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Subhash Chandra debt case explained: How Rs 22,006 crore of claims led to a Rs 6.25-crore repayment plan

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Subhash Chandra debt case explained: How Rs 22,006 crore of claims led to a Rs 6.25-crore repayment plan

Subhash Chandra debt case explained: How Rs 22,006 crore of claims led to a Rs 6.25-crore repayment plan

The plan implies a recovery of about 0.03% of the admitted claims and a haircut of nearly 99.97%. However, the figure does not mean that Chandra personally borrowed Rs 22,006 crore or that the entire underlying corporate debt has been extinguished.

The National Company Law Tribunal (NCLT) has approved a repayment plan under which Essel Group founder Subhash Chandra will pay Rs 6.25 crore to creditors against admitted claims of Rs 22,006.57 crore in his personal insolvency proceedings, with another Rs 25 lakh earmarked towards the insolvency process. The plan implies a recovery of about 0.03% of the admitted claims and a haircut of nearly 99.97%. However, the figure does not mean that Chandra personally borrowed Rs 22,006 crore or that the entire underlying corporate debt has been extinguished. The proceedings relate to his obligations as a personal guarantor for loans raised by corporate borrowers. Advt

What is the Rs 22,006-crore claim? The central distinction in the case is between corporate borrowing and personal guarantee liability. Chandra stood as a personal guarantor for borrowings by Essel Group-linked companies. When the principal borrowers defaulted, creditors were able to pursue the guarantees given by him. Under the Insolvency and Bankruptcy Code (IBC), a personal guarantor to a corporate debtor can be subjected to a separate insolvency process. The IBC defines a personal guarantor as an individual who is the surety in a contract of guarantee to a corporate debtor.


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