The Mumbai Bench of the National Company Law Tribunal (NCLT) on Wednesday asked the administrator of Dewan Housing Finance (DHFL) to place the offer of erstwhile promoter Kapil Wadhawan before the Committee of Creditors (CoC).
It subsequently asked the CoC to convene in 10 days and consider the proposal. The matter has been adjourned till May 31.
The bench of judicial member HP Chaturvedi and technical member Ravikumar Duraisamy in an oral order asked the administrator to consider the erstwhile promoters’ offer. The written order was not uploaded till the time of going to press.
Kapil Wadhawan had moved NCLT in November 2020 and had asked the tribunal to direct the Reserve Bank of India (RBI) administrator and CoC to consider his offer. Wadhawan is still behind bars on charges of money laundering.
While the RBI, lenders, and Competition Commission of India (CCI) have given their nod to the resolution plan put forth by Piramal Group, the NCLT is yet to approve of the same. The tribunal has finished hearing the matter and has reserved its order.
Piramal Group’s plan was approved by the CoC with 94 per cent votes, while the Adani group’s plan received 45 per cent and Oaktree’s plan 18 per cent.
According to Piramal’s plan, recovery for lenders would total Rs 35,250 crore, with upfront cash of Rs 12,700 crore, the latter tipping lenders’ votes towards Piramal. Total cash for the CoC stood at Rs 15,700 crore. Further, the plan had ascribed Rs 1,000 crore for DHFL’s stake in the insurance company.
In a letter to the administrator in December, Wadhawan had reiterated his offer to pay the entire outstanding principal of Rs 91,158 crore to creditors — an upfront payment of Rs 9,000 crore and the remainder in the form of debt-to-equity conversion across 7-8 years.
Ashish Pyasi, associate partner at Dhir and Dhir Associates, said: “The options before the CoC are to either consider the proposal and deal with it based on their commercial wisdom, or to approach the appellate tribunal.”
“Though various approvals like those from the RBI and CCI have been obtained after the resolution plan was approved by the CoC, there is no embargo on not considering the proposal, given the plan is yet to be approved of by the hon’ble authority,” Pyasi added.
DHFL was referred to the NCLT in November 2019 after defaulting on Rs 90,000 crore of debt, with auditors finding a Rs 15,000-crore hole in its books. It was the first financial services firm to be referred for insolvency, under Section 227 of the Insolvency and Bankruptcy Code (IBC).
According to industry sources, if Wadhawan’s proposal is accepted, the RBI has to withdraw IBC proceedings against the company. This is because the RBI had, under Section 227 of IBC, referred the mortgage lender to the NCLT and not any lender. Further, some experts have pointed out that the erstwhile promoters are prohibited from participating in the resolution process under Section 29A of the IBC.
Former DHFL promoter Kapil Wadhawan
Section 29A prohibits wilful defaulters, undischarged insolvents, and promoters of defaulting firms, among others, from participating in the resolution process, under the IBC.
An insolvency lawyer said this was a proposal of settlement to creditors, and not a resolution plan, which will be hit by section 29A. If it is accepted by the lenders, the application may be filed with the NCLT authority for withdrawal of the resolution process.
Another lawyer said, If it’s a one-time settlement that Kapil Wadhawan is offering then it has to be under Section 12A of IBC. So, Section 29A of IBC cannot be applied here. Section 12A stands on a different footing than Section 29A.
DHFL crumbled as a result of the liquidity crisis created after the collapse of IL&FS in 2018.