NEW DELHI: The National Company Law Tribunal (NCLT) on Tuesday restrained Essel Group chairman Subhash Chandra from transferring or disposing of his properties while it examines a contentious settlement proposal that would enable creditors to recover around Rs 6.5 crore against claims of nearly Rs 22,006 crore.
A special five-member bench headed by NCLT President Justice Anupinder Singh Grewal said there was no clear majority among its members on the matter and, consequently, the order allowing the settlement could not be given effect at this stage.
“Let notice be issued to all the parties,” the bench said, directing that the guarantor “shall not alienate the properties, either directly or indirectly”.
Justice Grewal said the tribunal would examine the matter in detail after hearing all stakeholders, including lenders who have opposed the repayment proposal.
The dispute has also reached the National Company Law Appellate Tribunal (NCLAT), where dissenting creditors have challenged the settlement. The appellate tribunal took up the matter on Tuesday and agreed to list it again on Wednesday following a request from Solicitor General Tushar Mehta, who appeared for LIC Housing Finance, Canara Bank and Union Bank, among other lenders.
Mehta sought a day’s time to determine whether the lenders would pursue the matter before the appellate tribunal. He told the three-member NCLAT bench, headed by Officiating Chairperson Justice Yogesh Khanna, that he would examine the issue and return on Wednesday.
At the centre of the dispute is a proposal permitting Chandra to settle liabilities arising from personal guarantees given for borrowings by Essel Group companies for approximately Rs 6.5 crore. The amount represents a recovery of only a fraction of the claims totalling about Rs 22,006 crore.
Ten banks and financial institutions backed the proposal, while lenders including HDFC Bank, LIC Housing Finance and Canara Bank opposed it, arguing that the recovery would be virtually negligible. The dissenting creditors together held less than 20 per cent of the voting share.
Chandra has disputed the characterization of the Rs 22,006-crore amount as his personal debt. He has maintained that the figure includes claims arising from guarantees he provided for loans taken by Essel Group companies. According to him, the claims under his personal guarantees stood at around Rs 3,990 crore, while the larger amount represented liabilities of the underlying corporate borrowers.
The NCLT had last week allowed the settlement, observing that initiating bankruptcy proceedings against Chandra could potentially result in an even lower recovery for creditors. The tribunal had also recorded that his personal estate consisted of very few assets of negligible value.
The dissenting lenders, however, have sought closer examination of Chandra’s declared net worth. They have argued that his financial standing was an important factor when the guarantees were extended. According to figures cited by the lenders, his certified net worth stood at approximately Rs 40,600 crore in 2018 and Rs 45,900 crore in 2017, but had declined substantially by 2024.
The proceedings originated with a split decision by a two-member NCLT bench comprising Ashok Kumar Bhardwaj, Member (Judicial), and Reena Sinha Puri, Member (Technical). The matter was subsequently referred to a third member, Nilesh Sharma, whose decision permitting recovery of around Rs 6.5 crore from Chandra’s personal estate was challenged by dissenting creditors before the NCLAT.
On Tuesday, the special bench stayed the August 25 order passed by Sharma, saying there was no definitive majority view that could be implemented under Section 419(5) of the Companies Act.
Chandra, once among India’s most prominent corporate figures, built the Essel Group into a diversified business conglomerate with interests including television, packaging, infrastructure and direct-to-home services. He also served as a BJP-backed Rajya Sabha member.
The group’s financial difficulties intensified after the 2018 liquidity crisis triggered by the collapse of infrastructure financier IL&FS. Essel Group companies, which had accumulated significant debt, faced growing difficulties in refinancing their obligations amid tightening liquidity.
A substantial portion of the group’s borrowings was backed by pledged shares. Falling share prices led to margin calls and additional share sales, further worsening the group’s financial stress. Several businesses were subsequently sold, while others entered insolvency proceedings.