Supreme Court upholds Piramal's Resolution Plan For DHFL [Read Order]

The Supreme Court ruled in favor of the Resolution Plan put forth by Piramal Capita and Housing Finance for the former Dewan Housing Finance Corporation Ltd (DHFL) and decided that Piramal Capital & Housing Finance Ltd would receive the money recovered from the fraudulent activities at Dewan Housing Finance Corporation Ltd (DHFL).

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One of the top housing finance corporations in India, Dewan Housing Finance Corporation Limited, filed for bankruptcy in November 2019 after accruing debts totaling Rs. 90,000 crores. The Resolution Plan, which was awaiting adjudication before the Adjudicating Authority under Section 31 of the Code, was approved by a majority of 93.65% of the votes cast during the proceedings. The Adjudicating Authority then issued an order instructing the CoC to take into consideration the "Second Settlement Offer" made by Mr. Kapil Wadhawan, the former promoter of DHFCL. The Piramal Group's buyout for Rs. 37,250 crores was approved by the CoC.

On behalf of the CoC of DHFL, Union Bank of India appealed to the NCLAT, Delhi, against the decision made by the Adjudicating Authority, NCLT Mumbai, which ordered the Administrator of DHFL to present the Second Settlement Proposal, which was sent by Mr. Kapil Wadhawan, to the CoC for review, decision, and voting.

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The Administrator was instructed by the Adjudicating Authority to submit the initial Settlement Proposal to the Coc; however, no response was received to that proposal. In this appeal, the Adjudicating Authority's two orders were contested.

The Adjudicating Authority issued an order approving the Resolution Plan while this appeal was pending. Because it was outside its jurisdiction and hence unsustainable under the law, the NCLAT overturned the Adjudicating Authority's order.

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The challenge was to the 2022 NCLAT order, which set aside the order passed by the NCLT directing the Administrator of DHFL to place its Second Settlement Proposal sent by Mr. Kapil Wadhawan before the Committee of Creditors for its consideration.

The division bench of Justice Bela Trivedi and Justice SC Sharma held that NCLT will freshly reconsider the applications relating to the allocation of proceeds from avoidance transactions worth Rs. 45,000 crore. The IBC 2016 defines "avoidance transactions" as particular measures taken by a corporate debtor before bankruptcy proceedings that are thought to be harmful to creditors' interests.

The bench overturned the NCLAT order that ordered the creditors of Dewan Housing Finance Corporation Limited (DHFL) to reevaluate the resolution plan put forth by Piramal Capital and Housing Finance and upheld the resolution plan that was approved by the COC in 2021, according to which a national value of Rs. 1 was assigned to potential recoveries of Rs. 45,000 crores.

To Read the full text of the Order CLICK HERE

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