99.97% Haircut for Subhash Chandra: HDFC to Appeal NCLT Ruling!

A recent decision by the National Company Law Tribunal (NCLT) has sparked significant controversy, approving a repayment plan for Zee Group’s Subhash Chandra that offers a mere Rs 6.5 crore against claims totaling Rs 22,006 crore.

This translates to an astonishing 99.97% haircut for creditors, leading to outrage and potential legal battles.

HDFC Bank, which alone has a claim of Rs 698 crore (representing 3.2% of the total sum), has announced its intention to explore an appeal against the NCLT's clearance. Other significant creditors, including Axis Bank, Canara Bank, RBL Bank, Union Bank UK, IDBI Trusteeship, and LIC Housing Finance, are also among those accounting for approximately 15% of the total claims who objected to the resolution plan.

LIC Housing Finance, for instance, faces a substantial exposure of Rs 1,322 crore across two of Subhash Chandra's loan accounts.

Subhash Chandra, while acknowledging the debt, has vehemently disputed the Rs 22,000-crore liability, stating it reflects historical claims filed in 2022. His defense primarily rests on the argument that he was merely a personal guarantor for the loans taken by his companies, not the principal borrower himself.

He further claimed that most of these guarantees were provided after group companies defaulted, following “emotional appeals” from lenders who warned of job losses if he didn't step in.

According to the resolution professional, Chandra's net worth is estimated at only Rs 31.8 crore, with Rs 25 crore of that being his mortgaged house. Assenting creditors, who comprised 80.8% of the total, argued that approving the Rs 6.5 crore plan offered a better outcome compared to pushing the personal guarantor into bankruptcy.

They also emphasized that the principal borrowers (the group companies) would still remain liable for the remaining debt.

The controversial ruling has not just created ripples in the financial sector but has also drawn political criticism.

The Congress party has slammed the NCLT decision, labeling it as detrimental and questioning the implications for corporate governance and lender confidence. The outcome of HDFC Bank's potential appeal and the broader political and economic fallout of this significant haircut will be closely watched.

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