Fixed deposit (FD)-holders as well as banks, which are part of the committee of creditors (CoC) in the resolution of Dewan Housing Finance Ltd (DHFL), have approached the Supreme Court challenging an order passed by the National Company Law Appellate Tribunal (NCLAT). Interestingly, the move by some members of the CoC, including Union Bank of India, State Bank of India (SBI), Bank of India, Canara Bank, Punjab National Bank (PNB), and Central Bank of India, is quite unusual since the NCLAT order gives banks more money than what they had initially bargained for.
Notably, in an appeal filed by 63 moons technologies, the NCLAT had directed that recoveries made in avoidance applications filed under Section 66 of the Insolvency and Bankruptcy Code (IBC) can only accrue for the benefit of the creditors.
In an order passed in January 2022, the NCLAT bench of justice M Venugopal (acting chairperson), VP Singh (member- technical) and Dr Ashok Kumar Mishra (member-technical), says, "...the present appeals ought to be allowed. The term in the resolution plan that permits the successful resolution applicant to appropriate recoveries, if any, from avoidance applications filed under section 66 of the IBC ought to be set aside. The resolution plan be sent back to the CoC for reconsideration on this aspect."
In its petition, 63 moons has alleged that Piramal Capital and Housing Finance Ltd has ascribed Re1 value against the assets worth Rs40,000 crore diverted fraudulently by the Wadhawans, erstwhile promoters of DHFL.
In a release, 63 moons says, "With this order, now the CoC have to reconsider the provision of section 66 of (IBC), which mandates that the benefit should go to all the creditors of DHFL. However, the CoC had, in its resolution plan, overlooked this provision to the benefit of the Piramal group. If CoC considers this without alteration of provision of section 66 of IBC, all creditors of DHFL will be benefited. 63 moons is the only company which challenged the decision of CoC in NCLAT." (Read: DHFL Case: NCLAT Asks Committee of Creditors To Consider 63 Moon's Petition
As a result of the NCLAT order, 63 moons and several other creditors stand to gain up to a whopping sum of Rs46,000 crore.
However, Piramal Capital & Housing Finance, which last September had acquired DHFL, also challenged the NCLAT order in the apex court. Piramal has made the CoC, 63 moons and the administrator appointed by the Reserve Bank of India (RBI) as a party in its suit.
Industry experts are also amazed at the move by the banks to approach the Supreme Court against an order passed by NCLAT that would benefit the lenders. Many public sector banks (PSBs) in the CoC, facing the brunt of several non-performing assets (NPAs), would have received up to Rs46,000 crore on a platter without even having bargained for it. "One can only wonder what is the commercial wisdom behind challenging an order that gives you money without any effort?" they quipped.
The hearing is scheduled for 21 March 2022. The apex court will also hear the appeal filed by the Piramal group against the recent NCLAT order that ruled a stipulation in the DHFL resolution plan as 'illegal' regarding recovery of avoidance transactions.
Separately, FD-holders of DHFL have approached the Supreme Court over the resolution plan approved by NCLAT. FD-holders of DHFL have been unhappy with the resolution plan and have been seeking 100% repayment of their claims.
Quoting Vinay Kumar Mittal, a lead petitioner on behalf of the FD-holders, a report from The Hindu BusinessLine
says, "A section of the fixed deposit holders of DHFL have filed a petition in the Supreme Court against the order by the NCLAT. We feel that the NCLAT is unjust."
Under the approved resolution plan, FD-holders received about Rs1,241 crore or 23% of their admitted claims of about Rs5,400 crore, the report says.
Earlier in September 2021, Piramal completed the acquisition of DHFL for Rs34,250 crore, which includes a cash component and NCDs (non-convertible debentures). It had upfront cash Rs14,700 crore and NCDs of Rs19,550 crore. The NCLT-approved plan shows 93.65% of financial creditors voted in favour of Piramal Capital & Housing Finance's Rs37,250 crore resolution plan.
DHFL also marked the first instance of a finance company being referred to the IBC process. At over Rs40,000 crore, the case had the highest ever public exposure to its liabilities because it enjoyed a high AAA credit rating almost until the collapse.
Piramal Capital & Housing Finance says it has retained over 3,000 employees of DHFL and is also adding over 2,000 new jobs in the merged entity.