The National Company Law Tribunal on Tuesday admitted a petition filed by the Reserve Bank of India (RBI) seeking to initiate Corporate Insolvency Resolution Process against the crisis hit Dewan Housing Finance Corporation Ltd, a Financial Service Provider under the Insolvency & Bankruptcy Code, 2016.
Coram of MK Shrawat, Judicial Member and Chandra Bhan Singh, Technical Member heard RBI's petition on Monday and pronounced the order admitting it on Tuesday.
RBI in its capacity as "Appropriate Regulator" filed the said petition through General Manager, Department of Regulation, RBI Mumbai, against DHFL.
On February 18, 2019, the Central Government in consultation with RBI had notified NBFC and Housing Finance Companies in the category of FSP and thereafter on November 22, 2019, RBI issued notification stating that in exercise of its powers u/S.45 IE 5(a) of the RBI Act 1934, the central bank superseded the board of directors of DHFL and appointed R Subramaniakumar as the Administrator (which is equivalent to a Insolvency Resolution Professional).
A three-member advisory committee was also appointed to assist the Administrator, they are-
1. Dr Rajiv Lall, Non-Executive Chairman, IDFC First Bank Ltd
2. NS Kannan, Managing Director and CEO, ICICI Prudential Life Insurance Co. Ltd
3. NS Venkatesh, Chief Executive, Association of Mutual Funds in India
RBI had enclosed several evidences to establish that loans were granted from time to time to DHFL, for example, External Commercial Borrowings ECB in two tranches aggregating $240 Million, the coram noted-
"It is interesting to note that the purpose intimated in the impugned "Terms and Conditions" was that for re-financing of existing ECB, the proceeds of which were utilized for low cost housing units as permitted by RBI."
RBI informed the tribunal that the total outstanding secured loan of DHFL as on March 31, 2018 from as many as about 25 in number, was for a sanctioned amount of Rs.61,000 crore (approx.) and outstanding amount of Rs.39,000 crore (approx). One more list of "Unsecured Loan" outstanding as on March 31, 2018 totaling Rs.18,800 crore was provided.
Senior Advocate Ravi Kadam appeared on behalf of RBI along with Ashish Kamat and Suharsh Sinha. Kadam pointed out that there was a trail of emails, which he placed as evidence, to demonstrate that the 'default' has duly been accepted by DHFL.
"It is a fit case for admission, since 'Debt' and 'Default' have duly been proved, the Insolvency Proceedings in terms of Rule 6 of Financial Service Providers Rule to be read with Section 227 of IBC can be commenced", Kadam argued.
During the hearing, some of the individual investors and a counsel representing them tried to intervene in the proceedings. However, RBI's counsel reliance on a decision of NCLAT, New Delhi in the case of IDBI Bank Ltd. Versus Odisha Slurry Pipeline Infrastructure Ltd. dated 15.01.2019 wherein it was observed that except the applicant (financial creditor) and the 'corporate debtor', there is no requirement of hearing a third party, including an intervenor at the stage of admission.
On due examination of the evidence and material at hand, the Tribunal noted-
"We hereby hold that the Debt in question is to be qualified as "Financial Debt" as defined u/s. 5(8) to be read with Section 3(11) of The Code. Further, on the basis of the correspondence and the Letters issued it has also been established that the FSP has committed default of repayment as defined u/s. 3(12) of The Code."
The Tribunal also confirmed proposed name of R Subramaniakumar, ex-MD and CEO of Indian Overseas Bank, as an Administrator to perform all the functions of Resolution Professional to complete the Corporate Insolvency Resolution Process.
Admitting the petition, the Tribunal said-
"The Administrator is hereby directed to cause a public announcement immediately (as per Section 13 of The Code) intimating the initiation of Corporate Insolvency Resolution Process and call for the admission of Claims as prescribed u/s.15 of the Code.
At this juncture, it is worth to mention that in the foregoing paragraphs reproduced a statement of "Unsecured Loans" which contained a figure of Rs.1,024,311 (in lacs) amount of public deposit. The Administrator shall update the list of Depositors along with the outstanding amount payable to each one with their address and communication information so that in future their interest can be watched along with all other stakeholders."
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