How far can the NCLT go? Decoding the Subhash Chandra judgment
CS Rachit Sharma
Parth Chourikar
Sr. Manager, Research and Advisory, Taxmann
Associate - Research and Advisory, Taxmann
How far can the NCLT go? Decoding the Subhash Chandra judgment
CS Rachit Sharma
Parth Chourikar
Sr. Manager, Research and Advisory, Taxmann
Associate - Research and Advisory, Taxmann
Contents 1.
Introduction
5
2.
Initiation of Insolvency Proceedings Against the Personal Guarantor
5
3.
The Repayment Plan Proposed by the Personal Guarantor
6
4.
The Grounds on Which the Repayment Plan Was Opposed
6
5.
The Eligibility of Creditors to Participate in Voting
7
6.
The Applicability of the “Associate” Concept Under Part III of the IBC
7
7.
The “Associate” Issue: What Did the Third Member Decide?
8
8.
The Scope of the Adjudicating Authority’s Powers Under Section 114
8
The Competing Positions on Judicial Intervention
9
10. The Alleged Suppression and Non-Disclosure of Assets
9
11. The RP’s Obligation to Conduct Forensic and Asset Investigation
10
12. The Most Important Takeaways
10
13. The Larger Question on Judicial Scrutiny and Creditor Commercial Wisdom
11
9.
1. Introduction What happens when 80.814% of creditors approve a repayment plan, but the process behind that approval is itself challenged? That is the central question in Indiabulls Housing Finance Limited v. Dr. Subhash Chandra [2026] 189 taxmann.com 989 (NCLT - New Delhi), arising from insolvency proceedings against Dr. Subhash Chandra as a Personal Guarantor under Part III of the IBC. The proposed plan offered approximately Rs. 6.50 crore to creditors against substantially larger claims. While the requisite majority approved it, creditors questioned the voting process, disputed the admission of certain claims, raised concerns over asset investigation, and alleged wider IBC non-compliance. The case ultimately tests the boundary between creditors’ commercial wisdom and the Tribunal’s judicial scrutiny. The Third Member held that the NCLT is neither a rubber stamp nor a forum to re-evaluate the creditors’ commercial decision. It may intervene where a material statutory defect affects the process, but not every irregularity warrants rejection of the entire plan. Now, the matter has since seen a significant procedural development. In an order dated 31 August 2026, the Division Bench noted that the Members had taken different views on the repayment plan, including on the rights of dissenting creditors and the scope of the Adjudicating Authority’s jurisdiction. Since no majority view emerged, the Bench made a fresh reference to the Hon’ble President of the NCLT under Section 419(5) of the IBC.
2. Initiation of Insolvency Proceedings Against the Personal Guarantor The proceedings originated in 2022 when Indiabulls Housing Finance Limited filed an application under Section 95 of the IBC for initiation of insolvency resolution proceedings against Dr. Subhash Chandra as a Personal Guarantor. The proceedings were initially delayed pursuant to an interim order of the Supreme Court, which was subsequently vacated on 22 April 2024. The Section 95 application was thereafter admitted, and Mr. Shiv Nandan Sharma was appointed as the Resolution Professional. The RP subsequently conducted the Personal Insolvency Resolution Process and placed the Personal Guarantor’s repayment plan before the creditors. The controversy before the Tribunal primarily arose at this stage, concerning the manner in which the process was conducted and whether the repayment plan could be approved under Section 114 of the IBC.
How far can the NCLT go? Decoding the Subhash Chandra judgment
5
3. The Repayment Plan Proposed by the Personal Guarantor The basic proposition put forward by Dr. Subhash Chandra was that his available estate was insufficient to satisfy the liabilities of the creditors through bankruptcy. According to the repayment plan, the Personal Guarantor had very limited assets capable of being realised for repayment. The plan proposed an amount of approximately Rs. 6.50 crore towards repayment to creditors, including approximately Rs. 25 lakh towards process costs. The rationale advanced was straightforward. If the repayment plan was accepted, the creditors would receive the amount available from the Personal Guarantor’s resources without undergoing a potentially expensive and uncertain bankruptcy process. The Personal Guarantor also represented that he would personally endeavour to resolve outstanding dues from the principal borrowers at the earliest. The plan was therefore presented as an alternative to bankruptcy. The RP’s report recorded the Personal Guarantor’s position that his estate in bankruptcy might not even be sufficient to meet the expenses of the bankruptcy process and that the repayment plan therefore offered a better outcome for stakeholders. This became one of the central commercial arguments supporting the plan.
4. The Grounds on Which the Repayment Plan Was Opposed The objections were not confined to the quantum of repayment offered under the plan. The objecting creditors also challenged the validity of the underlying liabilities and the process through which the repayment plan had reached the voting stage. Dr. Subhash Chandra disputed the enforceability of certain personal guarantees, relying, inter alia, on undertakings dated 19 and 29 November 2018, subsequent payments and release of securities. He also alleged that the guarantees had been obtained through misrepresentation, coercion, undue influence and fraud, with certain disputes being subject to arbitration proceedings. One such contention concerned a payment of Rs. 225 crore in June 2020, against which two securities were released, allegedly pursuant to an understanding that the payment would discharge the Personal Guarantee. These were essentially disputes concerning the underlying liabilities. The larger issue before the NCLT was whether such disputes could be examined at the stage of approval of the repayment plan and, if so, whether they were sufficient to prevent its approval under the IBC.
6
How far can the NCLT go? Decoding the Subhash Chandra judgment
5. The Eligibility of Creditors to Participate in Voting One of the most important controversies concerned certain creditors alleged to be associated with the Personal Guarantor. The objecting creditors alleged that entities such as: a.
Veena Investments Pvt. Ltd.
b.
Direct Media Distribution Ventures Pvt. Ltd.
c.
World Crest Advisors LLP
d.
Lemonade Capital Advisors LLP
e.
Corpcall Capital Advisors LLP
were connected with Dr. Subhash Chandra and should not have been permitted to influence the voting process. The objection was particularly significant because the creditors alleged that entities connected with the Personal Guarantor accounted for approximately 61.78% of the voting share. The argument was therefore not merely technical. If those creditors were ineligible to vote, the very foundation of the reported 80.814% approval could potentially be affected. The objecting creditors therefore argued that the voting process itself was compromised.
6. The Applicability of the “Associate” Concept Under Part III of the IBC A key controversy concerned whether persons connected with the Personal Guarantor could participate in the insolvency decision-making process. The objecting creditors argued that entities having a close connection with the debtor should not be allowed to influence the voting process. The Personal Guarantor and RP, however, contended that proceedings against a Personal Guarantor are governed by Part III of the IBC, which contains its own statutory concept of an “associate” under Section 79(2). According to them, the broader concept of “related party” applicable to corporate insolvency could not simply be imported into personal insolvency proceedings. The dispute therefore turned on whether the concerned entities actually fell within the statutory definition of “associate”, particularly under Section 79(2)(g), and whether control or influence could be considered beyond the prescribed shareholding requirement. This issue assumed greater significance because the repayment plan was approved by approximately 80.814% in value of the creditors. The Personal Guarantor argued that the statutory voting threshold had been crossed and, with the RP having submitted his report, Section 114 left little scope for the Tribunal to reject the creditors’ decision. The objecting
How far can the NCLT go? Decoding the Subhash Chandra judgment
7
creditors took the opposite position: a majority cannot cure a legally defective process. The Tribunal therefore had to consider not merely whether the requisite majority had approved the plan, but whether that approval was itself the product of a legally valid and compliant process.
7. The “Associate” Issue: What Did the Third Member Decide? The Third Member rejected the objecting creditors’ broader interpretation of the “associate” concept and held that the disputed entities had not been established as associates under Section 79(2)(g). Their votes, therefore, could not be excluded merely on the basis of an alleged association with the Personal Guarantor. This was significant because these creditors represented a substantial voting interest, and their exclusion could have materially affected the 80.814% approval of the repayment plan. The subsequent order also records that the Member (Judicial) and the Third Member were aligned in their interpretation of Section 79(2)(g). Both proceeded on the basis that although certain creditors could be regarded as interested parties, their voting rights could not be excluded unless they were brought within the statutory definition of “associates”. The divergence between the Members arose not from this interpretation, but from the consequences flowing from it and the manner in which the repayment plan was to operate against the creditors.
8. The Scope of the Adjudicating Authority’s Powers Under Section 114 This is arguably the most important legal issue in the entire judgment. There were two competing approaches.
Approach 1: Limited judicial intervention The Personal Guarantor and supporting parties argued that Section 114 is materially different from the corporate resolution-plan mechanism under Section 30. Under Section 114, the Tribunal is required to act on the basis of the report of the creditors’ meeting submitted by the RP under Section 112. Therefore, once the statutory voting requirement is satisfied, and the RP reports compliance, the Tribunal should ordinarily approve the plan. This was described as the statutory predominance of the creditors’ decision and the RP’s report. The Personal Guarantor argued that the Tribunal could not conduct a de novo examination merely because some creditors disagreed with the plan.
8
How far can the NCLT go? Decoding the Subhash Chandra judgment
Approach 2: Independent judicial scrutiny The opposing creditors argued that treating creditor approval as conclusive would reduce the Adjudicating Authority to a “rubber stamp”. Relying particularly on Section 114(3), they contended that the Tribunal must independently apply its judicial mind to the repayment plan and the process followed, including statutory compliance. The LICHFL specifically argued that merely securing the requisite voting majority could not automatically result in approval, as the Tribunal was required to examine whether the plan complied with the IBC and, where necessary, direct its reconsideration.
9. The Competing Positions on Judicial Intervention The Members ultimately adopted different approaches on the extent of judicial intervention under Section 114 and the consequences of approval of the repayment plan. The Member (Judicial) took the view that the repayment plan could be confined to the creditors who had voted in its favour, while dissenting banks and financial institutions could be left at liberty to pursue recovery of their debts outside the plan. The Technical Member, on the other hand, rejected the repayment plan. The Third Member disagreed with both these approaches and independently approved the repayment plan, applying Section 115(1) to all creditors. The difference was therefore not merely about whether the repayment plan should be approved. It extended to the extent of the Tribunal’s jurisdiction and, more importantly, the legal consequences of the plan for creditors who had voted against it. The Third Member’s view, although independently reasoned, did not constitute a majority view. Subsequently, by order dated 31 August 2026, the Division Bench noted that the Members had taken different views on the repayment plan and its effect on dissenting creditors. While the Member (Judicial) confined the plan to assenting creditors and preserved the rights of dissenting creditors to pursue recovery, the Third Member approved the plan as applicable to all creditors. The Technical Member had rejected the plan. The Bench accordingly held that no majority view had emerged and made a fresh reference to the Hon’ble President under Section 419(5) of the IBC.
10. The Alleged Suppression and NonDisclosure of Assets The objecting creditors questioned the significant gap between the Personal Guarantor’s disclosed assets and earlier indications of a substantially higher net worth. The Technical Member also emphasised the need for independent forensic investigation and asset tracing.
How far can the NCLT go? Decoding the Subhash Chandra judgment
9
This concern was heightened when Canara Bank sought to place subsequent events on record, referring to reports of the June 2026 sale of a Lutyens’ Delhi property for approximately Rs. 1,260 crore, compared with the Statement of Affairs dated 16 September 2024 showing total assets of only Rs. 31.77 crore. While the objecting creditors argued that this discrepancy indicated possible suppression or inadequate investigation of assets, the Third Member ultimately found insufficient material to establish concealment or suppression warranting rejection of the repayment plan.
11. The RP’s Obligation to Conduct Forensic and Asset Investigation The creditors argued that the RP should have appointed an independent forensic auditor and asset-tracing agency in view of the alleged discrepancy in the Personal Guarantor’s net-worth figures. The Third Member, however, held that there was no automatic obligation to undertake such an investigation merely on the basis of suspicion. The creditors were required to show that the repayment plan was based on unsupported assumptions or that any non-disclosure was material. In the absence of sufficient material warranting further investigation, the RP could not be faulted for failing to independently investigate assets merely because creditors suspected that additional assets might exist.
12. The Most Important Takeaways The judgment lays down a balanced framework on the extent of judicial scrutiny over a repayment plan under the IBC. Its key takeaways are: 1.
Creditor majority is important, but not conclusive: An 80.814% approval does not by itself validate the repayment plan. The process leading to that approval must also comply with the IBC.
2.
Materiality of the defect matters: Not every procedural irregularity warrants rejection. The defect must be material enough to affect the legality, voting or implementation of the plan. Here, the appropriate response was correction of the creditor list rather than rejection of the entire plan.
3.
Commercial wisdom remains with creditors: The Tribunal should not substitute its own commercial assessment for that of the creditors or reconsider the plan merely because some creditors disagree with it.
4.
Tribunal retains judicial oversight: Section 114 does not make the Tribunal a rubber stamp. Where material statutory violations are established, it can intervene and direct reconsideration of the repayment plan.
10
How far can the NCLT go? Decoding the Subhash Chandra judgment
5.
“Associate” must be proved under Section 79(2): A mere connection with the Personal Guarantor is insufficient. The entity must actually satisfy the statutory definition of an “associate” under Part III of the IBC.
6.
Corrective approach is preferable where possible: If the defect is severable and does not undermine the entire process, the Tribunal can correct the affected portion, such as excluding ineligible claims and redistributing the repayment amount, instead of rejecting the entire plan.
7.
Approved plan binds dissenting creditors: Once approved in accordance with the IBC, the repayment plan binds both assenting and dissenting creditors under Section 115.
8.
No majority position has emerged: The latest order dated 31 August 2026 records that no majority view emerged among the Members. The matter has consequently been referred afresh to the Hon’ble President under Section 419(5) of the IBC. The views expressed by the individual Members, therefore, should not presently be treated as a final majority determination.
13. The Larger Question on Judicial Scrutiny and Creditor Commercial Wisdom There is, however, a larger question that the case leaves us thinking about. How should one view a repayment plan where the proposed recovery is extraordinarily small in comparison with the claims admitted in the process, yet the plan nevertheless receives the requisite majority? In this case, the voting outcome becomes particularly interesting because voting is linked to the value of admitted claims, meaning that the creditors supporting the plan represented substantial voting interests. At the same time, creditors opposing the plan raised concerns about the underlying process, including the adequacy of asset investigation and the participation of alleged associates. This brings us to a broader question about the role of insolvency law. Should the Tribunal confine itself to asking whether the statutory requirements have technically been satisfied, or should the circumstances of the case justify a deeper inquiry where the commercial outcome appears extraordinary? The answer cannot simply be that the majority has spoken, nor can it be that the Tribunal should substitute its own view for that of the creditors. The real challenge is to determine how far the law should go in testing the process behind the majority decision, particularly where questions remain about the completeness of asset disclosure and the investigation undertaken by the RP. That balance between statutory compliance, creditor autonomy and meaningful judicial scrutiny is perhaps the most important question emerging from this judgment.
How far can the NCLT go? Decoding the Subhash Chandra judgment
11
About Us
Our Journey Founded
1972
Evolution
From a small family business to a leading technology-oriented Publishing/Product company
Expansion
Launch of Taxmann Advisory for personalized consulting solutions
Our Vision
Aim
Growth
Future
Achieve perfection, skill, and accuracy in all endeavour
Evolution into a company with strong independent divisions: Research & Editorial, Production, Sales & Marketing, and Technology
Continuously providing practical solutions through Taxmann Advisory
Our Strength Core Editorial and Research Division
Team Over 200 motivated legal professionals (Lawyers, Chartered Accountants, Company Secretaries)
Expertise Monitoring and processing developments in judicial, administrative, and legislative fields with unparalleled skill and accuracy
Impact Helping businesses navigate complex tax and regulatory requirements with ease
Taxmann Today Legacy
Innovation
Commitment
Over 60 years of domain knowledge and trust
Technology-driven solutions for modern challenges
Ensuring perfection, skill, and accuracy in every solution provided
Our Core Domain Areas Income Tax Corporate Tax Advisory Trusts & NGO Consultancy TDS Advisory Global Mobility Services Personal Taxation Training Due Diligence
Goods & Services Tax Transaction Advisory Business Restructuring Classification & Rate Advisory Due Diligence Training Trade Facilitation Measures
Foreign Exchange Management Laws
UAE Corporate Tax
Due Dilligence Advisory Services Assistance in compounding of offences Transactions Services Investment outside India
Corporate Tax Advisory Corporate Structuring VAT Advisory Residential Status
Your Partners for Frictionless Advice Tax Advisory High-quality advice for all your Income-tax, GST, FEMA, and UAE Corporate Tax queries From a distinguished panel of experts
Tax Research Support Get real-time research support
Tax Restructuring and Implementation Support
By a team of trained researchers
Structure your business and processes in a tax-efficient way
To upscale the quality of your advice
Implement the SOPs for tax compliances
And save your manpower cost
Automate your ERPs to handle tax compliances
A Glimpse of the People Behind Taxmann
Naveen Wadhwa
Vinod K. Singhania
V.S. Datey
Research and Advisory [Corporate and Personal Tax]
Expert on Panel | Research and Advisory (Direct Tax)
Expert on Panel | Research and Advisory [Indirect Tax]
Chartered Accountant (All India 24th Rank)
Over 35 years of experience in tax laws
Holds 30+ years of experience
14+ years of experience in Income tax and International Tax
PhD in Corporate Economics and Legislation
Engaged in consulting and training professionals on Indirect Taxation
Expertise across real estate, technology, publication, education, hospitality, and manufacturing sectors
Author and resource person in 800+ seminars
A regular speaker at various industry forums, associations and industry workshops Author of various books on Indirect Taxation used by professionals and Department officials
Contributor to renowned media outlets on tax issues
S.S. Gupta
Expert on Panel | Research and Advisory [Indirect Tax] Chartered Accountant and Cost & Works Accountant 34+ Years of Experience in Indirect Taxation Bestowed with numerous prestigious scholarships and prizes Author of the book GST – How to Meet Your Obligations', which is widely referred to by Trade and Industry
Manoj Fogla
Nirav Shah
Expert on Panel | Research and Advisory [Charitable Trusts and NGOs]
Expert on Panel | Research and Advisory [UAE Corporate Tax]
Over three decades of practising experience on tax, legal and regulatory aspects of NPOs and Charitable Institutions
25+ years of experience and practicing in the UAE
Law practitioner, a fellow member of the Institute of Chartered Accountants of India and also holds a Master's degree in Philosophy
Has previously worked with the KPMG
PhD from Utkal University, Doctoral Research on Social Accountability Standards for NPOs Author of several best-selling books for professionals, including the recent one titled 'Trust and NGO's Ready Reckoner' by Taxmann Drafted publications for The Institute of Chartered Accountants of India, New Delhi, such as FAQs on GST for NPOs & FAQs on FCRA for NPOs. Has been a faculty and resource person at various national and international forums
Chartered Accountant (All India 36th Rank)
Contact Us Taxmann Delhi 59/32, New Rohtak Road New Delhi – 110005 | India Phone | 011 45562222 Email | sales@taxmann.com Taxmann Mumbai 35, Bodke Building, Ground Floor, M.G. Road, Mulund (West), Opp. Mulund Railway Station Mumbai – 400080 | Maharashtra | India Phone | +91 93222 47686 Email | sales.mumbai@taxmann.com Taxmann Pune Office No. 14, First Floor, Prestige Point, 283 Shukrwar Peth, Bajirao Road, Opp. Chinchechi Talim, Pune – 411002 | Maharashtra | India Phone | +91 98224 11811 Email | sales.pune@taxmann.com Taxmann Ahmedabad 7, Abhinav Arcade, Ground Floor, Pritam Nagar Paldi Ahmedabad – 380007 | Gujarat | India Phone: +91 99099 84900 Email: sales.ahmedabad@taxmann.com Taxmann Hyderabad 4-1-369 Indralok Commercial Complex Shop No. 15/1 – Ground Floor, Reddy Hostel Lane Abids Hyderabad – 500001 | Telangana | India Phone | +91 93910 41461 Email | sales.hyderabad@taxmann.com Taxmann Chennai No. 26, 2, Rajan St, Rama Kamath Puram, T. Nagar Chennai – 600017 | Tamil Nadu | India Phone | +91 89390 09948 Email | sales.chennai@taxmann.com
www.taxmann.com
Taxmann Bengaluru 12/1, Nirmal Nivas, Ground Floor, 4th Cross, Gandhi Nagar Bengaluru – 560009 | Karnataka | India Phone | +91 99869 50066 Email | sales.bengaluru@taxmann.com Taxmann Kolkata Nigam Centre, 155-Lenin Sarani, Wellington, 2nd Floor, Room No. 213 Kolkata – 700013 | West Bengal | India Phone | +91 98300 71313 Email | sales.kolkata@taxmann.com Taxmann Lucknow House No. LIG – 4/40, Sector – H, Jankipuram Lucknow – 226021 | Uttar Pradesh | India Phone | +91 97924 23987 Email | sales.lucknow@taxmann.com Taxmann Bhubaneswar Plot No. 591, Nayapalli, Near Damayanti Apartments Bhubaneswar – 751012 | Odisha | India Phone | +91 99370 71353 Email | sales.bhubaneswar@taxmann.com Taxmann Guwahati House No. 2, Samnaay Path, Sawauchi Dakshin Gaon Road Guwahati – 781040 | Assam | India Phone | +91 70866 24504 Email | sales.guwahati@taxmann.com