Anup Pathak, a retail investor of Dewan Housing Finance Ltd (DHFL), has filed an appeal at National Company Law Appellate Tribunal (NCLAT) against delisting of the lender’s shares from the exchanges.
In his plea, the investor has alleged that the administrator of DHFL and lenders failed to adequately inform investors about the impending delisting, which was part of the Piramal group’s approved resolution plan under the Insolvency and Bankruptcy Code (IBC).
“The respondents either solely or collectively have failed to inform and obtain the consent of the appellant about the acquisition of the equity shares held by shareholders in company at ‘Rs0’ under the resolution plan, by way of reduction in paid up capital,” the petition by Mr Pathak mentions.
The plea filed last week requests the NCLAT to set aside order passed by NCLT on 7th June and relist the shares of DHFL.
On 7th June, NCLT had approved the resolution plan of Piramal Capital and Housing Finance (PCHFL) which offered to pay Rs37,250 crore to DHFL lenders. In its order copy, which came out 12th June, the NCLT appointed an observer to the monitoring committee
to ensure smooth functioning and transition to PCHFL.
In his plea, Mr Pathak has also added that the resolution of DHFL is contravention of Section 230 of Companies Act, 2013, which provides power to compromise or decide with creditor of a company, while stressing that minority shareholders have right to know even if they are not part of committee of creditors (CoC).
In January 2021, in a bitterly fought bidding war, PCHFL resolution plan for DHFL was endorsed by 94% votes from the CoC and had emerged the winner. However, many misled retail investors continued to buy DHFL shares (shrugging off warnings), while anticipating a higher value of the company in future.
The share price of DHFL rose more than 70% on BSE to Rs23.06 on 8th June from 19th April. The stock saw significant trading, even hitting upper circuits after the resolution plan was approved by NCLT, encouraging investors.
In DHFL’s case, many retail investors were misled to believe that it would remain listed like Ruchi Soya, Alok Industries and Essar even after IBC. Many such retail investors who continued to invest in DHFL shares who have lost large sums of money now feel victimised because of DHFL’s delisting. They claim that DHFL has assets worth over Rs1.05 trillion and a strong loan recovery process can fetch more money than what has been projected by the Piramal Group.
It is, therefore, important that investors heed the warnings and check out all details in the approved resolution plan in IBC cases before they fall for such bait rumours encouraging them to invest in dud shares.
Market experts had also sounded an early warning on DHFL.
Zerodha, the discount broker, even used its ‘Nudge’ feature to forewarn its customers that the investment (in DHFL shares) may go to zero and over 50% of its customers were saved from investing in DHFL because of this feature.
On 11th June, DHFL ended its trading session at Rs16.70, one day after having hit the 10% lower circuit. The BSE and NSE suspended trading in DHFL
shares from 14th June morning.
Meanwhile, Kapil Wadhawan, former promoter of DHFL, plans to challenge the approval by the NCLT to the resolution plan of PCHFL. Mr Wadhawan’s counsel JP Sen informed NCLAT about this on 25th June. Sources indicate that a petition challenging the NCLT order is likely to filed this week.
On 1st June, Mr Wadhawan, who seems to be using every legal option possible to try to scuttle Piramal’s resolution plan, had moved the Supreme Court
asking for a stay on the NCLAT order, which stayed an earlier order of the Mumbai bench of NCLT asking the CoC to consider the settlement offer Wadhawan put forward.
Petitions filed by DHFL’s CoC, the RBI appointed administrator and PCHFL came up for hearing before the NCLAT on 25th June.
Last month, the NCLAT had stayed an order by the NCLT, which had directed the lenders to consider the offer made by Mr Wadhawan within a period of 10 days. The stay, which was an interim order, was based on a plea by the CoC of DHFL challenging the NCLT order.
Appearing for DHFL administrator, the senior counsel said that since Piramal’s resolution plan has already been approved, the direction by the NCLT to the CoC cannot survive.
The NCLAT has adjourned the matter for further hearing to 2nd August. If Mr Wadhawan files his appeal, the full resolution of DHFL could turn to be further delayed. The road ahead remains bumpy because of all these legal hurdles and Piramal’s resolution plan might well take another nine to 12 months to fructify.
Legal experts point out that NCLT had set a dangerous precedent by giving Mr Wadhawan an opportunity given that he stands accused of serious financial fraud and is currently in jail.
Meanwhile, even the fixed deposit (FD)-holders and NCD-holders, who are set to lose out significant portions of their investment in DHFL, are unhappy with the approved resolution plan.
Separately, small depositors of DHFL (including fixed deposit-holders and secured NCD-holders) and 63 moons technologies (which has an exposure of Rs 200 crore in NCDs), are also said to be filing appeals for full repayment of their claims. 63 moons technologies stands to lose 65% to 75% of the invested amount if the approved resolution plan takes effect.
This might turn out into a long-drawn legal battle and a long wait for justice for lenders and investors in DHFL.