In a twist to the mess at Dewan Housing Finance Corporation Ltd (DHFL), the Mumbai bench of National Company Law Tribunal (NCLT) on Wednesday asked the committee of creditors (CoC) or lenders to consider the offer made by DHFL's promoter Kapil Wadhawan, who is in jail.
The NCLT asked the CoC to convene within 10 days a meeting to consider the offer from Mr Wadhawan, and inform the bench about its decision by 31st May, say media reports.
"The NCLT 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 Reserve Bank of India (RBI)-appointed administrator of the company,"
says a report from CNBCTV18 (https://www.cnbctv18.com/business/nclt-mumbai-asks-dhfl-creditors-committee-to-consider-wadhawans-offer-9353321.html).
Citing three people with direct knowledge of the matter,
a report from BloombergQuint says, "The committee of creditors and advisors to the process are set to meet today to chart the next few steps in the process. The creditors may choose to approach the appellate tribunal to appeal against the NCLT’s order."
In December 2020, Mr Wadhawan had submitted his revised proposal for acquiring DHFL in which he had offered to repay over Rs91,158 crore to lenders. This included an upfront payment of Rs9,000 crore and the balance over the next seven to eight years.
However, the CoC rejected the offer. "Refusing to consider Mr Wadhwan’s offer, the lenders’ legal counsel had responded to Mr 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," the report from BloombergQuint says.
In January 2021, the Indian public sector banks and other creditors had voted in favour of Piramal group’s debt resolution plan for DHFL.
In February this year, the RBI approved Piramal group’s plan for the takeover of DHFL. The CoC then submitted the plan for approval to the NCLT.
The bankrupt housing finance company has been in bankruptcy court since December 2019 after the company defaulted on debt worth Rs90,000 crore. State Bank of India (SBI) is the biggest lender having lent Rs10,000 crore. Other lenders include: Bank of Baroda, Bank of India, Canara Bank, Union Bank of India, Syndicate Bank and National Housing Bank (NHB).
The erstwhile promoters of the company are in jail.
In his revised proposal, Mr Wadhawan had stated that he would make an upfront payment of Rs9,000 crore in cash and Rs31,000 crore will be paid within a period of seven years in equal annual instalments with 8.5% per annum interest.
As per the revised proposal, Rs12,000 crore will be repaid within a period of seven years in equal annual instalments, following a one-year moratorium with 11% interest after two years of interest moratorium.
A sum of Rs18,000 crore will be repaid within a period of five years in equal annual instalments, following a five-year moratorium with 11% per annum interest. Further Rs5,000 crore will be converted to equity, as per the proposal.
Mr Wadhawan had also said that Rs16,158 crore will be converted into zero-coupon bonds and can be appropriately hived off to an asset reconstruction company (ARC) and can be recovered through the ARC in order to preserve the debt:equity ratio of DHFL.
A portion of the bonds may also be tied to specific projects and also from excess cash-flows following the servicing all lenders, based on agreed parameters of thresholds, he said in his letter.
However, the CoC rejected the proposal and, instead, selected Piramal Capital and Housing Finance to takeover DHFL. Piramal plans to merge its financial services business with DHFL and retain all employees.
Piramal Capital and Housing Finance merger with DHFL will be effective from the date NCLT approves the plan.
Earlier in February 2021, transaction auditor Grant Thornton, in a report shared with the administrator of DHFL, had found certain transactions which are undervalued, fraudulent and preferential in nature, putting the newly-discovered fraud at Rs6,182 crore.
On 20 February 2021, based on the investigation and observations of Grant Thornton, the administrator had filed an application before the Mumbai bench of NCLT under Section 45, Section 60(5) and Section 66 of the Insolvency and Bankruptcy Code (IBC), in respect of disbursement made to certain entities as other large project loans (OLPL), against Kapil Wadhawan, Dheeraj Wadhawan, Creatoz Builders Pvt Ltd, Ikshudip Fincap Pvt Ltd, Rite Developers Pvt Ltd and certain other entities.
The preliminary estimation included in the application places the monetary impact of the concerned transactions at about Rs6,182.11 crore, which includes Rs210.85 crore towards notional loss of interest on account of charging lower rate of interest.
