Dissenting banks say unresolved pleas for a forensic audit and asset trailing to be conducted on Subhash Chandra’s financials to probe how his networth fell from more than ₹40,562 crore when he issued the guarantees to ₹32 crore in 2025, the crowding out of lenders by related party entities in the committee of creditors (CoC), and the role of resolution professional (RP) Shiv Nandan Sharma in admitting questionable entities as creditors highlights the difficulties in recovery in high-profile cases.
“Banks were facing an uphill battle in this case since it was admitted in April 2024. Chandra’s net worth was shown sharply lower, new creditors with dubious credentials were added, and pleas for a proper audit and asset trail were rejected. Banks will have to challenge this till even the Supreme Court because otherwise this will become a model and trend setter for future cases,” said a banker closely involved in the case.
‘Related Parties’
Most of the creditors who voted for the ₹6.5 crore settlement for dues of ₹22,006 crore are linked to Subhash Chandra, bankers said.
, which had a 5% vote, is controlled by Chandra’s sister-in-law . Veena subsidiaries World Crest Advisors (28.49%), Direct Media Distribution Ventures (1.15%) and also other creditors Lemonade Capital Advisors (16.85%) and Corpcal Capital Advisors (10.30%) all have directors who were recorded as key management persons in the Essel Group at some point in time.
Together, these related party creditors cornered close to 75% of the vote, much more than the 66% required. Banks and other financial creditors had only 19% of the vote.
Financial creditors, including , , , and IDBI Trusteeship on behalf of Franklin Templeton had, in different interlocutory applications (IAs), objected to the inclusion related parties as creditors, questioning the fairness and viability of the repayment plan and raising questions on the resolution professional’s conduct.
However, judicial member Nilesh Sharma disposed of these IAs without much scrutiny, bankers said.
‘Legislative Onus’
For instance, while deciding on the related party entities, the court took a very lenient view, they said, relying on Section 79 (2) (g) of the insolvency code. This provision says that a debtor has to own more than 50% of the share capital in a company to exercise legal control over their boards. Justice Sharma put the onus on the legislature for changing the law while acknowledging that the entities were in fact related to Chandra.
“No material has been produced showing that the personal guarantor (PG), either individually or together with his associates, as statutorily defined, owned more than 50% of the share capital of the concerned entities or exercised legal control over their boards or governing bodies,” Justice Sharma said in his order. “However, there is no doubt about the fact that the said entities are controlled directly or indirectly by the individuals related to the PG. The legislature has adopted legal ownership and control, not commercial influence, as the statutory standard. If experience shows that a wider exclusion is necessary, it is for the legislature, and not the tribunal, to amend the provision.”
Resolution Professional
The court found no fault with the RP on the participation of related parties. Failure of RP Shiv Nandan Sharma to appoint an independent forensic auditor or asset-tracing agency to investigate the assets and financial affairs of debtor Chandra and determine his actual net worth was also glossed over, bankers pointed out, referencing the order.
“The code does not confer upon the RP… a general investigative power comparable to the specific power conferred upon the Bankruptcy Trustee under Section 149… The RP cannot, therefore, be faulted merely for not investigating every past transaction or asset of the PG. The allegation on this count is accordingly not established as a breach of his statutory duty.”
Bankers said repeated pleas and complaints against the conduct of the RP were not entertained.
“The conduct of the RP was always doubtful in this case. Despite such serious allegations, the case was expedited and brought to a close. This case had all the ingredients of how a case can be compromised,” said a second banker aware of the case.
The RP did not respond to ET’s queries in the matter.
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