 25 August order that had approved Zee Group founder Subhash Chandra's personal insolvency repayment plan. The plan would have paid creditors Rs 6.25 crore plus Rs 25 lakh in process costs against admitted claims of about Rs 22,006.57 crore. That is a haircut of 99.97 percent, or roughly three paise on every hundred rupees claimed.

The larger bench, headed by NCLT President Justice Anupinder Singh Grewal, said the earlier opinion of third member Nilesh Sharma could not be treated as a majority view. Notices went to all parties. On a request from Solicitor General Tushar Mehta, who appeared for creditors, the bench also barred Chandra from transferring or disposing of properties, directly or through another person, while the matter is heard again.

The other members of the special bench are Bachu Venkat Balaram Das, Mahendra Khandelwal, Atul Chaturvedi and Ravindra Chaturvedi. NCLT said this is the first five-member bench in the tribunal's history. Hearings were listed at the Principal Bench from 10:15 a.m. on Tuesday.

How the case reached a five-judge room

Chandra is in personal insolvency as a guarantor for loans taken by Essel Group companies. He has said he did not borrow the money himself and that the borrowing entities have already repaid about Rs 43,000 crore of Rs 45,000 crore outstanding. In a statement after the August approval, he also said those entities had offered about Rs 1,113 crore to lenders who opposed the plan.

Creditors holding 80.81 percent of the voting share backed the plan at a meeting in November 2024, above the three-fourths threshold in the Insolvency and Bankruptcy Code. LIC Housing Finance, Canara Bank and Union Bank of India were among the lenders who voted against it. LIC Housing Finance called the payout unviable and unlawful.

The original two-member division bench of Ashok Kumar Bhardwaj and Reena Sinha Puri split on the plan. The NCLT President referred the difference to Sharma in February. Sharma's 144-page order on 25 August approved the plan under Section 114 of the Code and sent it back to the division bench so a formal majority order could be issued under Section 419(5) of the Companies Act, 2013.

On 31 August the same division bench said no majority view had emerged even after that third opinion. It referred the file back to the President. Dissenting lenders also moved the National Company Law Appellate Tribunal against Sharma's approval. That is the sequence that produced Tuesday's special bench and the stay.

What the numbers actually mean

Admitted claims stand near Rs 22,006.57 crore. One public account of Chandra's position put admitted claims closer to Rs 21,696 crore, with opposing lenders holding about Rs 3,992 crore, of which Rs 620 crore had already been settled. Even on that arithmetic, the cash on the table is Rs 6.5 crore in total.

Sharma's August order relied on the resolution professional's valuation, which put Chandra's personal assets below the sum offered in the plan. That is the legal hook for a near-total write-off: if the guarantor's own estate cannot support a larger recovery, the Code allows creditors who vote in sufficient number to accept a thin payout and close the personal insolvency.

Banks that dissented argue the opposite. A 99.97 percent haircut on personal guarantees, they say, weakens the guarantee as a credit tool. If a promoter can settle tens of thousands of crores of contingent liability for a few crore, future lenders will price personal guarantees differently or stop taking them.

What happens next

The five-member bench said it will hear arguments on the scope of the reference and then frame issues. Status quo on Chandra's properties continues until that hearing produces a fresh order. The stay does not decide whether the plan is lawful. It only holds the August approval in place and keeps the assets from moving.

Chandra's counsel will have to show that the third member's view can still operate, or that a new majority can be assembled on the same facts. Creditors who want a larger recovery will press the absence of a clear majority and the size of the write-off. NCLAT's parallel challenge sits above both tracks.

The case now tests two separate questions that Indian insolvency law has not settled together. One is procedural: what counts as a majority when a two-member bench splits, a third member decides, and the original bench still cannot agree. The other is commercial: how thin a personal-guarantor payout can be when the voting majority is above 80 percent and the asset valuation is low.

Until the larger bench answers both, Chandra cannot sell or shift the properties that sit behind the guarantee, and creditors cannot treat the Rs 6.5 crore plan as closed.