Fixed deposit holder puts up fight against Piramal Group’s bid for DHFL
Can a writ petition pending in Delhi High Court by a fixed deposit holder put a spanner in Piramal Group’s acquisition of housing finance company DHFL?
The writ petition filed by Sasakawa-India Leprosy Foundation challenges the constitutional validity of the Financial Service Provider (FSP) rules of the Insolvency and Bankruptcy Code (IBC). The petition was filed on 29 January 2021 after the Committee of Creditors (CoC) in the DHFL CIRP approved the resolution plan of Piramal Group by 94%.
The 6% of the CoC vote share who opposed the resolution plan were mostly fixed depositors. There are 74,500 fixed deposit holders who had submitted claims of Rs 5,400 crore.
They opposed the resolution plan because the plan had provided for payment of only 20-25% amount owed to fixed deposit holders.
The writ petition filed by the fixed deposit holder challenges the FSP rule on the grounds that they prohibit the Reserve Bank of India (RBI) to exercise its powers under Chapter III-B of RBI Act to actively protect the interests of the depositors of an NBFC.
The new rules, as per the writ petition also nullify the rights of public depositors of a housing finance company to claim repayment of their deposits under the RBI Act and NHB Act, do not provide for any regulatory oversight by the RBI in respect of the distribution mechanism for creditors of a housing finance institution.
The writ petition also argues that FSP rules do not permit the RBI to withdraw an application filed before the Adjudicating Authority without the approval of 90% of the CoC, discriminates between fixed deposit holders of NBFCs and those of banks which are also regulated by the RBI and arbitrarily classify public depositors of a housing finance company along with banks and financial institutions in the CIRP.
Finally, it says that the rules permit the CoC to restrict distribution of funds to public depositors only to the extent of the liquidation value of the assets.
However, going by the media reports which quotes unnamed sources, the High Court does not seem to have a very sympathetic view towards the petition as it had not heard the case after February 2021 despite the petitioner reminding the court that NCLT was about to pass its approval order. The next hearing in the case in scheduled on 29 July 2021.
Meanwhile, the NCLT while approving the Piramal Group’s resolution plan had asked the CoC to reconsider the payment plan for fixed deposit holders.
Also Read: NCLT approves Piramal Group’s bid for DHFL
