DHFL: Investor Urges RBI To Stop Fraud by Administrator, Debenture Trustee, Banks & Advisors upon FD & NCDs Holders
An investor of Dewan Housing Finance Corp Ltd (DHFL) has urged Shaktikanta Das, governor of Reserve Bank of India (RBI) 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."
In a letter to the RBI governor, Jyoti Khemka, the investor, alleges that 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 interest of 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 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," the letter says.
According to the letter, if future recoveries are to accrue to financial creditors as in the Oaktree resolution plan, the new management of DHFL would not exercise due diligence in the Section 66 applications pending before the National Company Law Tribunal (NCLT). It says, "The total value of claims filed by the DHFL administrator is over Rs33,000 crore. The earlier promoter of DHFL and entities, who committed the fraud would benefit at the cost of public money. Hence RBI must step into the shoes of the DHFL administrator in all applications filed under section 66. Future recoveries in section 66 applications must accrue to the financial creditors. The evaluation of various resolution plans must be revised accordingly and put to vote again."
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.
The key issue here is: What happens to Rs33,309 crore siphoned away by the Wadhawans which was established by the Grant Thornton forensic audit report? Can any part of it be recovered? If, yes, who gets the recovery proceeds, if any? Shockingly, this money may go to the new bidders, depending on who wins. At the moment, there are two serious bids for DHFL: one from the Piramal group and another from Oaktree Capital Management. (Read: DHFL's FD and NCD-holders May Lose Twice Over unless They Intervene