India’s largest private‑sector lender, HDFC Bank, has indicated that it will consider filing an appeal with the National Company Law Appellate Tribunal (NCLAT) against a recent order of the National Company Law Tribunal (NCLT). The order approved a resolution plan that requires Essel Group founder Subhash Chandra to make a personal guarantor payment of ₹6.25 crore, a figure that represents a minute fraction of the admitted claims totaling ₹22,000.57 crore.
Background of the insolvency proceedings
The dispute originates from insolvency proceedings launched against Chandra in his capacity as a personal guarantor for loans taken by companies linked to the Essel group. Indiabulls Housing Finance approached the NCLT after it failed to recover dues, prompting Chandra to submit a repayment plan intended to settle the creditors’ claims. The plan was put to a vote by the resolution professional and received approval from 80.814 percent of voting creditors, while the remaining 19.186 percent either voted against it or did not cast a vote during the voting window.
Chandra has contested the size of the claims, asserting that the actual amount of admitted claims should be around ₹3,992 crore, not the ₹22,000 crore figure cited by the tribunal. He emphasized that he never borrowed money personally from any of the lenders; instead, he signed personal guarantees amounting to roughly ₹22,000 crore for loans raised by Essel‑linked companies.
Details of the NCLT resolution plan
The NCLT order authorises a total distribution corpus of ₹6.25 crore to be shared among creditors with admitted claims of about ₹22,006 crore. The plan also envisages that the principal corporate borrowers will repay approximately ₹1,494 crore, separate from Chandra’s personal contribution. The distribution is to be allocated after the tribunal excludes unsupported claims and redistributes their shares among eligible creditors, a step that marginally increases recoveries for some participants but does not enlarge the overall corpus.
Government sources clarified that the ₹22,000.57 crore figure represents claims admitted against Chandra in his guarantor role, not debt that he personally owes. Consequently, the corporate borrowers remain liable for their own obligations, and the discharge order under Section 138 of the Insolvency and Bankruptcy Code would prevent creditors from pursuing the guarantor for dues covered by the discharge.
Legal analyst Raheel Patel, a partner at Gandhi Law Associates, noted that the ₹6.25 crore distribution translates to a recovery rate of less than 0.03 percent of the admitted claims, amounting to a haircut exceeding 99.9 percent. Patel added that the distribution is broadly proportionate to the admitted eligible claims, given the limited corpus available.
Opposition from lenders and potential appeal
Several major lenders opposed the plan, arguing that the proposed recovery is untenable. HDFC Bank, which inherited the loan from HDFC Ltd following a merger in 2023, recorded an admitted claim that constituted only 3.2 percent of the total stated amount. The bank voted against the resolution and is now exploring an appeal to the NCLAT, citing concerns over the plan’s viability and the voting process.
LIC Housing Finance Limited (LICHFL) held a 6.09 percent voting share and strongly objected to the plan. Its admitted claim stood at ₹1,322.39 crore, yet the repayment schedule allocated merely ₹38.09 lakh—approximately 0.028 percent of its dues. LICHFL described the terms as “unviable and unlawful” and reiterated its intention to retain all security interests, enforcement remedies, and recovery avenues over the secured assets in accordance with applicable law.
Other dissenting lenders included Axis Bank (2.86 percent voting share), Canara Bank (1.60 percent), IDBI Trusteeship Services on behalf of the Franklin Templeton fund (3.36 percent), RBL Bank (0.55 percent), and Union Bank of India (0.76 percent). IndusInd Bank, with a 1.11 percent share, abstained from voting, while Indiabulls Housing Finance, holding a 1.98 percent share, voted in favour of the plan.
A senior banking executive, speaking on condition of anonymity, called the haircut “totally unviable” and confirmed that the institution is also evaluating an appeal before the NCLAT. The executive’s remarks underscore the broader industry discomfort with a resolution that would leave most creditors with negligible recoveries.
The NCLT’s order binds all creditors covered by the plan, including those that voted against it, unless an appellate court overturns the decision. At the NCLAT, dissenting banks can challenge the approval of the plan, the legitimacy of the voting outcome, and the methodology used to treat creditor claims.
Given the stark disparity between the size of the admitted claims and the modest distribution corpus, the outcome of any appeal could have significant implications for the treatment of personal guarantor liabilities in future insolvency cases. The appeal, if pursued, would also test the robustness of the voting mechanisms employed in corporate insolvency resolutions under the Indian Insolvency and Bankruptcy Code.
As the case proceeds, stakeholders will watch closely to see whether the appellate tribunal adjusts the recovery framework, expands the corpus, or modifies the allocation methodology. Until then, HDFC Bank and other dissenting lenders remain prepared to challenge the NCLT’s decision, emphasizing the need for a more equitable resolution for creditors and a clearer delineation of personal guarantor responsibilities.
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