The story so far: The National Company Law Tribunal (NCLT) on August 25 approved a repayment plan for Essel Group founder Subhash Chandra under the Insolvency and Bankruptcy Code, 2016 (IBC). Under the plan, ₹6.25 crore will be paid to creditors and ₹25 lakh towards the insolvency resolution process costs. Some creditors, including HDFC Bank, have opposed the plan and are considering an appeal.
This is against admitted claims of ₹22,006.57 crore, implying a recovery of about 0.03%, or a haircut of nearly 99.97%, which means a drop in the value of collateral assets, which reduces the lender’s protection against losses.
How is personal insolvency different from corporate insolvency?
A company and the individual who owns or controls it are separate legal persons. Consequently, insolvency proceedings against a company and its personal guarantor are separate proceedings, although they may arise from the same borrowing. In a corporate insolvency resolution process (CIRP), the focus is on resolving the company’s financial distress, generally through a resolution plan and, failing that, liquidation. In personal-guarantor insolvency, the individual can propose a repayment plan to creditors. Vasa. The two proceedings can run simultaneously. Thus, Mr. Chandra’s personal insolvency does not itself settle the liabilities of the Essel-linked companies that borrowed the money. Creditors can continue to pursue the principal borrowers through their own legal or insolvency proceedings.
Section 60 of the IBC provides for insolvency proceedings relating to a personal guarantor of a corporate debtor to be dealt with by the NCLT where proceedings against the corporate debtor are pending.
“In a corporate insolvency, the Code envisages the resolution of a company’s debt by taking over its management and finding a buyer or revival plan, whereas in personal insolvency, the first step is to allow the borrower to propose a repayment plan to be voted on by the creditors, if approved by the creditors and the NCLT, the Code provides the guarantor with a fresh start by passing a discharge order under section 119 of the Code.” said Mr. “The legal rationale for simultaneous proceedings is based on the settled principle of law found in contract jurisprudence i.e., the liability of a guarantor is coextensive and independent of the principal borrower’s liability,” said Mr.
What happens if the creditors appeal?
Chandra’s earlier reported wealth. Chandra’s liability as a personal guarantor and was not against the Essel Group as a corporate entity. Chandra had provided a personal guarantee. A personal guarantee is a promise by an individual to repay a borrower’s debt if the borrower defaults. “It is important to clarify at the very beginning that the present case, filed by Indiabulls Housing Finance Ltd., pertains to a personal guarantee provided by Dr. Vasa, a Mumbai-based counsel practising insolvency and commercial litigation. Chandra’s office clarified that he has not borrowed any money from any lender. “Chandra is only a personal guarantor. The admitted claims in Mr. Chandra’s personal repayment plan. It does not mean that Mr. Vasa. The resolution professional assessed Mr. The NCLT considered whether creditors would be better off under the repayment plan than if Mr. Chandra were pushed into bankruptcy, and approved the plan. The case also raised questions about Mr. Creditors sought a forensic audit to examine the discrepancy. It also held that a forensic audit was not a mandatory precondition for approving the repayment plan. The IBC provides for collective decision-making by creditors. A repayment plan does not require unanimous approval. The principle is that an individual creditor cannot veto a plan approved by the required majority. Once the NCLT sanctions the plan, it becomes binding on the creditors covered by it, including those who voted against it. However, creditors can challenge how the majority was obtained or whether the law was followed. One major objection in this case concerned five entities that dissenting creditors alleged were associates of Mr. The NCLT did not accept the objection. The plan binds everyone, including those who voted against it. The original NCLT Bench itself had differed over the plan, requiring the matter to be decided by a third member. The third judicial member, Nilesh Sharma, ultimately approved it. An appeal would have to raise a legal or procedural challenge, such as whether ineligible creditors were allowed to vote, whether the statutory majority was correctly calculated, or whether the NCLT wrongly applied the IBC. “The strongest grounds available to the dissenting creditors are the objections with respect to the votes that came from entities that are allegedly ‘associates’ of Dr. If the appellate tribunal finds that votes were wrongly counted and that the required majority was consequently not achieved, it could interfere with the NCLT’s approval. The plan concerns Mr. Chandra’s personal insolvency and does not, by itself, extinguish the separate liabilities of the companies that originally borrowed the money.
The proceedings were initiated by Indiabulls Housing Finance in connection with a ₹170-crore loan to Vivek Infracon Private Limited, for which Mr. In a press statement issued on Thursday (August 27, 2026), Mr. The total claim against Subhash Chandra as a personal guarantor in the personal insolvency proceedings is only ₹3,992 crore by the objectors of the plan and not ₹22,000 crore,” the statement said. Chandra’s personal insolvency proceedings total ₹22,006.57 crore. Against this, the repayment plan provides ₹6.25 crore to creditors and ₹25 lakh towards process costs. Chandra personally borrowed ₹22,006 crore. “The ‘99.97% haircut’ is a comparison against admitted claims, ₹22,006.57 crore, not against realisable assets that the guarantor, Dr. Chandra’s disclosed personal assets at about ₹31.79 crore. A 2017 net-worth certificate furnished to RBL Bank put his net worth at about ₹45,888 crore, while a 2018 certificate put it at about ₹40,562 crore. His assets in the present proceedings were assessed at about ₹31.79 crore. In this case, the plan received 80.814% of the voting share, above the statutory threshold of more than three-fourths. “Once a plan clears the 75% voting share requirement as provided by the Code, no creditor gets a veto. For now, however, the NCLT-approved plan provides for ₹6.25 crore to be distributed to creditors, with ₹25 lakh towards process costs.
The 99.97% haircut is therefore a comparison between the total admitted claims and the amount proposed for distribution under Mr. Chandra and therefore should not have been allowed to vote. Because it considers the ₹6.5-crore recovery too low, a creditor cannot overturn the plan merely. Therefore, the Subhash Chandra case is the norm, not the exception, for better or worse,” said Mr.
Chandra for loans sanctioned to M/s Vivek Infracon Private Limited,” said advocate Rohan S. Chandra in this case, actually owns,” said Mr. suspicion is not proof, and at present, the NCLT held that the creditors have failed to show, with actual evidence, that specific assets were transferred, concealed or diverted to defraud creditors” said Mr While this may be alarming. That’s the whole point of majority rule in insolvency law,” said Mr. Chandra and that family control over those entities should have been enough to disqualify their votes,” said Mr. “Lastly, the most recent newsletter published by the Insolvency and Bankruptcy Board of India (“IBBI”) confirms that since the Personal Guarantor law kicked in, out of the approximately 5,186 cases filed by creditors, only 64 cases ended in a repayment plan, and across those cases, creditors have recovered roughly 1% of what they are owed.
The case before the NCLT concerned Mr. The NCLT similarly held that the earlier certificates did not, by themselves, establish that assets had been concealed or diverted. Creditors can challenge the NCLT order before the National Company Law Appellate Tribunal (NCLAT).
“A gap between an old net-worth certificate and today’s disclosed assets, while being a rational question to ask, isn’t by itself proof of fraud, and it doesn’t automatically trigger a forensic audit.
