DHFL Insolvency: NCLAT Has Closed All Rights, Kapil Wadhawan Tells Supreme Court
The signage for Dewan Housing Finance Corporation Ltd. is displayed atop a building in Mumbai, India. (Photo: BloombergQuint)

DHFL Insolvency: NCLAT Has Closed All Rights, Kapil Wadhawan Tells Supreme Court

Public interest. Value maximisation. No conclusion of criminal proceedings.

DHFL’s promoter Kapil Wadhawan’s appeal before the Supreme Court is peppered with these key words. Wadhawan is contesting the May 25 interim order of the National Company Law Appellate Tribunal which had granted relief to Dewan Housing Finance Corp.’s creditors’ committee.

The matter reached the appellate tribunal after the Mumbai bench of the National Company Law Tribunal, on May 21, directed DHFL’s committee of creditors to consider and vote on Wadhawan’s settlement proposal within 10 days. The administrator had appealed the tribunal’s decision questioning its timing and also detailed why the creditors’ committee didn’t consider Wadhawan’s settlement proposal.

As an interim relief, the NCLAT bench said the case involves serious issues which need to be heard and proceeded to stay the NCLT order. The appellate tribunal also noted that it was unable to appreciate the hurry which was imposed on the Administrator, the Committee of Creditors to consider the proposal of the promoter.

Wadhawan Goes To Supreme Court

NCLAT has gravely erred in staying NCLT’s direction thereby effectively closing his rights, Wadhawan has submitted before the apex court. Even though it’s an interim direction, it’s in the nature of a final order because if Piramal Group’s plan is approved in the meantime, his appeal would have little meaning, Wadhawan has argued.

Lawyers involved in the matter shared with BloombergQuint the key arguments Wadhawan has made in his petition.

  • That his settlement proposal will result in 100% payment to all creditors, while Piramal’s plan contemplates a loss of more than Rs 53,000 crore to state-run banks and small depositors. DHFL’s administrator and creditors’ committee had contested this claim before the NCLAT, saying Wadhawan’s settlement proposal suffers from legal and commercial infirmities.

  • Pending criminal proceedings against him cannot be used a justification to dismiss the settlement proposal. No final decision has been made on criminal matters against him. To be clear, Wadhawan has been in jail since January last year for alleged violation of anti-money laundering law.

  • No prejudice would be caused to any party if NCLT’s directions are permitted. DHFL’s administrator had argued before the appellate tribunal that Wadhawan submitted a settlement proposal with the intent to set the stage for litigation.

  • There was no delay on his part. Even as the Mumbai NCLT was hearing the arguments on the settlement proposal, DHFL’s committee of creditors carried out voting on Piramal Group’s plan. And so, the argument that a resolution plan has been approved and the Reserve Bank of India has found Piramal to be fit and proper must not be accepted. DHFL’s administrator has disputed these claims saying Wadhawan didn’t submit an expression of interest as per IBC timelines—one of the many reasons why the creditors’ committee didn’t accept his proposal.

  • DHFL’s committee of creditors failed to vote on his second settlement proposal. In doing so, the committee has violated the principles of natural justice.

In passing the interim directions, the NCLAT has failed to follow its own precedents, Wadhawan said. He has pointed to several cases where resolution applicants have been directed to place promoter settlement offers, made under Section 12A, before the committee of creditors.

Section 12A allows for withdrawal of insolvency proceedings subject to certain conditions.

DHFL’s administrator has argued that Wadhawan’s plan doesn’t meet the conditions prescribed under this provision.

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