With the controversy over Zee group founder Subhash Chandra's Rs 6.5-crore repayment plan refusing to die down, MS Sahoo, former chairman of the Insolvency and Bankruptcy Board of India (IBBI), has said a repayment plan is inherently constrained by the guarantor's resources, irrespective of the amount of the guarantee.
Speaking to TNIE, Sahoo said the plan approved by the National Company Law Tribunal (NCLT) settles the guarantee liability and not the underlying loan, which remains recoverable from the corporate borrowers.
“While IBC permits consolidated proceedings against both borrowers and guarantors, which would have revealed the net haircut, stakeholders did not pursue that path,” he said.
“The key question is whether creditors would fare any better without this plan. While the guarantor presumably held adequate assets when lenders accepted his guarantee, it is not clear why they did not invoke the guarantee until after those assets had largely eroded,” Sahoo said.
The Delhi Bench of the NCLT on Tuesday approved the Rs 6.5-crore repayment plan submitted by Chandra against reported unpaid claims of Rs 22,006 crore.
Sahoo said that if the plan relied on misrepresentation or concealed diversion of assets, it would be rendered a nullity, exposing the guarantor to full enforcement under the IBC and general law. Conversely, if the assets disclosed genuinely represented all that remained, “that reality must be accepted”, he said.
However, Sahoo said the case underscored the need to reform provisions governing individual insolvency, similar to the iterative amendments made to the corporate insolvency framework as practical deficiencies emerged.
An insolvency lawyer told TNIE that with the tribunal having approved the repayment plan, it would be difficult to establish illegality in the plan. The approval was ultimately a commercial decision of the committee of creditors, even if the outcome appeared extraordinary, he said.
“It is visually shocking that the lenders let Subhash Chandra go so easily,” the lawyer said.
The repayment plan was approved by 80.814% of the creditors. However, Axis Bank, HDFC Bank, Canara Bank, LIC Housing Finance and some other lenders voted against the plan.
LIC Housing Finance, whose admitted claim stood at Rs 1,322 crore, said the proposed repayment to it was only Rs 38.09 lakh, or about 0.028% of its admitted dues.