NCLT admits insolvency plea moved by RBI against debt-laden DHFL

The Mumbai Bench of the National Company Law Tribunal (NCLT) on Monday admitted the insolvency plea moved by the Reserve Bank of India (RBI) against Dewan Housing Finance Corporation (DHFL) for defaulting on interest payments for the external commercial borrowings (ECBs) availed by it from State Bank of India (SBI).

DHFL is the first financial services firm that will undergo insolvency proceedings at the NCLT after the government notified the financial services insolvency law on November 15.

DHFL had availed of the ECB from SBI to the tune of $240 million in two tranches of $110 million and $130 million, respectively. It defaulted on an interest payment of $2.16 million, which triggered insolvency proceedings against the beleaguered mortgage lender.

DHFL has also defaulted on repayments to non-convertible debenture (NCD) holders in July.

SBI is the main financial creditor against DHFL. Although, the NCLT admitted the insolvency petition against DHFL, the tribunal raised concerns that there was nobody to oppose the RBI’s petition and observed that the erstwhile management was absent as the board had been superseded by RBI. The Bench was also upset that the administrator was not present in court to answer its questions. The RBI superseded the board of DHFL on November 20 and appointed R Subramaniakumar, former managing director (MD) and chief executive officer of Indian Overseas Bank, as the administrator of the mortgage lender. The RBI also appointed a three-member advisory committee to assist the administrator comprising IDFC First Bank Non-Executive Chairman Rajiv Lall, ICICI Prudential Life Insurance MD N S Kannan, and Association of Mutual Funds in India Chief Executive N S Venkatesh.

DHFL’s liabilities are to the tune of Rs 92,715 crore, of which secured loans are Rs 73,833 crore and unsecured loans are Rs 18,881 crore as of September 2019.

Now after admission of the matter, the administrator, who will function as the resolution professional, will call for all the claims from creditors and a committee of creditors will be constituted. The tribunal has also asked the administrator to be present for the next hearing of the matter.

The RBI, last week, moved the NCLT to initiate insolvency proceedings against DHFL.