Bombay high court discharges DHFL from CBI’s case against Kapil Wadhawan

Dewan Housing Finance Corporation Limited (DHFL) had moved the HC after a special CBI court in August rejected its plea for discharging the non-banking finance company from the case

The Bombay high court on Wednesday discharged Dewan Housing Finance Corporation Limited (DHFL) from the Central Bureau of Investigation (CBI) case against its erstwhile chairman and managing director (CMD) Kapil Wadhawan, director Rakesh Wadhawan and Yes Bank founder Rana Kapoor.

A file photo of Kapil Wadhawan, former chairman and managing director of DHFL. (Supplied photo/ File)

DHFL moved the high court after a special CBI court in August rejected its plea for discharging the non-banking finance company from the case. It argued the National Company Law Tribunal (NCLT) in June approved a resolution plan for DHFL’s reverse merger with Piramal Capital and Housing Finance Limited.

Senior advocate Ravi Kadam, who appeared for DHFL, submitted the special court did not take provisions contained in Section 32A of the Insolvency and Bankruptcy Code, 2016, into account while rejecting the discharge plea. He submitted DHFL would not be liable for any offence committed prior to commencement of the Corporate Insolvency Resolution Process. Kadam added the prosecution would not continue once the resolution plan was approved by the Adjudicating Authority - the NCLT.

Advocate Pranav Badheka, who represented Kapil Wadhawan, opposed the plea by pointing out that the former CMD of DHFL and 63 Moons Technologies Ltd have filed appeals challenging the approval for DHFL’s reverse merger. The outcome of the appeal would be a crucial consideration in deciding the discharge plea, he added.

CBI’s lawyer, Hiten Venegaonkar, also opposed the plea. He submitted it would be inappropriate to discharge DHFL of the criminal liability until statutory appeals were decided. Venegaonkar added that cognisance of an offence cannot be taken twice and therefore it would be very difficult for the CBI to reverse the situation if, in appeals, the approval to the resolution plan was reversed.

A single-judge bench of Justice Sandip Shinde took into consideration the National Company Law Appellate Tribunal’s refusal to stay the execution of the reverse merger. Subsequently, DHFL management has changed.

Shinde noted that Kapil Wadhawan and Rakesh Wadhawan were ousted from the Board of Directors two years ago and had since no control over the management of the NBFC.

The Wadhawans were booked in March 2020 along with Kapur and his family members. Between April and June 2018, Yes Bank allegedly invested ₹3,700 crore in short term non-convertible debenture of DHFL and Kapur received ₹600 crore as kickbacks from DHFL in terms of loan advanced to two firms his family members controlled.