The National Company Law Appellate Tribunal (NCLAT), on Thursday, asked the committee of creditors (CoC) of Dewan Housing Finance Corp Ltd (DHFL) to consider the petition of 63 moons technologies ltd (63 moons) (formerly Financial Technologies (India) Ltd). 63 moons holds over Rs200 crore worth of non-convertible debentures (NCDs) in DHFL.
In the order, the 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 Insolvency and Bankruptcy Code (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.”
In a regulatory filing, Piramal Enterprises Ltd, the parent of Piramal Capital & Housing Finance, says, "With reference to the Piramal's resolution plan, most appeals filed by several parties before the NCLAT against Piramal's approved DHFL resolution plan were disposed off on 27 January 2022. In the case of one of the appeals, which was limited to the extent of challenging the distribution of proceeds (if any) from fraudulent transactions to the benefit of the resolution applicant, NCLAT has ordered it to be re-considered by the CoC."
"We have analysed the detailed judgment of the NCLAT and consulted our legal advisors. We are confident and will continue to pursue the matter as multiple legal options are available to us for our future course of action, including approaching the Apex court. The DHFL acquisition by Piramal group remains unaffected and the business integration continues as envisaged," it added.
Earlier in September last year, Piramal completed the acquisition of DHFL for Rs34,250 crore, which includes a cash component and NCDs. It had upfront cash of 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 (Insolvency and Bankruptcy Code, 2016) 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 the DHFL and is also adding over 2,000 new jobs in the merged entity.
1. I agree that 40K crore and Rs. 1 are miles apart and the valuation sounds strange. BUT. If the 40K crore book is worth far more than Rs. 1, how is it that nobody else bid a better price for the book? Ultimately the market sets the value.
2. How many times will the SC have to rule that the COC's decision on commercials is not to be questioned or second-guessed by the courts?
3. How long will it take for our courts to understand that a quick resolution, even if less than perfect, offers more value than a perfect resolution that is stretched out for years?