Chandra case: NCLT divided over 99.7% haircut plan

On August 25, India's National Company Law Tribunal (NCLT) delivered a divided decision in the personal insolvency case against Essel Group Chairman Subhash Chandra. The two-member bench of Ashok Kumar Bhardwaj and Reena Sinha Puri failed to reach a majority verdict, leaving the matter to be reviewed by the NCLT President. The dispute centers around a proposed 99.7% haircut for Chandra, which would reduce his debt from around Rs 22,006.57 crore to just Rs 6.5 crore.

The third member of the tribunal, who delivered an independent 144-page order on August 25, approved the repayment plan but extinguished the claims of all creditors, including dissenting banks and financial institutions. This approach contrasts with the first two members, who confined the plan to creditors who agreed with it, allowing the remaining 19.2% to pursue debt recovery outside the plan.

The disagreement arises from the interpretation of Section 79(2)(g) of the Insolvency and Bankruptcy Code (IBC) and its relationship with Section 115(1), which governs creditor approval of repayment plans. The first two members maintained that the plan should only be approved by creditors who voted in favor of it (about 80.8% of creditors), while the third member applied the plan uniformly, extinguishing the claims of all creditors.

The disentanglement of the case hinges on the determination of a majority view by the NCLT President. Until then, no final order has been passed, and the matter remains unresolved.