In a surprising turn of events, the Mumbai bench of the National Company Law Tribunal (NCLT) has asked the lenders of Dewan Housing Finance Limited (DHFL) to now consider its former promoter Kapil Wadhwan’s settlement offer for the bankrupt company.
The NCLT has given the creditors committee ten days time to consider Wadhwan’s offer and come back to the court with its decision by May 31, according to people familiar with the matter.
The court pronounced a verbal order earlier on Wednesday, and the written copy is yet to be published. The NCLT order comes even as the same tribunal is hearing another matter involving a fraud claim against the same promoters of DHFL, filed by the RBI-appointed administrator of the company.
This comes months after the Committee of Creditors conducted a bidding process for the company under IBC, and declared Piramal Group as the successful resolution applicant in January this year.
The erstwhile promoters of DHFL were in discussion with the company’s lenders in 2019 to find a resolution for the debt default. However, on November 20th, 2019, the regulator superseded DHFL’s board “owing to governance concerns and defaults by DHFL,” and referred it to NCLT for resolution.
In late 2020, Kapil Wadhwan had then moved NCLT to urge the CoC to consider his offer, alleging that the bids received by the company under IBC “undervalued” it, and his offer was far superior.
In his last offer made in January this year after multiple revisions, Kapil Wadhawan’s offered to repay 100 percent of the principal amount to all the creditors, amounting to 91,158 crores.
He claimed he would make an upfront payment of Rs 9000 crores, service Rs 31,000 crore debt in 7 years at 8.5 percent per annum, and another Rs 12,000 crore within a period of 7 years at 11.5 percent per annum, following a one-year moratorium. The plan also included repayment of Rs 18,000 crore in 5 years at 11 percent per annum, following a 5-year moratorium. While Rs 5,000 crore will be converted to equity, Rs 16,158 crore will be converted into zero-coupon bonds as per the proposal.
However, lenders did not consider Wadhwan’s offer, based on the legal advice from their counsel. Refusing to consider Wadhwan’s offer, the lenders’ legal counsel had responded to Wadhwan’s letter, saying its eligibility under Section 29A of IBC was doubtful. Section 29A prohibits wilful defaulters, undischarged insolvents, promoters of defaulting firms etc from participating in the resolution of companies under the bankruptcy code.
After several rounds of bidding, Piramal Group was declared the winning bidder, pending the final clearance from NCLT. Piramal’s Rs 37,250 crores takeover bid for DHFL was also approved by the Reserve Bank earlier in February.
“We (lenders) are considering appealing against the order, or even establishing Wadhwan’s ineligibility under Section 29A of IBC to explain our case. All options are being considered,” said a person closely involved in the resolution matter.
DHFL is the first financial services company to be sent to NCLT under the insolvency and bankruptcy code (IBC). It is facing claims of Rs 87,031 crore from financial creditors, led by SBI, Bank of India, Canara Bank, Union Bank of India, National Housing Bank and others.