The National Company Law Tribunal (NCLT) on Wednesday directed lenders of bankrupt Dewan Housing Finance Corp Ltd (DHFL) to consider the offer made by former promoter Kapil Wadhawan, who has proposed to fully settle the mortgage lender’s ₹91,000 crore dues, including ₹43,000 crore in the initial few years.
The tribunal’s Mumbai bench asked DHFL’s committee of creditors (CoC) to meet within 10 working days to consider Wadhawan’s offer. The surprise turn comes at a time when both the CoC and the Reserve Bank of India have already approved the Piramal Group’s proposal to acquire DHFL, and the proposal is before the NCLT.
Wadhawan, who is facing charges of money laundering and diversion of bank funds, has repeatedly accused DHFL’s lenders of selling the company much below its fair value.
Last November, Wadhawan requested an RBI-appointed DHFL administrator to be included in the bidding process, but the lenders chose to go for Piramal, which emerged as the highest bidder after an intense bidding war between Oaktree Capital, Adani group and distressed assets buyer SC Lowy.
“The lenders don’t believe that Kapil Wadhawan has the resources to repay DHFL’s debt,” a person aware of the CoC negotiations said on condition of anonymity. India’s insolvency law prohibits the promoter or management of any bankrupt company from attempting to re-acquire it. “The NCLT order has clearly taken the lenders by surprise, and they may approach the National Company Law Appellate Tribunal (NCLAT), challenging the NCLT order since section 29A of the IBC does not allow Wadhawan or any promoter group entity to participate in bids for DHFL,” a banker who is part of the CoC said on condition of anonymity.
{{/usCountry}}“The lenders don’t believe that Kapil Wadhawan has the resources to repay DHFL’s debt,” a person aware of the CoC negotiations said on condition of anonymity. India’s insolvency law prohibits the promoter or management of any bankrupt company from attempting to re-acquire it. “The NCLT order has clearly taken the lenders by surprise, and they may approach the National Company Law Appellate Tribunal (NCLAT), challenging the NCLT order since section 29A of the IBC does not allow Wadhawan or any promoter group entity to participate in bids for DHFL,” a banker who is part of the CoC said on condition of anonymity.
{{/usCountry}}In November 2018, the RBI superseded the board of DHFL. On January 16 this year, the Ajay Piramal-led Piramal Group secured 94% of its creditors’ votes in favour of its resolution plan that commits ₹38,250 crore to take over the assets of the mortgage lender.
Following Wednesday’s NCLT ruling, the second person cited above said, “Withdrawing an invoked IBC process is only possible at the behest of the party that brought the case into IBC in the first place, which here is RBI, not any individual lender(s). The adjudicating authority may allow the withdrawal of an application admitted under section 7 or section 9 or section 10, on an application made by the applicant (resolution applicant) with the approval of 90% voting in favour by CoC.” DHFL has about 150,000 creditors, including fixed deposit and bondholders, banks and NBFCs.
On December 14, the day revised bids were made by resolution applicants like Oaktree Capital, Piramal Enterprises, Adani Group and SC Lowy, Wadhawan made yet another offer. He reiterated his offer to make 100% repayment to all creditors within 7-8 years with an upfront payment of ₹9,000 crore.
Wadhawan proposed that the settlement plan will commence from FY22 and will ensure the completion of stalled projects for recovery of dues from borrowers in the wholesale business. In December, he moved the NCLT against the lender’s administrator and the CoC over the bids made by the four suitors. Piramal’s offer was chosen by the CoC since, as compared to other bidders, it involved a higher cash component upfront, an easy merger process, and better synergies due to the group’s experience in lending and housing sectors.