DHFL vs 63 moons: Madras HC Continues Interim Injunction Against Wadhawans, CRAs and Others
Moneylife Digital Team 06 February 2023
Hearing a recovery suit filed by 63 moons technologies ltd, the Madras High Court (HC) says that its order of interim injunction, against the Dewan Housing Finance Ltd (DHFL) promoters, its former top executives, credit rating agencies (CRAs), statutory auditor and debenture trustee restraining them from dealing with any of their assets, will continue until they provide security for the principal suit claim in specific proportions. 
In an order issued earlier this month, the bench of justice Senthilkumar Ramamoorth says, "The order of interim injunction shall continue to operate against the first to eighth and eleventh defendants until they provide security for the principal suit claim..."
Wadhwan Global Capital Ltd, Kapil Rajeshkumar Wadhawan and Dheeraj Rajeshkumar Wadhawan are asked to provide jointly and severally security to the extent of 100% of the claim. Harshil Mehta, former chief executive officer (CEO) and Santosh Sharma, former chief financial officer (CFO) of DHFL, are asked to provide a security of 15% of the claim.
Those asked to provide security 10% of the claim include Credit Analysis and Research Ltd, Brickwork Ratings India Pvt Ltd, Chaturvedi and Shah (chartered accountants-CAs) and Catalyst Trusteeship Ltd (formerly GDA Trusteeship Ltd).
Noting that DHFL went into an insolvency resolution process and it is not possible to initiate action against the corporate entity after the resolution plan of Piramal Enterprises was accepted, and recording that these defendants are accused in criminal proceedings relating to the fraud and mismanagement of the affairs of DHFL, the HC asserted that "In the facts and circumstances, this order is fully justified…"
Commenting on the liability of CRAs, the HC observed that these agencies did not provide details of the progressively weakening liquidity of DHFL in their reviews. "More importantly, they did not take reasonable notice or give reasonable weight to the same and downgrade the ratings on such basis and, therefore, they cannot be absolved from liability."
The bench also pointed towards failure of the auditor in fulfilling its statutory obligation. It says, "The manner in which DHFL collapsed over the period when one of the defendants played a critical role as statutory auditor leads to the strong prima facie conclusion that they failed to fulfil their statutory obligations, thereby causing immense losses to investors..."
"...facts and circumstances considered cumulatively, in context, justify the issuances of orders directing those found prima facie liable to provide security for the principal suit claim. At this juncture, liability to provide security for the suit claim cannot be apportioned with any degree of accuracy. Nonetheless, by taking into account the role played by the respective defendant, the obligation to provide security is apportioned for interlocutory purposes," the bench concluded.
1 year ago
This fruad v/s fraud coc had considered rs 1 value of Rs40000cr white collar fraud even if ncd holder can't do anything expect 63 moon why Indian government is not involves. This is only benefited to piramal
1 year ago
What is the fate of thousands of retail investors who were not paid any interest for their NCD's, who are not able to go to courts.
1 year ago
Promoters enjoy and creditors slog .. promoters stay in Prison palaces
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