DHFL: RBI was never in favour of Wadhawan’s settlement offer

On the 14th page of the 86-page NCLT order by HP Chaturvedi and Ravikumar Duraisamy, it says DHFL no longer is a deposit taking NBFC but a non-deposit taking one.

By Ankur Mishra

The Reserve Bank of India (RBI) was never in favour of considering Kapil Wadhawan’s settlement offer for Dewan Housing Finance Corporation (DHFL). The regulator’s stance was made clear during RBI’s submission before the Mumbai Bench of the National Company Law Tribunal (NCLT) on January 15, 2021. On Tuesday, the regulator’s submission was read by the counsel of the Committee of Creditors (CoC) at National Company Law Appellate Tribunal (NCLAT), where the lower court’s order was set aside.

RBI, in its submission at NCLT Mumbai on January 15, 2021, had said, “Affording the applicant (Kapil Wadhawan) even an opportunity of presenting a settlement offer may amount to permitting the applicant to take benefit of its own wrong, which lead to the complete downfall of DHFL and resultantly, the various stakeholders.”

The Reserve Bank’s stance is important as the regulator had referred DHFL for insolvency proceedings. DHFL is the first financial services firm to be sent to the bankruptcy tribunal after the government notified the rules for referring financial services providers (FSPs) on November 15, 2019. Unlike insolvency proceedings for companies from other sectors, an FSP creditor or debtor cannot approach the tribunal without being referred by a regulator.

The regulator also raised concern on the alleged serious offences by Wadhawans and said, “It is pertinent to mention herein that the applicant is the ex-promoter of DHFL against whom various proceedings, civil and / or criminal, have been filed, alleging cheating, fraud, siphoning of funds and such other serious offences. The applicant is presently in judicial custody and most regulatory agencies like CBI, EoW, ED etc. are at present investigating against the applicant. This being so, affording the applicant even an opportunity of presenting a purported settlement offer may amount to permitting the applicant to take benefit of its own wrong, which led to complete downfall of DHFL and resultantly, various stakeholders.”

The lenders of DHFL were surprised by the NCLT’s May 19 order, asking them to consider ousted promoter Kapil Wadhawan’s offer for the company. The order from the tribunal came as a surprise for lenders as they had already approved a bid of Rs 34,250 crore from Piramal Capital and Housing Finance (PCHFL) for the troubled mortgage lender. Wadhawan had earlier proposed a settlement plan of Rs 91,158 crore, claiming he would repay 100% of the principal to all the creditors. The settlement offer was rejected by the lenders in which he had proposed to repay lenders by selling his assets.

DHFL has been undergoing insolvency proceedings at NCLT in Mumbai since December 3, 2019. The troubled mortgage lender has admitted claims of `87,120 crore, with State Bank of India (SBI) being the lead creditor. While bondholders have claimed Rs 45,550 crore, financial creditors have sought Rs 41,342.23 crore from the mortgage financier.

Emails sent to RBI, DHFL administrator, and SBI did not elicit any response till the time of going to press.