What happens to Rs 22,006 crore of admitted claims when three Members of a Tribunal give three different answers?
On 25 August 2026, a Member of the National Company Law Tribunal approved a Repayment Plan of Rs 6.5 crore proposed by Dr Subhash Chandra, founder of the Essel Group, against admitted claims of Rs 22,006.57 crore. Within seven days, that approval was stayed. Today the plan binds no one. A Special Bench of five Members is now hearing the matter, the Central Bureau of Investigation (CBI) has been asked to respond, the Appellate Tribunal has appeals from both sides, and the Insolvency and Bankruptcy Board of India (IBBI) has proposed rules that answer most of what the dissenting banks argued. This is no longer one promoter’s personal insolvency. It is the first serious test of whether Part III of the Insolvency and Bankruptcy Code, 2016 can protect a lender when the guarantor’s own circle controls the vote.
How Three Opinions Produced No Order
In the petition filed by Indiabulls Housing Finance, Member (Judicial) Ashok Kumar Bhardwaj and Member (Technical) Reena Sinha Puri delivered differing opinions on 3 September 2025. Member Bhardwaj approved the plan but observed that the dissenting financial creditors could pursue their remedies in law for the balance of their debt. Member Puri rejected it for irregularities in the admission of claims and in voting. The difference was referred in February 2026 to Member (Judicial) Nilesh Sharma, whose opinion of 25 August 2026 approved the plan, excluded the claims lodged through Mr Anil Kumar for 960 individuals and Mr Sunil Jain for 300 individuals, and held the plan binding on every creditor, assenting or dissenting, under Section 115.
On 31 August, the original Bench recorded that “no majority view has emerged” and made a fresh reference to the President, who constituted a Special Bench of five Members the same day. On 1 September, that Bench, presided over by Justice Anupinder Singh Grewal, held that under Section 419(5) of the Companies Act, 2013 there was “no clear majority view capable of being given effect to”. It stayed the 25 August order and directed that the guarantor “shall not alienate any assets whatsoever either directly or indirectly”.
Why The “No Majority” Finding Is Right
Two approvals against one rejection look like a majority. I do not think they are one, and the answer lies in Section 115. Once a plan is approved under Section 114, Section 115(1)(b) makes it “binding on creditors mentioned in the repayment plan and the debtor”. The Code knows no plan that is approved yet leaves the creditors named in it free to recover. Binding effect is not an optional consequence. It is the legal substance of the approval itself.
Seen this way, the approvals of Member Bhardwaj and Member Sharma are two different orders, one preserving the dissenting banks’ claims and the other extinguishing them. On the only question that matters to those banks, the three Members gave three different answers. Counting votes on the word “approved” would have concealed that disagreement, not resolved it.
The Jurisdiction Question Now Before The Appellate Tribunal
Dr Chandra has challenged the 1 September order before the Appellate Tribunal, contending that the Special Bench exceeded the limited reference Section 419(5) permits. On 29 September, a Bench headed by Justice Yogesh Khanna issued notice to the creditors, allowed a week each for their reply on maintainability and stay and for his rejoinder, and listed his plea for interim relief on 29 October, leaving the restraint on alienation in force. The Solicitor General, for dissenting lenders including LIC Housing Finance, Canara Bank and Union Bank of India, has asked that their own appeal against the 25 August order be heard alongside.
The objection has real force. Section 419(5) sends the “point or points” of difference to “one or more of the other Members”, to be decided by the majority of Members “who have heard the case, including those who first heard it”. A fresh hearing of the whole case by five Members, none of whom heard it earlier, sits uneasily with that text. But the section is silent where a reference itself yields no majority, and a process of this size cannot be left without an order. Whatever view the Appellate Tribunal takes, I doubt it will leave the estate unprotected meanwhile, since the case for preserving assets does not depend on which Bench hears the merits. The Appellate Tribunal’s decision on 29 September to issue notice without disturbing the restraint fits that reading. The real risk lies at the end. A final order from a Bench whose constitution is later held defective would return every party to 31 August 2026.
The CBI Notice And The Net Worth Question
On 23 September, the Special Bench recorded that it had been informed of a CBI investigation which “may have a bearing on the instant case”, issued notice to its Director with four weeks to respond, continued the 1 September directions “till the final disposal of the case”, and listed the matter on 19 November 2026 for arguments. The FIR, on a complaint by LIC Housing Finance, alleges that net worth certificates were used to secure loans of Rs 980 crore to Essel Group entities, with a claimed loss of over Rs 1,322 crore. An FIR records an allegation, not a finding, and Dr Chandra’s stand throughout has been that he was only a guarantor and not a borrower.
Section 114 is not a fraud inquiry, and an approval hearing cannot wait indefinitely on a criminal investigation. But the CBI has entered this proceeding for a reason. Nothing in Part III expressly obliged anyone to reconcile a net worth certified at about USD 7.17 billion to RBL Bank in 2017, and Rs 40,562 crore to Canara Bank in 2018, with the Rs 31.79 crore on which the plan proceeds. Had that reconciliation been a condition of the vote, the Tribunal would not now need to seek it from an investigating agency.
The Regulator Has Now Acknowledged The Gap
On 9 September, the IBBI issued a circular asking insolvency professionals to stay alert to signs of misuse of the insolvency process. On 12 September, it released a discussion paper on the personal guarantor process, open for comments until 3 October 2026. It proposes a “Nil” voting share for any related party of the guarantor under Section 5(24A), a registered valuation of the guarantor’s assets, an examination of avoidance transactions under Sections 164, 164A, 165 and 167 before the vote, and a recorded commercial rationale wherever creditors accept far less than their admitted claims.
The first proposal goes to the heart of this case. Section 109(4)(b) disqualifies only an “associate”, and Section 79(2)(g) treats a company as one only where the debtor, alone or with his associates, owns more than 50 per cent of its share capital or controls the appointment of its board. Section 5(24A) is far wider, reaching relatives of the individual and of his spouse, and any body corporate whose board ordinarily acts on his directions. The five contested entities together cast about 62 per cent of the vote. Had those votes carried no weight, the plan would have fallen well short of three fourths.
I support the policy but question the route. Parliament drew the voting bar at “associate” in Section 109(4)(b). Even though Section 109(2) leaves the manner of fixing voting share to the Board, a regulation that silences a wider class invites the argument that subordinate legislation is doing what the statute chose not to do. The durable solution is to amend Section 109(4)(b) itself to adopt the Section 5(24A) standard. Either way, a rule framed in 2026 is unlikely to govern a vote that has already been taken.
What Lenders Should Take From This
Three lessons follow for lenders. First, an objection to the voting bloc must be raised in writing at the meeting of creditors and pressed before the Adjudicating Authority, because that record kept this case alive after 80.814 per cent of the vote went the other way. Second, an interim restraint on the guarantor’s assets should be sought early, as the 1 September order shows the Tribunal will grant one. Third, a personal guarantee must be assessed against the guarantor’s full creditor base, including entities within his own group, because that base decides the vote on his release.
Conclusion
The 25 August order looked like the end of this case. It was the point at which the case began to test the Code itself. Whatever the pending hearings produce, one lesson is settled. A personal guarantee is only as strong as the rules that decide who may vote on its release. Those rules should be rewritten by Parliament, and not left to be patched by regulation or rescued by a larger Bench.
The views expressed are personal. This article is my independent legal analysis of the orders passed in this case and of facts reported in relation to them, undertaken for professional and academic understanding of Indian insolvency law. It is not intended as, and should not be relied upon as, legal advice. It does not make any allegation against, or express any opinion on behalf of, the National Company Law Tribunal, the National Company Law Appellate Tribunal, Dr Subhash Chandra, or any of the creditor institutions named in this article.
*Anand Kumar Maurya is the Founder and Principal Advocate of Maurya & Co., practising in the areas of Arbitration and Commercial Dispute Resolution, Banking and Finance, Insolvency, and Project and Infrastructure Law.