99.97% haircut? Decoding the Subhash Chandra case

The National Company Law Tribunal (NCLT) has approved a repayment plan for Essel Group chairman Subhash Chandra, who will pay around Rs 6.5 crore towards admitted creditor claims totaling Rs 22,006.57 crore. This has sparked controversy over a 99.97% debt reduction, which appears misleading at first glance.

Essentially, the case isn't about Essel Group's corporate borrowings, nor does it reveal that Chandra personally borrowed Rs 22,000 crore. The headlines, while technically accurate, can be confusing out of context.

The NCLT approved a resolution plan under the Insolvency and Bankruptcy Code, where creditors admitted claims totaling approximately Rs 22,006.57 crore. A payment of roughly Rs 6.5 crore was then proposed from Chandra's personal insolvency estate. The plan required support from around 80.81% of voting creditors, which it received, and was approved by the NCLT.

Creditors are unhappy with the tiny payout, but the plan's validity rests on its compliance with legal requirements and creditor approval. Critics argue the plan undermines the purpose of personal guarantees, while defenders maintain that the admitted claims represent debts owed by the companies, not Chandra personally. The tribunal didn't examine the plan's commercial viability but focused on legal compliance and creditor approval.