CoC must reassess assigning ₹1 to DHFL bad loans: NCLAT
PremiumThe NCLAT bench gave its order on a plea filed by Jignesh Shah-led 63 Moons Technologies
The National Company Law Appellate Tribunal (NCLAT) on Thursday asked the committee of creditors (CoC) to reconsider Piramal Capital and Housing Finance assigning a value of only ₹1 to the bad loans of Dewan Housing Finance Corp. Ltd (DHFL), the bankrupt mortgage lender that Piramal acquired last year.
The recoverable assets of DHFL, now renamed Piramal Capital and Housing Finance, run into ₹30,000 crore- ₹40,000 crore, according to a petition filed by Jignesh Shah-led 63 Moons Technologies Ltd, which was heard by the NCLAT.
“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 Code ought to be set aside. The resolution plan be sent back to the CoC for reconsideration on this aspect," said a bench of Justices M. Venugopal and V.P. Singh, which heard the plea.
Section 66 of the insolvency and bankruptcy code prescribes a claw-back clause or mechanism for recovery against fraudulent transactions.
The claw-back provides that the amount creditors expect to be recovered from a bunch of fraudulent transactions will be credited to the resolution plan to finally be distributed to creditors.
Enforcement agencies allege that ₹30,000 crore was siphoned off or diverted elsewhere by Kapil Wadhawan, erstwhile promoter of DHFL, through misuse of government schemes.
In its petition, 63 Moons questioned the “commercial wisdom" of the CoC in approving the resolution plan.
Assigning a value of ₹1 means that the amount will be written off by the lenders and recovery, as and when it happens, will be credited to the resolution applicant Piramal Group, it pointed out.
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With this order, recovery against the fraudulent assets will go to the creditors, said a lawyer involved in the matter.
If the CoC considers this without alteration of provision of section 66 of IBC, all creditors of DHFL will benefit, 63 Moons contended.
Piramal Enterprises Ltd (PEL) bought the bankrupt DHFL in September 2021 by making an upfront cash payment of ₹14,700 crore to creditors.
Piramal made a total payment of ₹34,250 crore, which also included a debt instrument issuance of ₹19,550 crore.
The creditors also received a total of ₹3,800 crore in cash that was with DHFL when the administrator took over the company for debt resolution.
Thursday’s ruling, however, will not affect the deal size and overall resolution of DHFL.
The bench said that 63 Moons is seeking to challenge through these appeals the same resolution plan that it has itself voted in favour of individually and that its class has also voted in favour of it by a majority of 98.94%.
“The creditors of the corporate debtor have, after several rounds of negotiations, in their commercial wisdom, considered the overall resolution amount proposed under the resolution plan and adopted the course of action that they believed was for their greatest benefit and would lead to value maximization. This judgment and the commercial decision cannot now be second-guessed by the appellant, especially after it has voted in favour of the plan," NCLAT said in the order.
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