The National Company Law Tribunal’s latest order in the personal insolvency case of Essel Group founder Subhash Chandra has drawn attention to the enormous gap between the claims admitted in the proceedings and the amount proposed for repayment.
The NCLT approved a plan under which creditors would receive Rs. 6.5 crore against admitted claims of around Rs. 22,006.57 crore. On the face of the numbers, that represents a recovery of roughly 0.03%, or a haircut of nearly 99.97%. However, the figure needs context since the proceedings relate to Chandra’s role as a personal guarantor for loans taken by companies, rather than to his personal borrowing of Rs. 22,000 crore.
The case dates back to a loan taken by Vivek Infracon, for which Chandra had provided a personal guarantee. After the loan turned bad, Indiabulls Housing Finance approached the NCLT.
The tribunal rejected Chandra’s argument that the insolvency process could not be applied to an individual guarantor. He subsequently challenged the decision before the NCLAT. The dispute continued even after the parties discussed a settlement.
The Supreme Court’s November 2023 ruling upholding provisions dealing with personal guarantors strengthened the legal basis for such proceedings. Indiabulls revived the insolvency case in February 2024 after the earlier settlement failed to materialize. The NCLT admitted the personal insolvency petition in April 2024, and a resolution professional was appointed.
The proposed repayment plan became controversial given the small amount offered to creditors relative to the admitted claims. The plan proposed Rs. 6.25 crore for creditors, along with Rs. 25 lakh toward insolvency process costs, taking the total to Rs. 6.5 crore. Several lenders, including LIC Housing Finance, objected, arguing that the proposed recovery was too low.
The original NCLT bench delivered a split verdict. A third member, judicial member Nilesh Sharma, was subsequently appointed to resolve the disagreement.
On August 25, the third member approved the repayment plan under Section 114 of the Insolvency and Bankruptcy Code. A major factor was creditor voting. The plan had support representing 80.81% of the voting share, while the objecting creditors together held less than 20%.
The tribunal also considered the resolution professional’s assessment of Chandra’s personal assets and the likelihood of creditors recovering more through other routes.
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Chandra has since objected to reports portraying the entire Rs. 22,006 crore as his personal debt. He said the amount represents claims filed in the proceedings and that the claims of lenders actively opposing the plan were substantially lower.
According to his statement, he did not personally borrow the money from the creditors and had acted as a guarantor for loans raised by Essel-linked companies. He also said the matter remains subject to further developments.
The case now returns to the original NCLT bench for consequential directions. Meanwhile, the extraordinary difference between the admitted claims and proposed repayment has put India's personal insolvency framework under renewed scrutiny.