HDFC Bank is exploring an appeal before the National Company Law Appellate Tribunal (NCLAT) against an NCLT order approving a repayment plan that effectively grants Essel Group founder Subhash Chandra a 99.97% haircut on admitted creditor claims.
HDFC Bank said its admitted claim in the matter accounted for only 3.2% of the total stated amount and that the loan facility was inherited from HDFC Limited following the merger of the two entities.
“With regard to the referred NCLT matter, HDFC Bank admitted claim was only 3.2% of the total stated amount. The Bank inherited this facility which was previously provided by HDFC Limited,” an HDFC Bank spokesperson told NDTV Profit.
The bank said it had opposed the settlement and voted against the resolution, which was nevertheless approved by the majority.
“The Bank is exploring filing an appeal at the NCLAT,” the spokesperson said.
The NCLT has approved a repayment plan under which Rs 6.25 crore will be distributed among creditors against admitted claims of approximately Rs 22,006.57 crore. This translates into a recovery of only around 0.028% of the admitted claims, implying a massive haircut of nearly 99.97%.
HDFC Bank said the facility had already been provided for and was inherited as part of the merger with HDFC Limited.
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Several financial institutions had opposed the repayment plan, citing concerns over the extremely low recovery, verification of claims and the participation of entities that they alleged were associated with Chandra in the voting process.
The tribunal's decision followed a difference of opinion between two members of the NCLT over whether the repayment plan should be approved. A third member, Nilesh Sharma, was appointed to decide the points of disagreement. On Aug. 25, Sharma favoured approval of the repayment plan.
The tribunal has also held that once approved, the repayment plan would be binding on all creditors under Section 115 of the Insolvency and Bankruptcy Code (IBC), including those who voted against it.
The insolvency proceedings against Chandra originated from a Rs 170 crore loan extended to Vivek Infracon, for which Chandra had stood as personal guarantor. Indiabulls Housing Finance, now known as Sammaan Capital, approached the NCLT in 2022 after the loan turned bad. The insolvency plea against Chandra was subsequently admitted in April 2024.
The proceedings against Chandra relate to his liability as a personal guarantor rather than insolvency proceedings against the entire Essel Group. The proposed settlement has drawn attention because of the substantial gap between the admitted claims and the amount proposed to be paid to creditors.
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