DHFL Insolvency: NCLAT Stays Order Directing Vote On Wadhawan Offer

The National Company Law Appellate Tribunal stayed an order that directed creditors of Dewan Housing Finance Corp. to consider a settlement offer by its promoter Kapil Wadhawan.

The National Company Law Tribunal’s Mumbai bench last week asked the Committee of Creditors to consider and vote on the offer by Wadhawan within 10 days. According to the NCLT’s order, since the settlement proposed to pay over Rs 91,000 crore to the financial creditors, which is higher than the Rs 37,250-crore offer by winning bidder Piramal Group, the financial creditors must duly consider the proposal.

DHFL's CoC led by the Union Bank of India, the Reserve Bank of India-appointed administrator and the Piramal group, the successful bidder in the ongoing IBC proceedings of DHFL, filed an appeal in the NCLAT.

Solicitor General of India Tushar Mehta, arguing on behalf of the CoC, opposed the NCLT order. He said neither the NCLT has the powers to pass such an order, nor the CoC has the power to consider the offer.

The statute doesn’t contemplate settlement proposal by a promoter of a financial company and the inherent jurisdiction of the tribunal can never overtake the statutory mandate, the Solicitor General told the NCLAT bench.

Wadhawan, the Solicitor General said, was trying to stall the insolvency process of the company by sending settlement proposals which were not even in accordance of the provisions of the Insolvency and Bankruptcy Code.

Senior Advocates Shyam Divan, Ravi Kadam and Abhishek Manu Singhvi joined the Solicitor General in opposing the NCLT order.

Singhvi informed the bench that the proposal by Piramal Capital & Housing Finance had already received the RBI approval and it was also presented to the NCLT for its approval where the arguments have concluded. At this stage, Singhvi said, passing the order to consider the promoter’s offer was not appropriate.

“There’s been a complete ambush by the promoter. Which zoo does this animal belong to? It’s neither a settlement proposal nor a resolution plan,” Singhvi argued.

Senior Advocate Sudipto Sarkar, representing Wadhawan, told the bench the key objective for the offer was maximising value. He pointed out that 65% of the creditors of the company are small depositors and the proposal by Wadhawan will pay them in full.

The NCLAT bench, however, said the case involves serious issues which need to be heard and proceeded to stay the NCLT order. The appellate tribunal in its order also noted that it was unable to appreciate the hurry which was imposed on the administrator, the Committee of Creditors to consider the proposal of the promoter.

The pendency of the appeal, the bench said, will not come in the way of the NCLT deciding on the approval for Piramal’s bid for DHFL. The NCLAT bench comprising Justice AIS Cheema and VP Singh will now take up the case next on June 25.