DHFL Insolvency Case: NCLT Approves Piramal Group's Resolution Plan
Moneylife Digital Team 07 June 2021
The Mumbai bench of the National Company Law Tribunal (NCLT) has approved the Piramal group’s resolution plan for Dewan Housing Finance Limited (DHFL). The order is, however, subject to the outcome of the appeal in the National Company Law Appellate Tribunal (NCLAT) and the Supreme Court (SC). The NCLT has further rejected DHFL’s former promoter Kapil Wadhawan's plea to get access to a copy of the approved resolution plan.
However, during today's hearing, the NCLT did not even bother to hear any intervention and dismiss it—they just ignored it, alleges Jyoti Khemka, an investor of DHFL. "I registered as interlocutory application ((IBC)/1192/2021), but it is not yet listed. I paid a Rs1,000 fee and the respondents were also given advance copies of my application. How can main application be decided without hearing me?" she asks.

In her application, she further alleges, "...bankers and their appointed advisers are ripping off the helpless FD and NCD-holders. DHFL was not an unregulated entity. The poor FD and NCD holders relied upon audited financial results, 'AAA' credit ratings, trustee and regulatory bodies like SEBI, National Housing Bank (NHB) at the time of investing their hard-earned money. They cannot be placed now on an equal footing with banks who have the necessary wherewithal to carry out due diligence before lending public money."

"The debenture trustee, Catalyst Trusteeship has failed miserably in its fiduciary duties to watch the iterest of the NCD holders. It has been acting hand-in-glove with the cronies (as also affirmed by the Bombay High Court). The DHFL administrator too is a silent spectator in the present resolution proceedings. Instead of watching interests of the FD and NCD holders, he is using the company money to protect the interests of credit rating agencies and debenture trustees in petitions pending before the Punjab and Haryana High Court and District Consumer Forum, Chandigarh," Ms Khemka says in her application.
Piramal Capital has already received approval from the Competition Commission of India (CCI) and Reserve Bank of India (RBI) for its Rs34,250-crore bid to take over DHFL. In January this year, the committee of creditors (CoC) had voted in favour of selling DHFL to the Piramal group under the bankruptcy process.
With yet another hurdle cleared, the Piramal group, in a statement released shortly after the NCLT’s approval came through, says, “We are pleased with the judgement today by the honourable NCLT for approving our resolution plan for DHFL. This follows the endorsement of 94% of lenders, and the subsequent approvals from RBI and CCI, and reiterates the strength and quality of our bid.”
“This is one of India’s largest IBC proceedings, and the very first in the financial sector. In that regard, it is an important and positive trendsetter for the future. The approval from NCLT is a significant milestone in DHFL's resolution and an affirmation of the sanctity of the IBC process in India. We are committed to collaborating with all relevant authorities, regulators, creditors and investors involved in this resolution and look forward to a speedy culmination of the resolution process,” the statement added.
The Piramal group’s resolution plan for DHFL was endorsed by 94% votes from the CoC. The bid amount will enable lenders to recover around 40% of their dues, out of the total admitted claims of Rs87,082 crore. Piramal has already raised funds for this.
Late last month, NCLAT had stayed the NCLT Mumbai bench's order, directing the lenders of debt-ridden mortgage firm DHFL to consider the settlement offer by its erstwhile promoter Kapil Wadhawan. NCLAT had also directed the NCLT to decide over the application filed by the administrator over the bid submitted by Piramal Capital and Housing Finance for DHFL.
On 1st June, Mr Wadhwan, who seems to be using every legal option possible to try to scuttle Piramal’s resolution plan, 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.
Lenders, RBI-appointed administrator and Piramal group (which won the bid) challenged the NCLT order. Lenders in their appeal to the NCLAT stated that if the order was allowed to operate, it would create a process contrary to the provisions of the IBC. The bankers were apprehensive about considering the promoter’s settlement offer because the account was declared 'fraud' by them.
The NCLAT in its order had said, “....here the matter had proceeded to the stage where even (the) resolution plan had been approved and was before (the) adjudicating authority. There would be no end if such reversals are allowed. There is no dispute regarding the fact that the resolution plan has already been approved and is before the adjudicating authority.”
NCLAT had asked Mr Wadhawan to file a reply within two weeks. The matter is slated to be heard again on 25th June. However, NCLAT also said that the pendency of the appeal before it should not come in the way of the NCLT passing orders in approving the resolution plan. 
Kapil Wadhawan, who is facing charges for serious offences of financial fraud, money laundering and diversion of bank funds, is currently in jail.  He has repeatedly accused DHFL’s lenders of selling the company much below its fair value. 
In November 2020, Mr Wadhawan had requested the RBI-appointed DHFL administrator to be included in the bidding process, but the lenders chose to go for Piramal, which emerged as the highest bidder after an intense bitterly fought bidding war between Oaktree Capital, Adani group and distressed assets buyer SC Lowy.
RBI was never in favour of considering Kapil Wadhawan’s settlement offer for DHFL. The banking regulator’s stance is important as it was the regulator which had referred DHFL for insolvency proceedings. 
Earlier in January this year, Ms Khemka wrote to RBI governor Shaktikanta Das urging him to stop 'self-serving fraud' being allegedly perpetrated by the administrator, debenture trustees, banks, and their advisers upon fixed deposit (FD) and non-convertible debenture (NCD)-holders of the crisis-hit company through "illegal, unfair and inequitable resolution proposals put to vote before helpless FD and NCD holders." (Read: DHFL: Investor Urges RBI To Stop Fraud by Administrator, Debenture Trustee, Banks & Advisors upon FD & NCDs Holders)

As Moneylife pointed out FD and NCD-holders are the biggest lenders to DHFL at Rs45,000 crore and they represent the savings of ordinary people. Another Rs35,000 crore is owed to commercial banks; but they dominate the committee of creditors (CoC) and will influence the outcome.

The losses, even after a successful sale, are massive-over Rs52,000 crore. Other than those who invested up to Rs2 lakh (who will get back their entire principal, not interest), the FD-holders stand to lose 75% of their investment, while those with secured NCDs will lose 60%.

Moreover, under the Piramal plan, any money recovered from the Wadhawans will go to the DHFL while financial creditors will get nothing. In effect, whichever bid is accepted, it seems like a raw deal for FD and NCD-holders who include individuals, trusts, pension funds and companies who went by the AAA credit rating (highest) accorded by rating agencies to the DHFL group, despite plenty of talk about their shady dealings.
Unlike insolvency proceedings for companies from other sectors, a financial services-provider (FSP) creditor or debtor cannot approach the tribunal without being referred by a regulator. DHFL is the first FSP to be sent to the bankruptcy tribunal after the government notified the rules for referring FSPs on 15 November 2019.
DHFL’s lenders too have been reluctant to consider Mr Wadhawan’s offer after careful consideration of the legal advice from their counsel. Lenders have also cited lack of credibility. Mr Wadhawan too has not sent any formal proposal with valuations attached to the proposed asset sales.
DHFL had gone bankrupt in 2019 with more than Rs90,000 crore in debt to various lenders, including banks, mutual funds and retail investors who invested in the company’s fixed deposits (FDs) and non-convertible debentures (NCDs).
3 years ago
kapil offered a more attractive package ...... any possibility Piramal may sell it to Kapil ???
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