Setback for Subhash Chandra: NCLT puts media baron's repayment plan on hold, seeks CBI response in 4 weeks

The legal battle over Zee founder Subhash Chandra’s repayment plan took another turn on Wednesday, as the National Company Law Tribunal (NCLT) sought a response from the Central Bureau of Investigation within four weeks and deferred the hearing because of a shortage of benches. The five-member bench said the CBI’s investigation could have a bearing on the proceedings, even as Chandra’s side opposed making the agency a party to the case.

The tribunal also said that continuing with the matter before a special five-member bench could affect the functioning of the NCLT. It asked all parties to file their responses before the next hearing. The dispute centres on Chandra’s liability as a personal guarantor, whether his repayment plan can bind creditors who opposed it, and whether the voting process that cleared the plan was proper.

NCLT seeks CBI response in Zee repayment plan case

The NCLT’s latest direction comes in a case involving Chandra’s liability as a personal guarantor for loans taken by companies linked to the Essel Group and the Zee Group. Government officials had earlier told Mint that about ₹2,574 crore of the claims relate to loans for which Chandra had given personal guarantees. Chandra has said he did not personally borrow the money and that his ₹31.79 crore net worth formed the basis of his repayment proposal.

In the background, the CBI had registered an FIR against Chandra in the LIC Housing fraud case. LIC Housing Finance is also among the lenders in the present matter.

Dispute over whether the plan binds dissenting lenders

At the centre of the case is Chandra’s repayment plan, which proposed a payment of ₹6.5 crore, including ₹6.25 crore to creditors and ₹25 lakh towards insolvency process costs. The plan received 80.81% support from creditors by value.

NCLT member Nilesh Sharma, who approved the plan, held that it would be binding on dissenting creditors as well. Creditors that voted against the plan included LIC Housing Finance, IDBI Trusteeship Services, HDFC Bank, Axis Bank, Canara Bank, Union Bank of India (UK) and RBL Bank.

How the split in the tribunal developed

The dispute unfolded against the backdrop of a split within the NCLT. In February, a two-member bench differed on whether Chandra’s repayment plan would bind creditors that had voted against it. Sharma was then brought in as the third member and approved the plan, holding that it would bind dissenting creditors.

However, on 1 September, a five-member special bench led by NCLT president Justice Anupinder Singh Grewal clarified that Sharma’s 25 August order could not be given effect because it did not constitute the majority view of the tribunal. There is also a stay on the order approving Chandra’s insolvency plan until the final ruling.

Five-member bench flags impact on NCLT functioning

On Wednesday, the five-member bench said that continuing to hear the case in its present form could affect the functioning of the NCLT. The bench comprises Justice Grewal, judicial members Bachu Venkat Balaram Das and Mahendra Khandelwal Das, and technical members Atul Chaturvedi and Ravindra Chaturvedi.

The bench had also restrained Chandra from selling or transferring any property held by him, directly or indirectly, while the matter remains pending. That direction followed solicitor general Tushar Mehta’s appearance for the creditors and his request for protection of Chandra’s assets.

Separate row over voting shares in the plan

A separate dispute in the case concerns the voting process. One creditor alleged that the resolution professional had wrongly admitted the claims of five entities — Veena Investments, Direct Media Distribution Ventures, World Crest Advisors, Lemonade Capital Advisors and Corpcall Capital Advisors — which together held 61.78% of the voting share and helped clear Chandra’s repayment plan.

Sharma, however, found no evidence to establish that these entities were related parties. Chandra’s office said the companies belonged to Jawahar Goel, his younger brother, whose business interests had been separated from Chandra’s during a family business separation in 2008-09.

Challenge continues before multiple forums

The dispute has also moved beyond the NCLT. Chandra has moved the NCLAT against the constitution of the five-member NCLT bench and has challenged the stay on the repayment plan in the insolvency case.

For now, the NCLT has asked the CBI to respond within four weeks, kept the matter pending, and directed all sides to place their responses on record. The questions over Chandra’s repayment plan, the rights of dissenting creditors and the voting process are set to remain before the tribunal in the next round of hearings.