Subhash Chandra case: HDFC Bank weighs appeal against NCLT ruling as lenders face 99.97% haircut

HDFC Bank is considering filing an appeal against the NCLT order approving a repayment plan in the personal insolvency case of media baron Subhash Chandra, the lender said on Thursday.

The bank said only 3.2% of the total claim of ₹680 crore has been admitted under the National Company Law Tribunal (NCLT) order in the matter.

The private sector lender had opposed and voted against the repayment plan, which was approved by the majority of creditors.

"HDFC Bank had opposed and voted against this resolution, which was approved by the majority. The Bank is exploring filing an appeal at the NCLAT (National Company Law Appellate Tribunal)," the bank said in a statement.

The bank also said it had inherited the loan facility from its parent HDFC Ltd before the merger of the two entities.

Chandra to pay ₹6.5 crore against ₹22,006 crore claims

The statement comes a day after the tribunal approved a repayment plan under which Chandra would pay ₹6.5 crore against admitted creditor claims of about ₹22,006.57 crore in his personal insolvency resolution process.

The approval translates into a recovery of around 0.03% and a haircut of nearly 99.97% for lenders.

The plan was approved by NCLT Member (Judicial) Nilesh Sharma, who was appointed as the third member after two members of the tribunal delivered a split verdict.

Sharma rejected objections from dissenting creditors, led by LIC Housing Finance, which had termed the proposed payout "unviable and unlawful".

LIC Housing Finance had pointed out that against admitted claims of around ₹22,006.57 crore, the repayment plan proposed payment of only ₹6.25 crore to creditors and ₹25 lakh towards process costs.

In the case of LIC Housing Finance, whose admitted claim stood at ₹1,322.39 crore, the proposed repayment was only ₹38.09 lakh, or about 0.028% of its admitted dues, the NCLT order said.

The tribunal, however, noted that the objecting creditors together held less than 20% of the voting share, while the plan had received approval from creditors representing 80.81% of the voting share.

Sharma said the valuation carried out by the resolution professional showed that Chandra's personal estate was worth significantly less than the amount offered under the plan.

He also said dissenting creditors were unlikely to recover more by rejecting the plan as Chandra would then face bankruptcy rather than being in a position to make payments following a financial resolution.

"If the plan is approved and the debtor's insolvency is resolved, putting him back on his feet, the objectors would ultimately stand a better chance of recovering their debts directly from the Principal Debtors," the tribunal observed.

The NCLT said its role was not to substitute its own commercial wisdom for that of creditors or determine whether the settlement amount was adequate.

The tribunal said allowing dissenting creditors to pursue recovery of their full original debt outside the approved plan would defeat the statutory scheme and result in unequal treatment of creditors.

Vivek Infracon loan default

The case relates to the default of Vivek Infracon on a ₹170-crore loan taken from the then Indiabulls Housing Finance. Chandra had provided a personal guarantee for the loan.

The lender's move to initiate insolvency proceedings against the guarantor resulted in claims of more than ₹22,000 crore from several creditors.

Subhash Chandra disputes ₹22,000 crore claims

Chandra, however, has disputed the size of the claims against him.

In a statement, he said the total claim against him as a personal guarantor in the personal insolvency proceedings was only ₹3,992 crore and not ₹22,000 crore.

He said he had not borrowed money from any lender and that he was only a personal guarantor for the borrowing entities.

Of the ₹3,992 crore, a claim of ₹620 crore had already been settled, while borrowing entities had offered to pay another ₹1,063 crore, he said.

"The borrowing entities for whom Chandra has provided personal guarantees have till date repaid ₹43,000 crore," the statement said, adding that the borrowing entities had assured that any other outstanding amount would also be settled.

The NCLT has directed the resolution professional to prepare the revised and final list of creditors after giving effect to exclusions ordered by the tribunal and take consequential steps for redistribution of the approved repayment plan value.