HDFC Bank Weighs Appeal After NCLT Approves Massive 99.97% Haircut in Subhash Chandra Case
MUMBAI: The National Company Law Tribunal (NCLT) has sparked a fierce debate over the integrity of India’s bankruptcy framework after approving a resolution plan that effectively wipes out 99.97% of the debt tied to the personal guarantees of Zee Group’s Subhash Chandra.
Under the court-cleared plan, creditors will receive a mere Rs 6.5 crore against total admitted claims of Rs 22,006 crore. Following the ruling, HDFC Bank has announced it is actively exploring an appeal against the decision.
The Contentious Resolution
The case centers on personal guarantees provided by Chandra for loans extended to various group companies, including Vivek Infracon, Spirit Textiles, and Churu Enterprises. While the haircut is staggering, the resolution professional and assenting creditors argued that the deal was the most pragmatic path forward. They contend that Chandra’s assessed net worth is only Rs 31.8 crore—much of which is locked in his mortgaged home—making a traditional bankruptcy process an exercise in futility.
Chandra has consistently disputed the scale of the liability, characterizing the Rs 22,000-crore figure as a collection of historical claims dating back to 2022. He maintained that he was not the primary borrower, but rather a guarantor who stepped in under pressure after lenders made “emotional appeals” to save the jobs of employees at his group firms.
Allegations of ‘Related Parties’
A significant point of contention involves the voting process. Dissenting lenders—including Axis Bank, Canara Bank, RBL Bank, Union Bank UK, and LIC Housing Finance—argued that the creditors who voted in favor of the plan (accounting for 80.8% of the vote) were “related parties.”
Critics allege that entities such as Veena Investments, Direct Media Distribution Ventures, and others are linked to Chandra’s family members or associates. Under Section 109(4)(b) of the Insolvency and Bankruptcy Code (IBC), related parties are ineligible to vote on a resolution plan, a rule the dissenting banks claim was circumvented to force the lopsided settlement.
National Outcry and Political Backlash
The ruling has drawn sharp criticism from across the political spectrum. Congress General Secretary Jairam Ramesh took to social media to denounce the move, calling it a “mundan” (a ceremonial shaving of hair) rather than a haircut. He stated that the decision “makes a complete mockery” of the insolvency process intended to protect creditors’ interests.
The controversy also drew a wry comment from fugitive businessman Vijay Mallya. Posting on X, Mallya congratulated Chandra, noting the contrast between this outcome and his own experience, where he claims state authorities have recovered Rs 14,100 crore against a Rs 6,203 crore judgment debt while still pursuing him.
What Comes Next?
While the NCLT order provides relief to Chandra, it does not absolve the primary borrowers—the group companies—from their existing corporate liabilities. Lenders like LIC Housing Finance have clarified that the order does not impact their security or the obligation of the principal borrowers to repay.
As HDFC Bank and other dissenters prepare to escalate the matter, legal experts suggest the case could become a landmark test for the limits of the IBC, particularly regarding how personal guarantors are treated when their personal assets are vastly outweighed by their total liability.