Govt sources reject 99.97% haircut claim in Subhash Chandra insolvency case
New Delhi, August 27
Government sources have rejected reports suggesting that banks have taken a 99.97 per cent haircut on more than Rs 22,000 crore of loans in the personal insolvency case involving Essel Group founder Subhash Chandra.
Sources said the Rs 22,006 crore figure does not represent money personally borrowed by Chandra. It represents claims admitted against him as a personal guarantor for loans taken by several Essel/Zee-linked companies.
The distinction is important because the insolvency proceeding is against Chandra in his capacity as a guarantor and not against the companies that originally borrowed the money.
The controversy arose after reports compared claims of more than Rs 22,000 crore with around Rs 6.25 crore proposed to be recovered from Chandra's personal estate, describing it as a haircut of nearly 99.97 per cent.
Government sources said that comparison does not reflect the full picture.
"The reported 99.97% haircut is therefore not a 99.97% loss on Rs 22,000 crore of bank loans," according to the government note. It said the reduction relates specifically to what can be recovered from Chandra as a personal guarantor.
The companies that actually borrowed the money remain liable for their dues. According to the sources, the repayment plan envisages around Rs 1,494 crore of payments by the principal borrowers, apart from Rs 6.25 crore from Chandra personally. Creditors can also continue recovery against securities and other available assets of these companies.
The repayment plan had received 80.81 per cent support from creditors. However, several lenders, including LIC Housing Finance, HDFC Bank, Axis Bank, Canara Bank, RBL Bank and Union Bank, opposed it.
One of the main concerns raised by creditors was the sharp fall in Chandra's disclosed net worth. They pointed to net-worth certificates showing Rs 45,888 crore in 2017 and Rs 40,562 crore in 2018, compared with a presently disclosed net worth of around Rs 31.79 crore, and sought greater scrutiny of his assets.
Government sources also stressed that the case is an exceptional personal-guarantor resolution and should not be seen as representative of recoveries under the Insolvency and Bankruptcy Code.
— ANI
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