NCLT has shown the green flag to the repayment plan submitted by Essel Group Chairman Subhash Chandra. However, people are questioning and interpreting this decision as politically nuanced. But is it really true?
It is easier to sensationalise by accusing NCLT and the Government of India of an approximate 100% haircut in this personal Bankruptcy case against Zee Group Chairman Subhash Chandra initiated by Indiabulls. But the fact is very simple. Let’s understand the case first.
Zee Group Chairman became a party to bankruptcy proceedings for being a guarantor of debt transactions with financial institutions in Essel Group insolvency proceedings. It should be noted that he didn’t borrow that money in a personal capacity. Rather, money was borrowed by the group. He is a guarantor. He is there in the case just because he is a guarantor who is eventually the Chairman of the group.
It is easier to sensationalise by accusing NCLT and the Government of India of an approximate 100% haircut in this personal Bankruptcy case against Zee Group Chairman Subhash Chandra initiated by Indiabulls. But the fact is very simple. Let’s understand the case first.
Zee Group Chairman became a party to bankruptcy proceedings for being a guarantor of debt transactions with financial institutions in Essel Group insolvency proceedings. It should be noted that he didn’t borrow that money in a personal capacity. Rather, money was borrowed by the group. He is a guarantor. He is there in the case just because he is a guarantor who is eventually the Chairman of the group.
NCLT has to follow a prudent process as stipulated in the Insolvency and Bankruptcy Code. It’s worth mentioning here that NCLT doesn't have overarching power like the Supreme Court of India. It is bound by the boundaries set in the Insolvency and Bankruptcy Code. In this process, no one (even the government or court) can interfere, irrespective of who. The process stipulates that the submitted repayment plan has to be accepted by the Committee of Creditors by the majority of votes. Voting rights to every creditor are assigned in proportion to a creditor’s debt in the consideration.
In this case, the Committee of Creditors (CoC), with 80.81% share of total votes, has approved the repayment plan proposed by Subhash Chandra! Creditors with less than 20% share of voting rights opposed this plan. The opposing creditors are financial institutions like LIC Housing Finance.
So, eventually, it is the Committee of Creditors which is ready for a haircut of almost 99.7% of the total consideration. Now, it's binding on every creditor. Interestingly, at this point, even NCLT cannot do much more than to trust its own verdicts. So it is the Committee of Creditors who are making such a bizarre repayment plan acceptable! Neither NCLT, the government, nor any other entity! However, there may remain questions as to how and why the Committee of Creditors accepted a haircut of 99.7%.
In this case, the Committee of Creditors (CoC), with 80.81% share of total votes, has approved the repayment plan proposed by Subhash Chandra! Creditors with less than 20% share of voting rights opposed this plan. The opposing creditors are financial institutions like LIC Housing Finance.
So, eventually, it is the Committee of Creditors which is ready for a haircut of almost 99.7% of the total consideration. Now, it's binding on every creditor. Interestingly, at this point, even NCLT cannot do much more than to trust its own verdicts. So it is the Committee of Creditors who are making such a bizarre repayment plan acceptable! Neither NCLT, the government, nor any other entity! However, there may remain questions as to how and why the Committee of Creditors accepted a haircut of 99.7%.
Rajeev Upadhyay
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