By Pratik Datta and Boon Verma
Welcome to The Bridge! India's regulators affect markets, govern disputes, and test the rule of law through their orders, regulations, and policy implementation actions. Yet the quality of this work rarely gets the scrutiny it deserves. The Bridge is TrustBridge's window into India's regulatory state: how it decides, how it regulates, and how it could do both better.
Introduction
India’s media mogul, Subhash Chandra, has been getting a lot of bad press lately. Media outrage stemmed from Chandra securing a National Company Law Tribunal (“NCLT”) order to settle his personal guarantees against loans worth ₹22,006.57 crores for just ₹6.5 crore. News headlines emphasising 99.97% haircuts faced by banks in the process made for particularly bad optics. Lenders who were opposed to the settlement challenged the NCLT order. It turned out that two NCLT members had initially disagreed with each other, and so a third member was brought in to resolve the tie. Then a special five-judge bench of the NCLT was constituted, which stayed the order of the three-member bench. Amidst all this, the Central Bureau of Investigation threw its hat in the ring by registering an FIR against Chandra for inflating his net worth to obtain loans. Even the Enforcement Directorate has reportedly instructed its zonal offices to reexamine cases involving alleged collusive resolutions, large haircuts and promoters re-acquiring assets. And now, the Insolvency and Bankruptcy Board of India has released a Discussion Paper proposing regulatory changes to address the loophole this episode has highlighted.
Dozens of commentaries have by now analysed the controversy threadbare. Some explain why this is not the scandal everyone is making it out to be; others, why the ₹22,006.57 crores of lender money has not simply disappeared in exchange for ₹6.5 crore. Yet others have pointed out that personal guarantees are a peculiar feature of Indian credit markets that has persisted because the Insolvency and Bankruptcy Code, 2016 (“IBC”) has failed to tackle avoidance transactions.
But somehow, in this deluge of news bites and analytical commentaries, the legal question at the heart of it all has received little attention - the very question on which the two NCLT members differed, requiring intervention by a third member in the first place. In this piece, we turn to this legal question and argue that the real story was never about haircuts but about creditors’ eligibility to vote.
The basics
When a bank lends a company money, it usually secures the loan against some collateral that the company offers. More often than not in India, the bank demands more. It requires another company belonging to the same promoter for a corporate guarantee, or the promoter to sign a personal guarantee - a promise to pay from their own pocket if the borrower company defaults. If the borrower company actually ends up in default, the bank can trigger separate IBC proceedings against the borrower company and the personal guarantor.
During its insolvency proceeding, a personal guarantor prepares a repayment plan which its creditors vote upon. If a majority of more than three-fourth in value of the creditors of the personal guarantor approve the plan, it is placed before the NCLT for its approval. Once approved by the NCLT, the plan becomes binding on the personal guarantor and its creditors, in the manner specified in the repayment plan.
The sanctity of this process clearly depends on which creditors get to vote on the personal guarantor’s repayment plan. The law explicitly says that ‘a creditor shall not be entitled to vote in a meeting of the creditors if he is an associate of the debtor’.1 And the word “associate” is defined in the law.2 The entire case hinges around this definition.
The facts
In Chandra’s case, the repayment plan was approved by 80.814% of votes cast. Although all the banks voted against the plan, 61.78% of the votes in favour were from five specific entities including Veena Investments Pvt. Ltd. Although Veena Investments held only 4.99% of the votes, it had various linkages with the other four entities. Therefore, the central question was whether Veena Investments Pvt. Ltd. was an “associate” of Subhash Chandra and so, ineligible to vote in the creditors’ meeting.
It turns out that more than 50% of share capital in Veena Investments Pvt Ltd. was owned by Sushila Devi Goel, who is the wife of Subhashh Chandra’s brother Jawahar Goel. The word “associate” includes a “relative”, which in turn includes a brother’s spouse.3 So evidently, Sushila Devi is an “associate” of Subhash Chandra.
Now the word “associate” also includes “a company, where the debtor or the debtor along with his associates, own more than fifty per cent of the share capital of the company or control the appointment of the board of directors of the company”.4 So the question before the NCLT was whether “Subhash Chandra along with Sushila Devi” owned more than 50% in Veena Investments Pvt. Ltd. or not.
Differing views
The Judicial Member took a purposive interpretation. They observed that while the definition of individual relatives is clear and unambiguous, a different standard must apply to corporate entities. For a company to be deemed an “associate” of an individual debtor, a concrete relationship between the individual debtor and the company must be legally proven. As per the law, such a concrete relationship exists only if the individual debtor possesses an actual ownership stake in the company by holding more than 50% of share capital, either independently or collectively alongside his associates. In the present case, since Subhash Chandra himself did not hold any share in Veena Investments Pvt. Ltd., the Judicial Member concluded that Subhash Chandra along with Sushila Devi did not own more than 50%.5
The Technical Member observed that accepting the Judicial Member’s interpretation would mean that the wife of Chandra’s brother qualifies as an “associate”, yet a company where she is a majority shareholder would not, simply because Chandra himself holds no shares in it. If this interpretation is upheld, a person who is an “associate” in their individual capacity could effectively evade the statutory consequences attached to the “associate” status merely by routing transactions through a corporate entity. To avoid such possibility, they held that the words “debtor along with his associates” must be interpreted in its plain and ordinary sense to mean “the debtor together with, or in addition to, his associates”. Since the combined shareholding of Chandra and Sushila Devi exceeded 50%, the Technical Member concluded that Veena Investments was an associate of Chandra.6
This disagreement ultimately required intervention by a third member. The third member sided with the Judicial Member. They reasoned that the legislature has consciously adopted legal ownership and control, not commercial influence, as the statutory standard to exclude a creditor from voting. If experience shows that a wider exclusion is necessary, it is for the legislature, and not the NCLT, to amend the provision.7 Accordingly, they allowed voting by all the five entities, which in turn enabled the repayment plan to be approved.
Conclusion
Cutting through the clutter around haircuts and inadequate personal guarantees, the Subhash Chandra controversy turns on a narrow question of law as much as policy: should a company controlled by an individual debtor’s relative, but not by the debtor themself, qualify as the debtor’s “associate”, and be excluded from voting on the debtor’s repayment plan? Veena Investments was undisputedly linked to Chandra through his brother’s wife, Sushila Devi, who held a majority stake in it. The entire dispute was whether her shareholding could be attributed to Chandra so as to bring Veena Investments within the “associate” definition, and thereby exclude it from voting on his repayment plan.
Whatever view one takes, the episode is best understood as a dispute over statutory drafting rather than, as much of the commentary suggested, a case of judicial impropriety. The real story is not that ₹22,006.57 crores vanished or that banks took a haircut of 99.97%, but that rule of law requires jurisprudence to evolve slowly with one judgment at a time.
- The authors are researchers at TrustBridge and would like to thank Bhavin Patel and Natasha Aggarwal for their feedback.
CITATION
Pratik Datta and Boon Verma, 2026. “Subhash Chandra and ‘Associates’: Cutting through the clutter”, The Bridge, TrustBridge Rule of Law Foundation
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References
Bhargavi Shah Zaveri. “Subhash Chandra Repayment Case: NCLT Scandal?” ThePrint, September 2026. https://theprint.in/opinion/subhash-chandra-repayment-case-nclt-scandal/3029315/
Bhavini Mishra. “NCLAT to Hear Lenders’ Challenge to Subhash Chandra Repayment Plan Tuesday.” Business Standard, August 2026. https://www.business-standard.com/india-news/nclat-to-hear-lenders-challenge-to-subhash-chandra-repayment-plan-tuesday-126083101175_1.html
Devesh K. Pandey. “ED Widens Scrutiny of Possible Irregularities in IBC Proceedings: Explained.” The Hindu, September 2026. https://www.thehindu.com/news/national/ed-widens-scrutiny-of-possible-irregularities-in-ibc-proceedings-explained/article71475626.ece
Indiabulls Housing Finance Ltd. v. Dr. Subhash Chandra (August 25, 2026)
Insolvency and Bankruptcy Board of India. “Discussion Paper on Strengthening Safeguards in the Insolvency Resolution Process for Personal Guarantors to Corporate Debtors.” Insolvency and Bankruptcy Board of India, September 2026. https://ibbi.gov.in/uploads/public_comments/DiscussionPaper-120926.pdf
Lalatendu Mishra. “Subhash Chandra Gets Relief in Personal Guarantee Case as Leading Banks Face 99% Haircut.” The Hindu, September 2026. https://www.thehindu.com/business/subhash-chandra-gets-relief-in-personal-guarantee-case-as-leading-banks-face-99-haircut/article71396484.ece
M S Sahoo and Raghav Pandey. “What Is a Personal Guarantee Really Worth?” Business Standard, September 2026. https://www.business-standard.com/opinion/columns/what-is-a-personal-guarantee-really-worth-126090701438_1.html
PTI. “CBI FIR against Subhash Chandra for inflating net worth to secure Rs 980 Cr in loans.” Press Trust of India, September 2026. https://www.ptinews.com/detail/business/CBI-FIR-against-Subhash-Chandra-for-inflating-net-worth-to-secure-Rs-980-Cr-in-loans/4037736
Renuka Sane and Harsh Vardhan. “Subhash Chandra Fraud Case: India, Insolvency and Bankruptcy Code.” ThePrint, September 2026. https://theprint.in/opinion/subhash-chandra-fraud-case-india-insolvency-bankruptcy-code/3036472/
Rimjhim Singh. “NCLT Stays Order Approving Subhash Chandra’s ₹6.5 Crore Repayment Plan.” Business Standard, September 2026. https://www.business-standard.com/companies/news/nclt-stays-order-approving-subhash-chandra-s-6-5-crore-repayment-plan-126090100265_1.html
The Insolvency and Bankruptcy (Application to Adjudicating Authority for Insolvency Resolution Process for Personal Guarantors to Corporate Debtors) Rules, 2019
The Insolvency and Bankruptcy Code, 2016
Section 109(4)(b), IBC.
Section 79(2), IBC.
Explanation (ii) to Section 79(2) read with Rule 4 of I&B (Application to AA for IRP for PG to CD) Rules, 2019 read with Explanations (a) and (b) to Section 5(24A).
Section 79(2)(g), IBC.
Indiabulls Housing Finance Ltd. v. Dr. Subhash Chandra (August 25, 2026), p. 25-26.
Ibid at p. 36.
Ibid at p. 111.