NCLT approves Piramal Group’s bid for DHFL

The Mumbai Bench of NCLT has today approved the resolution plan submitted by Piramal group for acquisition of housing finance company Dewan Housing Finance Corporation Ltd (DHFL).

With this DHFL becomes the first financial services default case to be resolved under the Insolvency and Bankruptcy Code (IBC).

Piramal Group had emerged as the highest bidder with Rs 35,500 crore-bid for whole loan portfolio of housing finance company DHFL. The committee of creditors has approved Piramal’s resolution plan by 94% vote share.

Piramal Group’s bid is higher than Oaktree Capital’s Rs 34,000 crore and Adani Group’s Rs 33,000 crore. 

Sources close to the development, however, said that ex-promoters of DHFL are most likely going to challenge the NCLT’s order approving Piramal group’s order.

Promoters of DHFL had offered for one-time-settlement and had apparently offered to pay Rs 91,000 crore.

The NCLT in a 19 May order had asked the committee of creditors (CoC) to consider DHFL’s ex-promoter Kapil Wadhawan’s one-time-settlement offer under Section 12A of IBC.

The CoC moved NCLAT and got a stay against the NCLT.

The NCLAT has expressed its surprise that NCLT passed the order asking CoC to consider Kapil Wadhawan’s offer when the resolution plan of Piramal Group, approved by the CoC, is already with it, but instead of “deciding the same, the present order has been passed”.

“When even resolution plan requires No Objection of regulator, it needs to be considered if Section 12A could be resorted to bye-pass no objection of regulator,” said the NCLAT.

The Reserve Bank of India (RBI) under the new law for insolvency of financial services provider had on 29 Nov 2019 filed insolvency application against DHFL for defaulting on repayment of ECB loan to State Bank of India.

The NCLT on 3 Dec 2019admitted RBI’s insolvency application against DHFL and appointed R Subramaniakumar as administrator.

Meanwhile, DHFL has informed the exchanges that the resolution plan proposes to extinguish all the equity shares (including any right to subscribe to, or be allocated such equity shares, including any employee stock options, pre-emptive subscription rights or convertible instruments held by any person) held by the existing shareholders of the Company or any other person by way of a capital reduction without payment of any price to the shareholders/ such person.

Explaining its decision, it said that no value was attributable to the equity shares as per the liquidation value of the Company estimated by registered valuers appointed under the CIRP Regulations.

The Securities and Exchange Board of India (Delisting Of Equity Shares) Regulations, 2009, provides that in case of delisting of equity shares of a listed company pursuant to a resolution plan under Section 31 of the Insolvency & Bankruptcy Code, 2016, the exit to the shareholders should be at a price which should not be less than the liquidation value after paying off dues in the order of priority.

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