Subhash Chandra insolvency: Why are creditors set to recover only ₹6.5 crore against ₹22,006 crore claims?
The NCLT has approved an insolvency plan for Subhash Chandra that results in creditors recovering only 0.03% of their claims. The case centers on Chandra's personal guarantee for a loan provided to Vivek Infracon Private Limited.
Why it matters
The case highlights the complexities and risks associated with personal guarantees in corporate insolvency and the limited recovery potential for lenders.
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. 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. Some creditors, including HDFC Bank, have opposed the plan and are considering an appeal.
The case before the NCLT concerned Mr. Chandra’s liability as a personal guarantor and was not against the Essel Group as a corporate entity.
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