NCLT forms first-ever 5-member bench to decide Subhash Chandra’s ₹6.5 crore repayment plan against ₹22,006 crore claims

Insolvency tribunal NCLT on Monday formed a five-member bench to decide on media baron Subhash Chandra's repayment plan in a personal insolvency case involving claims of more than ₹22,000 crore after a division bench failed to reach a majority verdict.

The division bench had referred the personal insolvency case against the Essel Group Chairman to the tribunal's president for fresh adjudication after failing to reach majority consensus on a proposed ₹6.5 crore repayment plan despite referring the matter to a third judge.

The five-member bench, formed for the first time in the NCLT's history, will be led by President Justice Anupinder Singh Grewal. The other members are Bachu Venkat Balaram Das, Mahendra Khandelwal, Atul Chaturvedi and Ravindra Chaturvedi. The bench will start hearing at 10:15 am on Tuesday in the Principal Bench of NCLT.

Earlier, the matter had been referred to the Third member, as the two-member division bench of Ashok Kumar Bhardwaj (Member Judicial), and Reena Sinha Puri (Member Technical), gave a split verdict on the repayment plan.

The third member's order dated August 26, backing the ₹6.5 crore repayment plan, was sent back to the original division bench for a formal order in line with the majority opinion, as required under Section 419 (5) of the Companies Act, 2013.

However, the division bench of Ashok Kumar Bhardwaj and Reena Sinha Puri on Monday said no majority view has emerged despite reconsidering the matter, following a differing opinion from a Third Member of the tribunal, and referred the matter back to the NCLT President. The bench said the "Third Member consciously passed an independent order. Thus, no majority view emerges" and hence "no order can be passed at this stage".

"While Member (Technical) rejected the plan, the Member (Judicial) confined the plan to those who accepted and approved it and accorded liberty to dissenting creditors to recover their debt. He did not extinguish the claim of banks/financial institutions/dissenting creditors qua principal debtor/debtor/PG. The Third Member approved the plan but extinguished the right of all the creditors by applying Section 115(1) of the Code uniformly," it said.

Earlier in the day, in a precautionary move, dissenting lenders of Subhash Chandra moved before the insolvency appellate tribunal NCLAT, on the basis of the order/opinion by the third member who approved a ₹6.5 crore payment by the Essel Group chairman over creditor claims of about ₹22,006.57 crore in his personal insolvency resolution process.

Solicitor General Tushar Mehta, appearing for LIC Housing Finance, mentioned it in the morning before an NCLAT bench, comprising Officiating Chairperson Justice Yogesh Khanna, and sought an urgent hearing in the second half of the day.

Mehta, who also represented Canara Bank and Union Bank, said that if the order is allowed to continue, it will "defeat the very purpose of the Insolvency & Bankruptcy Code" and requested that the bench hear it at 2 PM.

However, the National Company Law Appellate Tribunal (NCLAT) agreed to list the matter for hearing on Tuesday at 10.30 AM.

The dispute has arisen over the interpretation of Section 79(2)(g) of the IBC and its interplay with the procedural provisions of Section 115(1), which deals with approval of a repayment plan by creditors.

In the original order, Bhardwaj had confined the approval of the repayment plan only to creditors who voted in its favour — about 80.8% of creditors -- while granting liberty to dissenting financial institutions and banks, comprising roughly 19.2%, to independently pursue debt recovery against Chandra outside the plan.

However, the Third Member of the tribunal, in an independent order, took a different view, applying Section 115(1) uniformly to all creditors. This approved the plan but extinguished the claims of all creditors, including dissenting banks and financial institutions, against the personal guarantor.

The bench noted the Third Member also disagreed with both members on the scope of the Adjudicating Authority's jurisdiction to question the Section 112 report submitted by the Resolution Professional on creditors' meetings.

Sharma rejected the claims of the dissenting creditors led by LIC Housing Finance, which had argued that the payout was "unviable and unlawful".

It had contended that against admitted claims of approximately ₹22,006.57 crore, the repayment plan proposed the payment of only ₹6.25 crore to creditors and ₹25 lakhs towards process costs.

Sharma, in its 144-page-long order, said the resolution professional's valuation showed Chandra's personal estate was worth significantly less than the amount offered under the plan, and that dissenting creditors were unlikely to recover more by rejecting it, since he would then face bankruptcy rather than being able to pay from a position of financial recovery.