NCLT orders insolvency proceedings against Subhash Chandra

Delhi: The National Company Law Tribunal (NCLT) on Monday, ordered insolvency proceedings against media baron Subhash Chandra on a plea filed by Indiabulls Housing Finance.

A two-member Delhi bench of the NCLT directed initiation of the Corporate Insolvency Resolution Process (CIRP) against Zee Entertainment Enterprises (ZEEL) Chairman Emeritus Chandra, who was a guarantor for a loan given to Essel group firm Vivek Infracon.

The NCLT bench, consisting members Ashok K Bhardwaj and Subrata K Das, however, rejected similar pleas filed by two other creditors IDBI Trusteeship and Axis Bank.

The order was pronounced by the NCLT in open court and a detailed judgement is still awaited.

Indiabulls Housing Finance (IHFL) had moved NCLT after Vivek Infracon had in 2022 defaulted a payment of around Rs 170 crore. Vivek Infracon is a part of Essel Group promoted by Chandra.

Though some settlement talks had taken place, no payment was made to IHFL.

After initiation of CIRP, Chandra would come under the moratorium provisions of the Insolvency and Bankruptcy Code (IBC) and would not be allowed to sell, dispose or alienate any property or assets.

A Resolution Professional would be appointed by the insolvency tribunal, who would collate all the loans and help the financial creditors recover their money.

Earlier, Chandra had contended that a personal guarantor cannot be liable for insolvency proceedings and the NCLT has no powers to initiate the process against him.

However, this was rejected by the NCLT in May 2022 and the tribunal held that it has the jurisdiction and authority to adjudicate personal insolvency proceedings.

Subsequently, this was challenged by Chandra before the appellate tribunal NCLAT. However, the matter was withdrawn as parties decided to settle the matter amicably.

However, the issue was revived again by IHFL earlier this year as the settlement with Chandra did not materialise.

In 2019, the government amended the provisions of IBC, allowing the creditors to file insolvency proceedings against personal guarantors.

This provision was challenged in the Supreme Court and the apex court in November 2023 upheld the validity of these provisions.