DHFL Creditors Vote against Higher Payout to FD-holders, Unsecured NCD-holders
Moneylife Digital Team 23 June 2021
The committee of creditors (CoC) of the beleaguered Dewan Housing Finance Ltd (DHFL) has voted against a proposal that sought to increase payouts to fixed depositors and non-convertible debenture(NCD) holders in the company. A proposal to repay the Rs39 crore claim by the Army Group Insurance Fund in full has also been rejected, as per documents shared in the Smartroom portal. From the copy of the results Moneylife has accessed, an overwhelming 89.19% of the financial creditors have voted against the proposal while a mere 2.96% voted in favour of the proposal and 7.85% abstained from voting. At least 66% of the financial creditors must vote in favour of such a proposal for it to be passed.
 
The voting on the proposal to raise payout to retail depositors and unsecured NCD-holders ended at 9pm on Tuesday night. 
 
The proposal had sought to increase fixed depositors recovery to 41% from 23% earlier, while in case of unsecured NCD-holders, the proposal recommended the recovery rate be increased from 5% to 41%. The first resolution was rejected since the cumulative votes cast in favour of the resolution by the CoC is less than 66% of the total voting rights as required under Sec 30(4) of IBC (Insolvency and Bankruptcy Code, 2016). Surprisingly, the fixed deposit-holders and unsecured NCD-holders have also voted against the proposal which would have given them more money. 
 
From the large secured lenders (banks) only IDBI (with 1.15% voting share) has voted in favour of the proposal while all other large banks (including several public sector banks) have voted against it. Accepting the proposal would have meant that other large creditors would get back lesser money (around 5% difference). 
 
There was another resolution put up for voting which sought to to authorise representatives of State Bank of India, Union Bank of India and Catalyst Trusteeship to act on their behalf for further actions in the DHFL case and including the implementation of Piramal Group's resolution plan for DHFL. 
 
However, strangely, a majority of CoC has cast their votes (81.98%) in favour of this resolution while a mere 7.31% rejected this proposal and 10.71% abstained from voting. The second resolution is approved since the cumulative votes cast in favour of the resolution by the CoC is more than 51% of the total voting rights as required under Sec 21(8) of the Code. 
 
Earlier, Catalyst Trusteeship, the debenture trustee for DHFL NCDs had sought a vote from the NCD holders (from 20th to 22nd June) on both these resolutions from the NCD-holders. 
 
Earlier in January this year, fixed depositors and unsecured NCD-holders had voted against the Piramal group plan, making them dissenting financial creditors in the scheme.
 
While the National Company Law Tribunal (NCLT) had earlier this month approved Piramal group's plan to acquire DHFL under IBC, it had requested the creditors to consider increasing the payments to smaller creditors and full repayment of invested money for the Army Group Insurance Fund on compassionate grounds.
 
In its order, the Tribunal had said small investors should not face more risk than institutions. Considering the number of small investors and senior citizens who had deposited their hard-earned money and who now face a financial crisis due to the pandemic, the resolution plan should provide for an increased share for them, the order said while nudging the CoC. 
 
“Accordingly, for this limited purpose, we direct the CoC to reconsider their distribution method amongst various members of the CoC within two weeks from today and report the same to this Adjudicating Authority,” the NCLT said in its order.
 
Experts had pointed out that if the CoC had agreed to give more to the FD-holders, then it could have set a precedent for other insolvency cases in future. The DHFL case has seen many sharp twists and turns in the past one month.
 
So far, Piramal group has already received regulatory approvals from the Reserve Bank of India (RBI),  Competition Commission of India (CCI) and the NCLT. Piramal group is said to be earnestly involved in the process of implementing the resolution plan, which is expected to be completed by August 2021.
 
The Bombay Stock Exchange (BSE) and National Stock Exchange (NSE) have already suspended trading in DHFL shares from 14 June 2021.
 
Comments
ushareet
3 months ago
DHFL case is an eye opener for all small depositors and senior citizens will be an eye opener. It will caution them to avoid investing their hard earned savings by getting carried away by a little higher interest offered by any NBFC or private enterprise . Hope Government authorities do justice to small investors.
josud
3 months ago
I have DHfLsecuted NCD bought throught Demat Trading account.Do I need to takeany action to claim amount or it Will automatically get credited in my Trading account.? Your kindguidance is requested. Joginder Sud?([email protected])

I am also subscribed Moneylife
wegupta
3 months ago
This big investor and small investor debate is utter garbage. I put my life savings to invest Rs 10 lacs based on the rating of DHFL. I have the most to lose as I lose 60% of 10 lacs. A person who just put 2 lacs will lose so little. Putting a small amount in a particular NCD does not mean he/she is a small guy. The people in NCLT are idiots!!!
cbk1097
Replied to wegupta comment 3 months ago
Weguptaji, I feel the real idiot in this situation is nobody other than yourself. You put the entire life savings in just one company. Also your entire life savings is 10 Lakhs, now that is absolute idiocracy.
arasgv
3 months ago
As expected nobody cares for small investors . The biggest sufferers in our country are always the small investors and senior citizen as they lack the required voting strength. The biggies enjoy the might and always crush the helpless small investors. Indeed its a sad day for small investors in FD and NCD.
wegupta
Replied to arasgv comment 3 months ago
This big investor and small investor debate is utter garbage. I put my life savings to invest Rs 10 lacs. I have the most to lose as I lose 60% of 10 lacs. A person who just put 2 lacs will lose so little. Putting a small amount in a particular NCD does not mean he/she is a small guy. The people in NCLT are idiots!!!
cbk1097
Replied to wegupta comment 3 months ago
Weguptaji, I feel the real idiot in this situation is nobody other than yourself. You put the entire life savings in just one company. Also your entire life savings is 10 Lakhs, now that is absolute idiocracy.
wegupta
Replied to arasgv comment 3 months ago
This big investor and small investor debate is utter garbage. I put my life savings to invest Rs 10 lacs. I have the most to lose as I lose 60% of 10 lacs. A person who just put 2 lacs will lose so little. Putting a small amount in a particular NCD does not mean he/she is a small guy. The people in NCLT are idiots!!!
cbk1097
Replied to wegupta comment 3 months ago
Weguptaji, I feel the real idiot in this situation is nobody other than yourself. You put the entire life savings in just one company. Also your entire life savings is 10 Lakhs, now that is absolute idiocracy.
arasgv
3 months ago
As expected nobody cares for small investors . The biggest sufferers in our country are always the small investors and senior citizen as they lack the required voting strength. The biggies enjoy the might and always crush the helpless small investors. Indeed its a sad day for small investors in FD and NCD.
arasgv
3 months ago
As expected nobody cares for small investors . The biggest sufferers in our country are always the small investors and senior citizen as they lack the required voting strength. The biggies enjoy the might and always crush the helpless small investors. Indeed its a sad day for small investors in FD and NCD.
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