Subhash Chandra's 99.97% haircut explained: What it means in the Rs 6.5-crore settlement

The National Company Law Tribunal (NCLT) has approved a repayment proposal under which Zee Group founder Subhash Chandra will pay creditors just Rs 6.5 crore. This decision has sparked a heated debate because the repayment amount appears to be a 99.97% haircut on admitted creditor claims of Rs 22,006.57 crore, meaning creditors would recover only about 0.03 per cent of their total claims. The term "haircut" is not defined under the Insolvency and Bankruptcy Code (IBC). The controversy arose because the headline figure compares the admitted claims against the payout, suggesting nearly the entire debt has vanished. However, the NCLT noted that these figures do not represent the entire universe of recoveries. The tribunal rejected objections from lenders, including LIC Housing Finance, which argued that the recovery rate of 0.028 per cent for its admitted claim of Rs 1,322.39 crore was too meagre. The NCLT ruled that the dissenting creditors collectively represented less than 20 per cent of the total voting share, while the plan had been approved by the required 80.81 per cent. The judgment emphasized that the resolution professional's valuation revealed Chandra's personal estate was valued far below the offered amount, and that dissenting creditors were unlikely to recover more by rejecting the plan. Furthermore, the tribunal clarified that under Section 115 of the IBC, an approved repayment structure becomes binding on all creditors, irrespective of whether they voted for or against it.

(Source：Et Now)