HC relief for SBI, other lenders in debt recovery from crisis-hit DHFL

The lenders, led by State Bank of India, Bank of Baroda and IDFC had moved the high court seeking a relief from an earlier order that restrained DHFL from making any payments to creditors

Even as an insurance society owned by Indian Air Force employees moved the Bombay High Court seeking the clearance of its dues by Dewan Housing Finance Limited (DHFL), the court on Wednesday allowed Indian lenders to also receive payments from the troubled housing finance firm against securitised assets.  

The banks, led by State Bank of India, Bank of Baroda and IDFC had moved the high court after an October order restrained DHFL from making payments to any creditors.

During the hearing, the banks argued they did not fall in the category of creditors as they were the owner of assets securitised by DHFL. The housing finance company, the banks argued, was making regular payments before the HC order, and if the HC order was not modified, DHFL's assets might become a non-performing asset (NPA).

Most of the banks plan to make provisions for DHFL exposure in the current quarter. Banks have an exposure of Rs 38,000 crore in DHFL. The total debt of DHFL including to fixed deposit holders, mutual funds and unsecured lenders are at around Rs 1 trillion.

Meanwhile, the Indian Air Force’s Group Insurance Society, which has an exposure of Rs 84 crore in DHFL, moved the Bombay High Court for recovery of its dues. The court will hear the matter next week.

During the hearing, the counsel for the Air Force personnel argued it has highest priority compared to the claims made by other creditors, as per the provisions of the National Housing Bank Act, 1987. Therefore, the IAF society said the claim of other lenders should be made subordinated.

With this the Indian Air Force employees join the ranks of 45,000 UP state  state power employees who have announced a 48 hour work boycott across Uttar Pradesh power corporation offices beginning November 18. The employees are protesting against the investment of their provident fund (PF) corpus worth about Rs 4,100 crore by the employee trusts in DHFL. The UP government has ordered a Central Bureau of Investigation probe against DHFL and investment made by UP Power Corporation Limited (UPPCL) but no preliminary enquiry has been filed as yet.

The UPPCL employees are on the warpath and have demanded the state government to undertake the responsibility of repayment.

The agitation comes at a time when a forensic audit initiated by Union Bank of India and conducted by KPMG confirmed that the promoters of DHFL have diverted funds from the company worth Rs 20,000 crore and in several cases they did not keep proper records on the end use of funds lent by DHFL to over 40 shell entities.  

The regulators led by the Reserve Bank of India and the Sebi plan to seek the views of DHFL auditors during the period 2015 to 2019 when the forensic audit was conducted.