HDFC Bank to appeal NCLT's 99.97% haircut on Subhash Chandra claims

HDFC Bank, India's largest private lender, is actively considering an appeal against a recent order by the National Company Law Tribunal (NCLT) that approved a repayment plan for Subhash Chandra, the founder and chairman emeritus of Zee Group (Essel Group). This NCLT order has sparked significant controversy as it entails a staggering 99.97% haircut for creditors on their admitted claims against Chandra, arising from his personal guarantees for loans taken by various Essel Group entities. The NCLT's decision, delivered on August 25, 2026, approved a resolution plan under which creditors are slated to receive a paltry ₹6.5 crore (₹6.25 crore for distribution and ₹25 lakh for process costs) against total admitted claims amounting to approximately ₹22,006.57 crore in Chandra's personal insolvency proceedings. This effectively translates to a recovery of only about 0.028% to 0.03% of the admitted claims, leading to the widely reported 99.97% haircut. HDFC Bank, which had an admitted claim of approximately ₹680 crore (some reports mention ₹698 crore) in this matter, expressed its strong opposition to the repayment plan. The bank stated that its admitted claim represented only 3.2% of the total stated claim amount. Furthermore, HDFC Bank clarified that this loan facility was inherited from the erstwhile HDFC Ltd prior to its merger with HDFC Bank. The bank had formally opposed the settlement and voted against the resolution during the creditor's meeting; however, it was approved by a majority of creditors (reportedly 80.81% by value). The massive haircut figure of 99.97% has drawn considerable attention, with various stakeholders, including government sources and Subhash Chandra himself, offering clarifications. Government sources have emphasized that the ₹22,006.57 crore figure represents claims admitted against Chandra in his capacity as a *personal guarantor* for loans taken by several Essel/Zee-linked companies, and *not* direct debt personally borrowed by him. They pointed out that only about ₹2,574 crore of the admitted claims relate to loans for which Chandra's personal guarantee was provided at the time of the original borrowing, with most other guarantees being furnished later as additional security. Crucially, the NCLT's approval and the subsequent haircut specifically pertain to the recovery from Chandra's personal estate, and it does *not* imply a 99.97% write-off on the entire ₹22,000 crore of bank loans, as the principal borrowing entities (the Essel Group companies) remain separately liable for their debts, and creditors retain avenues to recover from those companies and their assets. The insolvency proceedings against Subhash Chandra originated in 2022 when Indiabulls Housing Finance (now known as Sammaan Capital) filed a petition with the NCLT. This petition was triggered by the default on a ₹170 crore loan extended to Vivek Infracon, for which Chandra had provided a personal guarantee. The NCLT subsequently admitted the personal insolvency proceedings against Chandra in April 2024. The NCLT's approval of the repayment plan was not straightforward. An initial two-member bench had delivered a split verdict on the proposal. To break the deadlock, a third judicial member, Nilesh Sharma, was appointed, who ultimately sided with the approval of the repayment plan on August 25, 2026. Several other financial institutions, including LIC Housing Finance, Axis Bank, Canara Bank, RBL Bank, and Union Bank of India, also opposed the repayment plan, citing concerns over the extremely low recovery rate and allegations regarding the participation of entities potentially linked to Chandra in the voting process. Subhash Chandra, in his defense, has consistently maintained that he never personally borrowed money from any lender but merely acted as a personal guarantor for the borrowing entities within the Essel Group. He further disputed the ₹22,006 crore liability figure, stating that it represents historical claims and that the current claims of lenders who specifically objected to the repayment plan amount to ₹3,992 crore, of which ₹620 crore has already been settled. Chandra also mentioned that his personal net worth stood at ₹31.79 crore in 2024, including a residential property valued at approximately ₹25 crore, which formed the basis for the ₹6.5 crore repayment offer. He highlighted that the borrowing entities for which he provided guarantees have already repaid approximately ₹43,000 crore out of total outstanding borrowings of around ₹45,000 crore since January 2019. The NCLT's decision makes the approved repayment plan binding on all creditors, including those who voted against it, under Section 115 of the Insolvency and Bankruptcy Code (IBC). This aspect has raised questions among dissenting lenders about the complexities and efficacy of the personal insolvency framework under the IBC, particularly when the recovery for guarantors is minimal despite substantial corporate liabilities. HDFC Bank's decision to explore an appeal to the National Company Law Appellate Tribunal (NCLAT) indicates a continued challenge to this settlement, reflecting the broader dissatisfaction among some creditors regarding the outcome of the personal insolvency proceedings.

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