63 Moons to challenge NCLT order allowing Piramal Group to acquire DHFL

63 Moons Technologies has said that it will challenge the order of the National Company Law Tribunal (NCLT), allowing Piramal Group to take over DHFL under Insolvency and Bankruptcy Code (IBC).

According to a statement issued by the company, 63 Moons believes that the current resolution plan is contrary to law and against the interest of all DHFL’s creditors including NCD holders. The Administrator of DHFL has filed applications for recovery of almost Rs 45,000 crores under Section 66 of the IBC against DHFL’s promoters and other persons on account of their fraud against the creditors.

Contention of 63 Moons is that this amount of Rs 45,000 crores must come to the defrauded parties, which are the creditors. Instead, the Resolution Plan is drafted in such a way that it favors the resolution applicant — Piramal Group — allowing it to reap the benefits of recoveries from the promoters.

Ascribing a value of Re 1 to the recoveries of fraud where claims are in excess of Rs 45,000 crore creates unjust enrichment of the buyer (Piramal) at the cost of creditors. Piramal has bid only for the current value of DHFL which does not include these amounts that were taken away fraudulently.

63 Moons, which holds more than Rs. 200 crores of NCDs of DHFL, had filed an application in the NCLT-Mumbai seeking that the fraudulent transaction recovery benefit of approximately Rs 45,000 crores filed by DHFL administrator under section 66 of IBC should come to creditors, including NCD holders who are the actual sufferers of the default, and not to the buyer of the company.

The current DHFL resolution plan allows the Piramal Group to buy the company by paying mere Rs 37,500 crore as against the outstanding debt of Rs 85,000 crore. Also, in addition to this, the benefits of claims of over Rs 45,000 crore are to be appropriated by Piramal fully by ascribing the entire recoverable amount a value of Re 1.

According to 63 Moons, the current resolution plan is disappointing for NCD holders in as much as they stand to bear the greatest loss as opposed to any other party involved. It argues that other members of the Committee of Creditors, who comprise mainly of banks, have recourse to personal guarantees of promoters whereas NCD holders do not have any such contractual recourse.

NCD holders will be left high and dry with a massive 65%- 75% haircut if in future such recoveries from fraudulent transactions are allowed to pass through to the resolution applicants, instead of the creditors.

The company said it is awaiting for the copy of the order and will be reviewing its options on the basis of advice from its legal advisors.

63 Moons has been founded by former managing director of MCX Jignesh Shah.

Also Read: Fixed deposit holder puts up fight against Piramal Group’s bid for DHFL