After low recovery, NCLT forms 5-member bench to hear Subhash Chandra insolvency

The National Company Law Tribunal (NCLT) Monday constituted a five-member Special Bench to hear the personal insolvency proceedings involving Essel Group founder Subhash Chandra, a day before the matter is scheduled to come up for hearing.

The development comes after the NCLT Special Bench, New Delhi Court-II, made a fresh reference to the President of the tribunal under Section 419(5) of the Companies Act, 2013, in the case filed by Indiabulls Housing Finance against Chandra.

According to an order issued by the NCLT, the newly constituted Bench will comprise the NCLT president along with judicial members Bachu Venkat Balaram Das and Mahendra Khandelwal, and technical members Atul Chaturvedi and Ravindra Chaturvedi.

The Special Bench has been directed to sit at 10:15 am on September 1. The constitution of the larger Bench follows the NCLT’s earlier order approving a repayment plan under which creditors would receive only about Rs 6.25 crore against guarantees of around Rs 22,000 crore signed by Chandra.

The case has attracted considerable attention because of the exceptionally large gap between the claims and the amount proposed to be paid to creditors. The personal insolvency proceedings against Chandra were initiated in 2024 following a petition by Indiabulls Housing Finance.

The proceedings relate to personal guarantees given by Chandra for borrowings of Essel Group-linked companies and are separate from corporate insolvency proceedings involving group companies and regulatory proceedings concerning Zee Entertainment Enterprises.

The NCLT’s August 25 order approving the repayment plan came after a split verdict by a two-member Bench was resolved by a third member. The plan received 80.814 per cent of the voting share, while banks opposing it accounted for only 19.186 per cent.

Banks and other creditors had raised objections over the exceptionally low recovery and questioned whether Chandra’s financial position and assets had been examined sufficiently. They had also questioned whether a forensic investigation was warranted.

On August 30, Subhash Chandra said borrowers associated with his personal guarantees had assured him that they would reconcile the accounts with lenders and settle the balance of Rs 4,262 crore. The tribunal, however, concluded that the repayment plan could provide a better outcome for creditors than pushing the matter into bankruptcy.

It also held that where creditors had approved a plan in accordance with the Insolvency and Bankruptcy Code, the tribunal would not ordinarily substitute its own commercial assessment for that of the creditors. The August 25 order has nevertheless triggered further questions over the effectiveness of personal guarantees and the ability of lenders to recover money when the guarantor’s available assets are substantially lower than the liabilities.

The development adds another layer to a closely watched insolvency case that has raised questions about creditor recoveries, promoter guarantees and the limits of the personal insolvency framework.