Subhash Chandra moves NCLAT, challenges NCLT 5-member bench order against alienation of assets

Subhash Chandra has moved the appellate tribunal, NCLAT, against the order of a five-member bench of the National Company Law Tribunal (NCLT), which restrained him from alienating his assets during the pendency of the matter.

Chandra has challenged an order passed by a five-member NCLT bench, formed to decide his personal insolvency, on September 1, which stayed the order passed by the third tie-breaker judge, who voted for Rs 6.5 crore repayment against total liabilities of around Rs 22,000 crore.

The appeal came up for hearing before a three-member bench, which asked his counsel to serve the copies to creditors and implead them as parties.

The bench, which includes NCLAT officiating Chairperson Justice Yogesh Khanna, has directed that the matter be listed for the next hearing on September 29.

During the proceedings, counsel representing the creditors told the NCLAT that advance copies of the appeal have not been served on them or they have not been made parties despite having participated in the proceedings before the NCLT.

In his petition, Subhash Chandra has questioned the scope of the order passed by the five-member NCLT bench.

The five-member bench “directed issuance of notices and filing of fresh replies in all pending applications, without defining the scope of the further reference, and imposed a restraint upon the Appellant from alienating “any assets whatsoever either directly or indirectly,” the petition said.

Chandra contended that the NCLT order “travels beyond the limited statutory jurisdiction contemplated”.

This also “effectively converts a statutory reference for determination of specified points of difference into a de novo (afresh) rehearing of the entire proceedings,” Chandra contended in his petition.

Section 419(5) of the Companies Act lays down the procedure for resolving a split verdict by referring the points of difference to additional members of the tribunal for a majority decision.

Chandra is questioning the formation of the five-member bench by the NCLT.

Earlier, a two-member NCLT bench delivered a split verdict on Chandra’s personal insolvency resolution process.

While Member (Judicial) Ashok Kumar Bhardwaj approved a Rs 6.5 crore repayment plan submitted by Chandra and held that he was eligible to seek relief under the insolvency framework for personal guarantors, Member (Technical) Reeta Kohli disagreed and rejected the proposal, leading to a reference under Section 419(5) of the Companies Act, 2013.

The matter was subsequently placed before Nilesh Sharma, Member (Judicial), as the third member to decide the points of difference.

Sharma concurred with Bhardwaj on the key issues and upheld Chandra’s repayment plan, under which claims of around Rs 22,006 crore arising from personal guarantees were proposed to be settled for about Rs 6.5 crore.

However, the operation of Sharma’s order was later stayed by a five-member NCLT bench, which also restrained Chandra from alienating his assets pending further proceedings.