Bringing Back from Oblivion: Key NCLT and NCLAT Verdicts in the DHFL “Scam” Cases

Posted on 22nd April, 2025 (GMT 13:57 hrs)

ABSTRACT

The article strongly commends the NCLT (May 19, 2021) and NCLAT (January 27, 2022) for their bold rulings in the DHFL insolvency case, which criticized the exclusion of ex-promoters, exposed irregularities in the resolution plan by Ajay Piramal, and questioned the opaque conduct of the RBI-appointed Committee of Creditors (CoC). It highlights the lack of transparency in auditing, denied access to CoC audits under RTI, and systemic disregard for small depositors. The authors critique the Supreme Court’s April 1, 2025, judgment for upholding the resolution plan without adequately addressing these issues, while remanding the matter of avoidance transaction recoveries to the NCLT. Emphasizing a pro-people, constitutional ethos, the piece appeals to NCLT and NCLAT to uphold their earlier stances and protect public interest, calling for justice and restitution for DHFL’s small depositors.

“Where did the child go? Has someone kept him in some

Cave of a cliff, unknown and

Hidden?

Or has he fallen asleep playing with pebbles, grass and earth

By the banks

Of a distant river, or in the shade of a tree?

At any costs

Go, Find him.

Let him once come in front of the naked King

And stand unafraid.

Let him once raise his voice above this roar of applause

And ask:

Hey, where are your clothes, King?“

Closing Lines from Ulongo Raja (The Naked King) by Nirendranath Chakravarty

We extend our sincere gratitude to the two esteemed benches of the National Company Law Tribunal (NCLT) and the National Company Law Appellate Tribunal (NCLAT) for their resolute and forthright observations in the matters related to the Corporate Insolvency Resolution Process (CIRP) of Dewan Housing Finance Corporation Limited (DHFL). These significant pronouncements are encapsulated in two landmark verdicts: the NCLT’s judgment dated 19th May 2021, delivered by the bench comprising Ravikumar Duraisamy (Member, Technical) and H.P. Chaturvedi (Member, Judicial); and the NCLAT’s judgment dated 27th January 2022, delivered by the bench comprising Justice M. Venugopal (Member, Judicial), V.P. Singh (Member, Technical), and Dr. Ashok Kumar Mishra (Member, Technical).

In both rulings, the respective benches exhibited commendable judicial courage in unflinchingly addressing critical issues—calling a spade a spade.

They have highlighted several matters of utmost importance, which are given as follows:

A) The exclusion of DHFL’s ex-promoters from the CIRP and the repeated dismissal of their proposals for full repayment, which could have potentially safeguarded small stakeholders’ interests;

B) The numerous loopholes, lacunae, irregularities, and illegalities in the DHFL CIRP and the “approved” resolution plan of Mr. Ajay Piramal, which raised serious concerns about the process’s transparency, accountability and integrity.

Furthermore, these benches exposed alleged corruption and abuse of power within the Reserve Bank of India (RBI)-appointed Committee of Creditors (CoC) for DHFL. The lack of transparency is evident, as the CoC’s audit remains inaccessible to DHFL’s public depositors. Despite repeated requests under the Right to Information (RTI) Act, no satisfactory responses have been provided, leaving depositors in the dark.

It is deeply concerning that the Supreme Court verdict dated April 1, 2025, on the DHFL “scam” cases appears to have dismissed these critical observations and arguments without, in our view, providing robust or logical counterarguments. This raises questions about the adequacy of the reasoning behind the dismissal of the ex-promoters’ rights and the sanctity of the CIRP process.

We sincerely hope that, as the Supreme Court has directed the NCLT to reconsider the matter of avoidance transactions from scratch, the NCLT will uphold the spirit of its May 19, 2021, order and draw logical strength from the NCLAT’s January 27, 2022, verdict in its deliberations. We urge the NCLT to ensure that justice prevails by addressing the concerns raised regarding the treatment of avoidance transaction recoveries, ensuring they benefit creditors and depositors rather than the supposed “owner” of the DHFL, viz., Mr. Ajay Piramal.

“The impugned judgment and order dated 27.01.2022 passed by the NCLAT in Company Appeal Nos. 454-455 and 750 of 2021 is set aside, and the judgment and order dated 07.06.2021 passed by the Adjudicating Authority/ NCLT granting its approval to the Plan Approval Application, and thereby approving the Resolution Plan, is upheld. However, it is clarified and directed that the NCLT shall decide the Avoidance Applications filed by the Administrator under Section 43, 45, and 50, and shall separately decide the Applications under Section 66, and it shall pass the orders in accordance with the powers conferred upon it under Section 44, 48, 49, 50, and under Section 66, as the case may be. The recoveries/benefits that may follow from such Applications shall be appropriated in favour of the CoC in case of Avoidance Applications under Section 43, 45 and 50, and in favour of SRA-Piramal Capital in case of Applications under Section 66 of IBC.” (Excerpt from the SCI Verdict on the DHFL “scam” cases, pp. 144-145, Civil Appeal Nos. 1632-1634 of 2022, 01.04.2025)

We humbly appeal to the NCLT and NCLAT to reaffirm their pro-people stance, as demonstrated in the aforementioned rulings, and deliver complete justice to the vulnerable DHFL victims—particularly the small depositors of a once AAA-rated Non-Banking Financial Company (NBFC). We earnestly request that these esteemed quasi-judicial bodies maintain their principled stand, boldly declaring the truth, even if it means stating that the emperor has no clothes. We sincerely request both the adjudicating authorities to maintain the status quo of these two specific verdicts, as they align with the core values of the Indian Constitution.

Below are a series of relevant posters and posts related to the aforementioned verdicts of the NCLT and NCLAT that we have created throughout our years of struggle. Please feel free to share them widely to influence the legal outcomes that may follow:

I. PROPAGANDA POSTERS