Subhash Chandra. File picture.
Contending that the National Company Law Tribunal (NCLT) does not have the power to constitute a five-member bench, Essel Group Chairman Subhash Chandra on Wednesday opposed the NCLT's recent order in his personal insolvency case, according to news agency PTI.
A five-member special bench of insolvency tribunal NCLT on Tuesday had stayed the previous order of the proposed repayment of Rs 6.5 crore to creditors in Subhash Chandra's personal insolvency case and had barred him from selling his assets.
Senior Advocate Sasmit Patra, appearing for Chandra before the National Company Law Appellate Tribunal (NCLAT) termed the NCLT order "faulty and wrong" and said, "they are not empowered" to form a five-member bench.
Patra submitted that the five-member bench had on Tuesday stayed the order of Nilesh Sharma, Member (Judicial), who was brought in as the third member after a division bench of the NCLT delivered a split verdict.
"Under which power" it was stayed and "when did this five-member bench sit together? What proceedings were conducted that led to this five-member bench taking only one order?" Patra argued.
Solicitor General Tushar Mehta, representing creditors such as LIC Housing Finance, Canara Bank and Union Bank of India 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.
He 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, according to PTI.
However, Patra opposed it and said the orders by Ashok Kumar Bhardwaj, Member (Judicial), and Nilesh Sharma were aligned on the repayment plan and eligibility issues.
"Both are equally on the same page as far as Section 79 is concerned on eligibility. Therefore, to say all these issues have to be re-litigated is completely wrong. The scope of 419 (5) (of the Companies Act, 2013) is very limited," Patra said, adding 419 (6) says if there is a differing view, then that differing view has to be taken up by another member or other members.
"It does not give power to the NCLT under the IPC or company law to form a five-member bench. Under which authority, which power, then there is a five-member bench," he argued.
The NCLT on Monday had formed a five-member bench, that stayed the order of Nilesh Sharma on Tuesday after issuing notice to all parties and listed the matter for next hearing on September 23, 2026.
"It is manifest that as per section 419(5) of the Companies Act, there is no clear majority view capable of being given effect to. Therefore, the order dated 25th August, 2026 of the third member, Shri Nilesh Sharma, Member (J) is stayed," the special bench headed by President Justice Anupinder Singh Grewal had said on Tuesday.
This matter is also at NCLAT, where lenders have challenged the Sharma's NCLT order on August 25.
On Wednesday, Mehta informed a three-member NCLAT bench to dispose of the appeal as the five-member NCLT bench had on Tuesday stayed the order of the third member the tie-breaker judge Nilesh Sharma.
However, Patra opposed the Solicitor General's plea to withdraw the appeal and contended that the five-member NCLT bench should have stayed all the three orders passed, including the split verdict of the division bench.
Officiating Chairperson Justice Yogesh Khanna, heading the NCLAT bench, then observed that the constitution of the five-member bench was "not a question before challenge for us."
Mehta suggested that Chandra's side be allowed to challenge that order separately while his own appeal remained pending, saying he had "no difficulty" with that course. However, the NCLAT bench said this could not be permitted.
Patra told NCLAT that Chandra has been vilified across the country over a proposed payment of Rs 6.5 crore against admitted creditor claims of Rs 22,006 crore even though no final order approving the repayment plan currently exists.
Mehta responded by saying, "This forum cannot be used for saying something outside the court... this forum is being used to say something which will be printed tomorrow in the media. This is not the forum."
The NCLAT bench said, "If you have any grievances, the matter is pending before NCLT; you raise grievance right there."
Mehta decided not to press the withdrawal applications and requested that the appeals remain pending. The NCLAT agreed and directed that the petitions be listed for next hearing on October 7.
On August 25, the NCLT Member (Judicial) Nilesh Sharma, ruling as a third member, had approved the plan under which Chandra will pay just Rs 6.5 crore to settle against creditor claims of around Rs 22,006 crore.
Earlier, two members of the NCLT had given a split verdict, following which the President of the forum had appointed Sharma as a third Member in regard to the difference of opinion.
Sharma had rejected the claims of the dissenting creditors including LIC Housing Finance, which had argued that the payout was "unviable and unlawful".
The proposed repayment plan entailed Chandra to settle claims arising from personal guarantees on his group's borrowings for just Rs 6.5 crore, which meant the creditors would take a 99.97 per cent haircut on the quantum of Rs 22,006 crore which was owed.
While 10 banks and lenders had supported the proposal, creditors including HDFC Bank, LIC Housing Finance, Union Bank of India and Canara Bank had opposed it on the grounds that the recovery would be a fraction of the amount.
(With inputs from PTI)
