THE SUBHASH CHANDRA INSOLVENCY CASE has brought in a new financial buzzword—Haircut—as media, social media content creators, finance and economic experts build on the concept to explain a very vital aspect of the insolvency and bankruptcy-related rules in India.
However, there has been a lot of confusion and speculation regarding the numbers, after Chandra reportedly took to social media and sought to declare the fallacies in the existing figures. Responding to the rising dissent and anger against the insolvency case’s ‘haircut’ figures, Chandra stated that he, ‘has not borrowed any money from any lender’ and tried to make a case for himself in the public sphere.
“Total claim against Subhash Chandra as a personal guarantor, in the personal insolvency proceedings, is only Rs 3,992 crore by the objectors of the plan and not Rs 22,000 crore,” Chandra Said on August 27, 2026, according to news agency PTI.
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Whatever be the claims on either end, an NCLT Special Bench, headed by President Justice Anupinder Singh has been constituted to look into the case afresh, which has put a stay on the existing order issued on August 25, 2026.
Given this state of affairs, it is essential to understand what the terms like ‘Haircut’ and other insolvency-related phrases imply, in order to get the full picture of the case..
Insolvency cases in India are governed or regulated by the Insolvency and Bankruptcy code (IBC). In these cases, tribunals, arrangements and decision-making benches are constituted in order to mitigate a particular situation of insolvency. To put it simply, a dedicated engagement mechanism between creditors/lenders and borrowers is instituted to settle the terms, in case of alleged or proven defaults in payment.
The IBC was brought into effect in 2016 by the then Finance Minister Arun Jaitley under the PM Modi-led government. This code forges a time-bound mechanism to deal with companies that fail to repay their loans. The mechanisms involve reviving the firms through a resolution process or by liquidating the given firm in case resolution does not work.
The procedure under the IBC takes shape when a company/borrower fails to clear its debt. In this case, the creditor approaches the National Company Law Tribunal (NCLT) to initiate the ‘insolvency proceedings.’ In simple terms, Insolvency refers to the state of being unable to pay one’s debt.
At first, a ‘demand notice’ under section 8 of the IBC is filed. Once the proceedings are initiated, a minimum of two valuers are appointed by the NCLT to assign a fair value and a liquidation value to the company (defaulter) in light of its financial records and physical examination of its assets.
A ‘fair value’ is assigned based on the total estimated value of assets under the company/defaulter at present. On the other hand, liquidation value is the amount that the creditor(s) would get if the assets of the company are sold. Additionally, the ‘enterprise value’ is also calculated, which is the estimated worth of the firm/company if it continues to operate.
Once these values are calculated, the process moves ahead to invite the ‘potential buyers’ to submit their resolution plans against the fair value and liquidation value. When a certain potential buyer submits their resolution, there is a process of taking the approval of the majority of the creditors/lenders and then by the NCLT.
When a buyer’s resolution is approved, the debt-ridden company is transferred to them, who then pays back the creditors. In case a resolution is not accepted, the company moves toward liquidation.
In the Subhash Chandra case, the initial appeal was done by Indiabulls Housing Finance—a Non-Nanking Financial Company-Investment and Credit Company (NBFC-ICC). They got back at Subhash Chandra on account of him being the ‘personal guarantor’ against the loan taken by Vivek Infracon Pvt Ltd. In January-February 2022, a demand notice was served by Indiabulls, and they filed an application under Section 95 of the Insolvency code before the NCLT in order to initiate proceedings against him. Section 95 of the Insolvency code allows a financial institution or a creditor to initiate an insolvency resolution process against the personal guarantor.
Since then, other creditors also joined the wagon, who had lent money to other companies associated with the Essel Group—conglomerate of companies of which Subhash Chandra is the founder—with Chandra being the ‘Personal Guarantor.’ The proceedings continued for a long period, which reached a conclusion on August 25, 2026. Although the NCLT has constituted a renewed hearing on the case, the initial decision approved the repayment plan of Rs 6.25 crore against the admitted claims of Rs 22,000 crore reportedly. This plan holds that the creditors/ lenders would recover only 0.03% of the admitted claims, implying a ‘haircut’ of approximately 99.97%.
This figure has been challenged by Subhash Chandra publicly citing the actual figure to be Rs 3,922 Crore in place of Rs 22,000 crore. But the term ‘haircut’ has already grasped the imaginations of the Indian public, academicians, political commentators, and netizens across social media platforms.
The buzzword of the hour—haircut—is not defined under the IBC. However, if we go by the parlance of banking and finance, ‘haircut’ refers to the reduction in the value of an asset that was used as collateral to protect a lender from potential losses. Put it simply, it is the portion of the admitted claim or amount lent that the creditor does not recover in the resolution process.
Often, ‘haircuts’ are conflated with the discount a borrower receives on its loans. This is not appropriate, as ‘haircut’ is generally used from a creditors perspective. It denotes the reduction in what a creditor can recover.
If a particular institution or company has an admitted claim of Rs 10 crore from the debtor, and receives Rs 6 crore at the end of the insolvency resolution process, then there is a haircut of Rs 4 crore or 40% respectively.
From a moral perspective, this might appear difficult to swallow. But the reality lies in what Bhargavi Zaveri Shah—an Entrepreneur, and columnist on financial regulation, bankruptcy and regulatory governance—states in her latest opinion piece in The Print. She stated that any insolvency situation is bound to have a haircut. “An insolvency situation—particularly one involving debts of infrastructure companies that have been in distress for years—is inevitably going to involve a haircut.
This is not an accidental consequence of the Insolvency and Bankruptcy Code (IBC) under which Chandra’s repayment plan was approved” Bhargavi stated. When a particular company enters insolvency, the creditors assess how much they can recover. Subsequently, the prepared resolution plan, in most cases, offers them less than the original claim. But, liquidating the company might provide them much less. Thus, in spite of losses incurred, the creditors go on to accept that haircut, due to the lack of better alternatives available to them.
In Subhash Chandra’s case, the National Company Law Tribunal (NCLT) approved a repayment plan in which Chandra was to pay a sum of Rs 6.25 crore against the admitted claims of Rs 22,000 crore, applying a ‘Haircut’ of approximately 99.97%, i.e. the creditors/lenders would recover only 0.03% of the admitted claims.
India has witnessed huge haircuts in its insolvency cases over the years. Of them, Videocon Industries stands as one of the most primary examples. The haircut for the creditors in Videocon's case was 95.85%. The NCLT had approved the resolution plan for 13 Videocon Group companies in 2021 at Rs 2,962.02 crore against the admitted claims of Rs 64,838.63 crore. In addition to this, the operational creditors faced a 99.28% haircut, which led to the tribunal phrasing it as “Haircut or tonsure, Total Shave.”
Other notable instances were that of Aircel, Jet Airways and Amtek Auto. The Jet Airline’s resolution plan involved admitted claims of around Rs 5,432 crore and concluded with a haircut of 92.33%, or an amount of Rs 1.183 crore. Aircel and Amtek Auto reported haircuts of around 82% and 80 % respectively.
However, certain things must be taken into account while iterating on Subhash Chandra’s case. Chandra acted as a personal guarantor in the borrowings by different associates under the Essel group. The admitted claims of Rs 22,000 crore is not a personal debt of Chandra. Thus, it is more precise to state that, the lenders/creditors have faced a haircut of 99.97% under the Subhash Chandra repayment plan.
As of now, the existing decision which was taken in August 25, 2026 was stayed by the NCLT bench. Subsequently, five-member Bench has been constituted for the first time in the history of the NCLT to deal with this case afresh. The historic Bench would be led by President Justice (retd.) Anupinder Singh Grewal, Judicial Members Bachu Venkat Balaram Das and Mahendra Khandelwal, and Technical Members Atul Chaturvedi and Ravinder Chaturvedi, and was scheduled to begin the hearing at 10.15 a.m on Tuesday, September 1, 2026.
(Edited by Ritik Singh)
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