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HDFC Bank is considering an appeal against the NCLT order approving a repayment plan in the insolvency case involving media baron Subhash Chandra. The bank said only 3.2 per cent of its total claim of INR 680 crore was admitted under the order. It had opposed the resolution and voted against it. The NCLT approved a plan under which Chandra will pay around INR 6.5 crore against admitted creditor claims exceeding INR 22,000 crore, resulting in a 99.97 per cent haircut for lenders. The case originated from a default involving Vivek Infracon.
HDFC Bank is considering approaching the National Company Law Appellate Tribunal (NCLAT) against the NCLT's order in the insolvency proceedings involving Subhash Chandra.
The bank said only 3.2 per cent of its total claim of INR 680 crore was admitted under the NCLT order. HDFC Bank had opposed the resolution plan and voted against it, which was approved by the majority of creditors. The lender said it was exploring the option of filing an appeal before the NCLAT.
HDFC Bank also said the loan facility involved in the case had been inherited from its parent company, HDFC, before the merger of HDFC with HDFC Bank.
The bank's response followed an NCLT ruling that approved a repayment plan under which Chandra will pay around INR 6.5 crore to settle admitted creditor claims of more than INR 22,000 crore. The approval results in a 99.97 per cent haircut for lenders.
The case relates to a INR 170 crore loan taken by Vivek Infracon from the then Indiabulls Housing Finance, which subsequently turned sour. Chandra had provided a personal guarantee for the loan. Proceedings initiated before the NCLT following the default resulted in claims of more than INR 22,000 crore from various creditors.
The tribunal had earlier seen a split verdict from two members. Following the difference of opinion, the president of the NCLT appointed judicial member Nilesh Sharma as the third member to decide the matter.
Sharma rejected objections raised by dissenting creditors led by LIC Housing Finance, which had argued that the proposed repayment was unviable and unlawful. The creditors had pointed out that against admitted claims of around INR 22,006.57 crore, the plan offered only INR 6.25 crore to creditors, along with INR 25 lakh towards process costs.
In his 144-page order, Sharma said the valuation carried out by the resolution professional showed that Chandra's personal estate was worth substantially less than the amount offered under the repayment plan. The tribunal also held that rejecting the plan was unlikely to result in a better recovery for dissenting creditors, as Chandra could otherwise face bankruptcy and lose the ability to make payments from a position of financial recovery.
The NCLT observed that resolving Chandra's insolvency and allowing him to return to financial stability could give creditors a better chance of recovering their dues directly from the principal debtors.
The tribunal further held that its role was not to replace the commercial decision of creditors with its own assessment or determine whether the settlement amount was adequate. It noted that creditors' commercial decisions must operate within the statutory framework prescribed under the Insolvency and Bankruptcy Code.
The NCLT's decision has drawn attention because of the exceptionally high haircut involved and the limited recovery proposed against the admitted claims. HDFC Bank's possible appeal before the NCLAT could now provide another avenue for creditors to challenge aspects of the repayment plan.
Source PTI
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