India’s top corporate insolvency courts are set to revisit a contentious decision that limits the liability of Essel Group founder Subhash Chandra to a fraction of the claims lodged against him. The National Company Law Appellate Tribunal (NCLAT) will consider an appeal filed by a coalition of creditors, including LIC Housing Finance, after the National Company Law Tribunal (NCLT) approved a repayment plan that allocates just ₹6.25 crore against admitted claims of roughly ₹22,006.57 crore.
Background of the insolvency case
The dispute traces back to 2022 when Indiabulls Housing Finance Limited – now operating under the name Sammaan Capital – initiated insolvency proceedings against Chandra. The move was made under Section 95 of the Insolvency and Bankruptcy Code (IBC), after Chandra acted as a personal guarantor for a ₹170 crore loan extended to Vivek Infracon that later turned sour. The petition was admitted by the NCLT in 2024, and several additional creditors subsequently joined the case.
Throughout the proceedings, the NCLT panel experienced internal disagreement. Judicial Member Ashok Kumar Bhardwaj and Technical Member Reena Sinha Puri issued opposing views on the viability of a proposed repayment plan. Bhardwaj supported approval, whereas Puri highlighted serious legal and procedural shortcomings. To break the deadlock, the tribunal appointed a third member, Judicial Member Nilesh Sharma, to render a final opinion.
The August 25 decision and its terms
On August 25, Member Sharma endorsed the repayment plan, invoking Section 114 of the IBC, which governs the approval of a personal guarantor’s settlement. The plan earmarks ₹6.25 crore for distribution among eligible creditors, while a further ₹25 lakh is set aside to cover the costs of the insolvency resolution process. In addition, Sharma instructed the Resolution Professional to exclude claims submitted by two specific creditors – Anil Kumar, representing 960 individuals, and Sunil Jain, representing 300 individuals – pending a revised list of eligible claimants.
Under the approved scheme, the modest ₹6.25 crore would be shared among the remaining creditors after the revised list is finalized. The allocation represents roughly 0.028 percent of the total admitted claims, a figure that has drawn sharp criticism from many of the parties involved.
Creditor opposition and legal challenge
Several banks and financial institutions have voiced strong objections to the plan, arguing that the recovery amount is negligible and that the verification of claims was insufficient. They also raised concerns about the participation of entities allegedly linked to Chandra in the voting process that approved the plan.
LIC Housing Finance, one of the largest claimants, highlighted the disparity between its admitted claim of ₹1,322.39 crore and the projected recovery of just ₹38.09 lakh. The company further contended that the ₹6.5 crore mentioned in the plan was described as indicative and uncertain, casting doubt on the reliability of the proposed figures.
Objecting creditors also cited net‑worth certificates that purportedly show Chandra’s wealth at approximately ₹45,888 crore in 2017 and ₹40,562 crore in 2018, contrasting sharply with a current net worth reported at about ₹31.79 crore. The discrepancy fuels the argument that the repayment plan does not reflect the guarantor’s true financial capacity.
In response to the NCLT order, Solicitor General Tushar Mehta, representing LIC Housing Finance, filed an urgent petition seeking immediate listing of the challenge. Mehta warned that allowing the order to stand would undermine the purpose of the IBC, which is designed to ensure equitable recovery for creditors.
The petition was presented before a bench comprising Officiating Chairperson Justice Yogesh Khanna, Member (Technical) Banu Mitra, and Member (Technical) Ajai Das Mehrotra. While the bench expressed a willingness to hear the matter, it noted that the files had not yet been reviewed and therefore scheduled a hearing for the following day.
The upcoming NCLAT hearing will determine whether the modest repayment allocation will be upheld or whether a revised settlement that offers a more realistic recovery to creditors will be mandated. The outcome carries significant implications for the credibility of the IBC framework and for future insolvency cases involving high‑profile guarantors.
Stakeholders across the financial sector are closely monitoring the proceedings, recognizing that the decision could set a precedent for how personal guarantees are treated in large‑scale insolvency scenarios. As the NCLAT prepares to deliberate, the balance between protecting creditor interests and acknowledging the debtor’s actual financial standing remains at the core of the dispute.
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