Subhash Chandra Challenges NCLT Bench Formation In Insolvency Case

Essel Group Chairman Subhash Chandra has challenged the formation of a five-member bench by the National Company Law Tribunal (NCLT) to decide his personal insolvency case.

Chandra's counsel, Senior Advocate Sasmit Patra, argued before the National Company Law Appellate Tribunal (NCLAT) that the NCLT does not have the power to constitute such a bench. Patra termed the NCLT order as 'faulty and wrong' and questioned the authority under which the five-member bench was formed.

The NCLT had formed the five-member bench on Monday, which stayed the operation of an order by Nilesh Sharma, Member (Judicial), on Tuesday. The order had allowed Chandra to settle claims arising from personal guarantees on group borrowings for about Rs 6.5 crore, against claims of roughly Rs 22,006 crore.

Patra argued that the five-member bench had no power to stay the order and questioned the proceedings that led to the formation of the bench. He also pointed out that the orders by Ashok Kumar Bhardwaj, Member (Judicial), and Nilesh Sharma were aligned on the repayment plan and eligibility issues.

Solicitor General Tushar Mehta, representing dissenting creditors such as LIC Housing Finance, Canara Bank, and Union Bank, submitted that the petition filed against the third member's order may be disposed of with liberty to revive since some respondents could challenge the reference itself. Mehta said the case involved 'very peculiar circumstances' as it had thrown up 'three views' that were 'divergent to each other,' making it fit for a larger bench to examine the issue.

However, Patra opposed the formation of a larger bench, saying that the scope of Section 419(5) of the Companies Act, 2013, is very limited. He argued that the NCLT does not have the power to form a five-member bench under the IPC or company law.

The NCLAT will hear the creditors' challenge against the NCLT repayment plan on September 23, 2026. The case has significant implications for Chandra and the Essel Group, with claims of roughly Rs 22,006 crore at stake.

The formation of the five-member bench has also raised questions about the powers of the NCLT and the procedure for forming larger benches. The NCLAT's decision in this case will provide clarity on these issues and have significant implications for future insolvency cases.

In the meantime, Zee Entertainment shares have crashed 15% as lenders challenge the NCLT approval of Subhash Chandra's repayment plan. The case is being closely watched by investors and creditors, who are eager to see the outcome of the NCLAT's decision.

The NCLAT's decision will also have significant implications for the Indian economy, as it will provide clarity on the procedure for resolving insolvency cases involving large corporations. The case has highlighted the need for clear procedures and guidelines for resolving such cases, and the NCLAT's decision will provide valuable guidance on these issues.

In conclusion, the challenge by Subhash Chandra to the formation of the five-member bench by the NCLT has significant implications for the Essel Group and the Indian economy. The NCLAT's decision will provide clarity on the powers of the NCLT and the procedure for forming larger benches, and will have significant implications for future insolvency cases.