The DHFL Case and the Contradictory Verdicts of the NCLAT

The DHFL Case and the Contradictory Verdicts of the NCLAT

Posted on 12/05/2024 (GMT 12:05 hrs)

With regard to the DHFL scam⤡ ⤡, four verdicts of the NCLAT as a quasi-judicial body could be compared side by side, among which three verdicts were given on 27th January, 2022, while the last one was on 7th February, 2022. This comparative study would show how the very same body apparently changed its mind to and fro on the very same day and then again 11 days later.

(a) Was it due to political pressure from above?

Or

(b) Was it due to lack of thorough judicial argumentation from the perspective of appellants?

Or

(c) Was it all due to the contradictory nature of the ill-conceived IBC (2016) itself?

And/Or

(d) Is the treatment of NCLAT different in the case of DHFL NCD Holders than in the case of DHFL FD Holders? If yes, why is that so?

What are these four judgments of the NCLAT in 2022?

1. The first one was given on 27th January, 2022, in response to 63 Moons’ Technologies’ Appeals.
2. The second one was given on 27th January, 2022, in response to the SESA Group’s (NCD Holders) appeals.
3. The third one was given on 27th January, 2022, in response to the appeals filed by certain FD Holders and other Jesuit Institutes clubbed together.
4. The fourth one was given on 7th February, 2022, in response to a group of individual FD Holders.

Let us deal with each judgement’s crux one by one.

(1) said that the DHFL resolution process was full of material irregularities, void ab initio and contrary to law. NCLAT directed the reconsideration of the provisions of the resolution plan, which ignored the Section 66 of the IBC that otherwise leads to the benefit of all the creditors. It problematized the 45k crore assets=1 rupee equation perpetrated by Piramal and Co., with the help of the BJP in the recoveries of avoidance transactions.

Defending the 63 Moons’ argument-points, it said:

“Therefore, the present appeals ought to be allowed. The term in the Resolution Plan that permits the Successful Resolution Applicant to appropriate recoveries, if any, from avoidance applications filed under Section 66 of the Code ought to be set aside. The Resolution Plan be sent back to the CoC for reconsideration on this aspect.”

Here is the PDF for the same:

Here is the PDF for the same:

63-moons-nclat-27th-jan-1Download

Against this particular verdict, Mr. Piramal went on to seek a “blanket” stay order⤡ in the Supreme Court of India on 1st March, 2022, and also got one on 11th April, 2022. However, the same is an ex parte stay, not a blanket stay order that would “hold forever”.

(2) was passed in response to the appeals, which had the following pertinent points:

Without completely ignoring the above points while also staying true to the fact of excessive jurisdiction of the adjudicating authority, in the conclusion of the said judgment, the NCLAT said the following:

“Thus, while the Adjudicating Authority cannot interfere on merits with the commercial wisdom taken by the Committee of Creditors, the limited judicial review available is to see that the Committee of Creditors has taken into account the fact that the Corporate Debtor needs to keep going as a going concern during the Insolvency Resolution Process; that it needs to maximise the value of its assets; and that the interest of all the stakeholders including operational creditors has been taken care of.”

The PDF of (2) is given as follows:

nclat-27-01-2022Download

(3) said that there is no provision in any of the existing acts (NHB, RBI Acts) to make full payments to the FD Holders seeking some sort of “preferential treatment”. There is no need to change the terms of the already “approved” resolution plan so as to not “extinguish” the claims of these FD Holders, i.e., “Further, Section 238 of the Insolvency and Bankruptcy Code, 2016, overrides the RBI and NHB Act. Therefore the approved Resolution Plan that stipulates extinguishment of the claims to the F.D. without discharging their payments in full is valid and legal under the Code.”

Here is the URL for this verdict: Vinay Kumar Mittal & Ors vs Dewan Housing Finance Corporation Ltd. on 27 January, 2022 VIEW HERE ⤡

(4) said the same thing as (3), which goes against the FD Holders’ full repayment (without haircut) claims:

nclat-7th-feb-on-fd-holders-1Download

Despite the visible differences in the four verdicts, the appeals on which these judgements were given all question the terms of the “approved” resolution plan of Mr. Ajay Piramal under the RBI-Appointed CoC’s resolution process.

Now, how to explain the NCLAT”s position in relation to the DHFL case in this context? It seems so confusing, inextricably contradictory and appears to be somehow preferring the NCD Holders’ appeals more than that of the FD Holders. It seems that the NCLAT, apart from the variables enlisted earlier, is bound by the facts of  “Error in jurisdiction vs. Excessive Jurisdiction” VIEW HERE ⤡ (As reported on 17th July, 2020 ©Law Street India) in this matter.

However, building on the previously addressed point of commonality that these appeals share, one could question the terms of the resolution plan not only because of the 1 rupee = 45k crore assets equation, not only because the non-participation of the ex-promoters of the DHFL⤡ in the resolution process, not only because the CoC administrator and FD-holder representative ignored the voice of the FD Holders⤡ ⤡ ⤡ ⤡ ⤡— but because IT IS BASED ON THE VERY ILL-CONCEIVED IBC (2016), which has been amended multiple times (35+). DHFL, before going into the IBC was an ongoing, profitable company that was meeting its payment obligations and continued to be an AAA-rated NBFC. Simply to justify and legitimize the IBC to show the current ruling party: the BJP, in good terms, the DHFL was deliberately forced into bankruptcy as a “litmus test” without turning into a “bad precedent”⤡ (nevertheless, we must call spade a spade, good or bad!), making the DHFL FD holders mere guinea pigs in the lab-state of the IBC-experimentation. VIEW HERE ⤡ ⤡

If the IBC serves as the basic initial premise and it itself is flawed on many accounts, then the resolution plan based on it is also flawed and cannot hold. On this ground, we are seeking a reframing or remodelling of the central provisions of the IBC in this context to provide for the distributive justice of all the small depositors without violently extinguishing or annihilating their rightful demands. IBC in its present form would only benefit the chosen few capitalists alone!

Instead of simply “begging the premise” of IBC, the courts should move ahead and question the validity/legitimacy/justification of the IBC itself, so as to prevent it from becoming a gateway for escape as well as profit for the exploitative business tycoons!

This is totally unjustified and reflects the idea that the resolution process and so-called “approved” resolution plan go against the express provisions of law and the Constitution of India that upholds a non-discriminatory ethos and economic justice for all without concentrating wealth into fewer hands (22 persons, i.e., concentration of wealth). However, the RBI-CoC-approved resolution plan does just this: it handed over the DHFL to Mr. Ajay Piramal, a close associate of the BJP for years and a family member of the crony Ambani, in a predetermined manner that makes it a case of adverse possession⤡ through hostile takeover while the DHFL case is still pending in the apex court of law or is sub judice.

This calls for our voice against the BJP’s shrewd tactics to benefit only two-three crony business tycoons at the cost of the lifetime savings of the thousands of the innocent common Indian citizens, who are being punished under this different sort of “capital” punishment of manufactured financial abuse due to no fault of their own.

Seize Cronies, Fairplay for DHFL Victims!

Scrap and Remodel the IBC ASAP!