SC upholds Piramal Capital & Housing Finance's resolution plan for DHFL

Says all money recovered from fraudulent transactions must be paid to Piramal

The Supreme Court on Tuesday upheld Piramal Capital & Housing Finance Limited’s resolution plan for Dewan Housing Finance Corporation Limited (DHFL). 

 

The top court also ordered all monies related to fraudulent transactions recovered under the Insolvency and Bankruptcy Code (IBC) should be paid to the successful bidder, that is, Piramal, and not to the lenders of DHFL.

 

A Bench of Justices Bela Trivedi and Satish Chandra Sharma overruled the National Company Law Appellate Tribunal’s (NCLAT) judgment which had said that the recovered amount should go to lenders. The appellate tribunal also held DHFL’s resolution plan as illegal.

 

 “Judgment and order by NCLAT is set aside. Order by the NCLT is upheld. NCLT shall decide avoidance applications. Recoveries from avoidance shall be given to the Committee of Creditors (CoC). Recoveries from fraudulent transactions must be paid to the successful resolution applicant (that is Piramal),” the apex court said.

 

Under IBC, avoidance transactions are the financial deals by a borrower (in this case DHFL), which put the lenders at a disadvantage, or give preference to some lenders over others. A committee of creditors is a group of financial creditors or lenders who represent a company in the insolvency process. 

 

In its order on Tuesday, the apex court also observed that the NCLT has little say in approving or rejecting a resolution plan and in this case Piramal's plan was compliant with the banking laws.

 

In January 2022, NCLAT had directed that recoveries made in avoidance applications filed under Section 66 of the Insolvency and Bankruptcy Code (IBC) can only accrue for the benefit of lenders.

 

It had, however, approved the resolution plan of Piramal. It was proposed by Piramal Capital to take over DHFL provided that these recoveries will be appropriated at an ascribed value of ₹1. 

 

63 Moons Technologies Limited had, however, challenged this part of the resolution plan before the NCLAT, and the appellate tribunal had allowed the latter’s plea.