Bombay High Court Extends Payment Restrictions On DHFL Until Further Orders
The signage for Dewan Housing Finance Corporation Ltd. (DHFL) atop a building in Mumbai, India. (Photo: BloombergQuint)

Bombay High Court Extends Payment Restrictions On DHFL Until Further Orders

The Bombay High Court extended the restriction on payments by Dewan Housing Finance Corporation Ltd. to third parties until further orders.

Earlier, it had temporarily restrained the non-bank lender from making further payments or disbursements to secured and unsecured creditors till Oct. 10, except certain payments made on pro rata basis to all the secured creditors including Reliance Nippon Life Asset Management Company Ltd.

This came after Reliance Nippon moved the high court against the stressed home financier to recover dues worth around Rs 470 crore.

In a separate order, the high court allowed Edelweiss Asset Management Company Ltd.’s request to seek disclosure of all assets and liabilities by DHFL. Edelweiss AMC had also moved the court earlier this week to recover about Rs 70 crore owed to it by the non-bank lender.

The high court directed DHFL to reply to Edelweiss’ application within four weeks.

Reliance Nippon AMC had approached the high court after lenders to DHFL signed an intercreditor agreement. Under an ICA, lenders agreed to receive certain percentage of their claims against a debtor and forgo the rest of their claim. Thus, when a debtor makes payments under an ICA the borrower is discharged from rest of the claims as per the agreed terms. Reliance Nippon AMC and Edelweiss AMC wanted a preferential treatment over members of the ICA as they were secured creditors on account of being subscribers to debentures issued by DHFL and have claims over its receivables.

After Reliance Nippon AMC had moved the high court, in August, the market regulator permitted mutual funds to be part of ICAs. The Securities and Exchange Board of India’s directions came with the condition that there must be a segregation of portfolio in such cases and the signing of ICA must be in the interest of the investors.

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