The National Company Law Tribunal (NCLT) on Monday ordered insolvency proceedings against media mogul Subhash Chandra, following a plea filed by Indiabulls Housing Finance. The decision, announced by a two-member bench in Delhi, comes in response to Chandra’s role as a guarantor for a loan extended to Essel group firm Vivek Infracon Ltd.
The NCLT’s directive focuses on initiating personal insolvency proceedings against Subhash Chandra, who serves as the Chairman Emeritus of Zee Entertainment Enterprises Ltd (ZEEL).
Vivek Infracon, a subsidiary of the Essel Group, defaulted on a payment of approximately Rs 170 crore in 2022, prompting Indiabulls Housing Finance to seek legal recourse.
While Indiabulls Housing Finance’s plea was upheld by the NCLT, similar requests from two other creditors, IDBI Trusteeship and Axis Bank, were rejected by the bench comprising members Ashok K Bhardwaj and Subrata K Das.
The order was pronounced during the open court session, yet a comprehensive judgment detailing the rationale behind the decision is still awaited.
Indiabulls Housing Finance Ltd (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.
The matter which was admitted in NCLT on Monday was the case of personal insolvency against Chandra under Section 95 of the Insolvency & Bankruptcy Code (IBC).
After initiation of the insolvency proceedings, Chandra would come under the moratorium provisions of the 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 However, the matter was withdrawn as parties decided to settle the matter amicably.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.
Source: Economic Times