Examining the Supreme Court’s Ruling on the DHFL “Fraud” (?) Cases
Examining the Supreme Court’s Ruling on the DHFL “Fraud” (?) Cases
Examining the Supreme Court’s Ruling on the DHFL “Fraud” (?) Cases
Posted on 2nd April, 2025 (GMT 07:18 hrs)
ABSTRACT
The article examines the recent verdict of the Supreme Court of India regarding the Dewan Housing Finance Corporation Limited (DHFL) “fraud” (?) cases. It raises concerns about the integrity, accountability and transparency of the present Indian judiciary, highlighting India’s low rankings in global indices related to the rule of law and corruption. The piece also touches upon alarming incidents, such as the discovery of burnt cash at a judge’s residence, and critiques the perceived erosion of the separation between the judiciary and the political executive. These issues are framed within a broader context of the challenges confronting India’s democratic institutions, prompting critical questions about the Supreme Court’s verdict on the DHFL “Scam” cases. The article concludes with a call for hope, emphasizing the potential for resilience on the part of the DHFL victims.
I. THE OVERVIEW: INDIA, A CRONY OLIGARCHY
In 2024, India ranked 79th out of 142 countries in the Rule of Law Index, according to data from Statista⤡. The index evaluates eight factors, including constraints on government powers, absence of corruption, open government, fundamental rights, order and security, regulatory enforcement, civil justice, and criminal justice.
The compartmentalized distinction between the judiciary and the political executive has become increasingly blurred under the leadership of Chief Justices Gogoi and D. Y. Chandrachud.
https://onceinabluemoon2021.in/2022/09/02/do-you-have-faith-in-the-contemporary-indian-judiciary/
The event of finding stacks of burnt cash from an Indian judicial professional’s residence was not unexpected, but it was unsettling, bewildering… Judicial accountability in contemporary India appears to be largely overlooked.
In March 2025, a fire at the official residence of Justice Yashwant Varma of the Delhi High Court led to the discovery of partially burnt stacks of cash in a storeroom near the staff quarters. Justice Varma, who was in Bhopal at the time, denied any knowledge of the cash, suggesting a conspiracy to frame him.
In response to these events, Chief Justice of India Sanjiv Khanna established a three-member committee to conduct an in-house inquiry into the allegations. Justice Varma was relieved of judicial duties during the investigation.
The incident has sparked significant debate within the legal community and the public, raising concerns about judicial accountability, integrity and transparency.
Furthermore, India’s position in the Corruption Index stands at rank 85 out of 180 countries as of 2020. In Transparency International’s 2024 Corruption Perceptions Index, which scored 180 countries on a scale from 0 (“highly corrupt”) to 100 (“very clean”), India scored 38⤡.
India is “partly free”, says 2021 World Press Freedom Index.
V-Dem Democracy Report, 2022, classified India as an electoral autocracy, ranking it 93rd on the Liberal Democracy Index (LDI) out of 179 countries. According to the report, India is among the top ten ‘autocratisers’ in the world. VIEW HERE ⤡
The George Soros-funded V-Dem Institute listed India at 108th in the World Democracy Index (2023), reiterating the classification of India as an “electoral autocracy.”
India Ranks 108th on Electoral Democracy Index 2023 VIEW HERE ⤡ (As reported on 3rd March, 2023 ©CNBC)
V-Dem denigrates India once again, ranks it 108th on Democracy Index VIEW HERE ⤡ (As reported on 3rd March, 2023 ©Firstpost)
For more information, view the following:
https://onceinabluemoon2021.in/2021/02/12/india-wounded-a-birds-eye-view-2/
The National Human Rights Commission (NHRC) of India was delisted from the Global Alliance of National Human Rights Institutions (GANHRI) in 2016, 2023, and 2024. This development underscores a troubling trend in human rights within the country, which is further illustrated by India’s declining rank in the global human rights index⤡, with India currently positioned 109th out of 165 countries as of 2024.
Apart from this dilapidated state of the Indian republic, we have observed the massive rigging, money laundering, ballot/EVM manipulations in Indian elections by the BJP as reported by the ADR and Vote for Democracy (VFD).
https://onceinabluemoon2021.in/2024/08/28/the-legitimation-crisis-of-indian-elections/
Now, let us move over to our major point of concern as of now, viz., the recent Supreme Court verdict on the DHFL scam cases.
II. THE SUPREME COURT VERDICT ON THE DHFL ISSUE (01.04.2025)
Due to the above-mentioned issues regarding the Indian “republic” (?), the Supreme Court’s verdict dated April 1, 2025, regarding the DHFL issue in the 63 Moons Technologies case (Civil Appeal Nos. 1632-1634 of 2022) and related appeals, delivered by the bench led by Justice Bela M. Trivedi and Justice S. C. Sharma, comes as no surprise to us.
We wrote the following earlier:
https://onceinabluemoon2021.in/2024/11/07/dhfl-victims-know-your-judge-justice-bela-m-trivedi/
Below is the full verdict:
Here is a summary of the main points of the verdict:
Case Background
- The appeals arose from the Corporate Insolvency Resolution Process (CIRP) of Dewan Housing Finance Corporation Limited (DHFL), a housing finance and non-banking financial company (NBFC), under the Insolvency and Bankruptcy Code, 2016 (IBC).
- Piramal Capital and Housing Finance Limited (Piramal Capital) was the Successful Resolution Applicant (SRA), with its Resolution Plan (RP) approved by the Committee of Creditors (CoC) with 93.65% votes and by the National Company Law Tribunal (NCLT) on June 7, 2021.
- The National Company Law Appellate Tribunal (NCLAT) modified the RP on January 27, 2022, regarding the treatment of recoveries from avoidance applications under Section 66 of the IBC, prompting multiple appeals to the Supreme Court.
Main Points of the Verdict
The judgment categorized the appeals into three groups and addressed them as follows:
1. First Category: Appeals Regarding Avoidance Applications
- Issue: The NCLAT had set aside the RP clause allowing Piramal Capital to appropriate recoveries from avoidance applications under Section 66 (fraudulent/wrongful trading), directing reconsideration by the CoC.
- Findings:
- The CoC’s decision to assign a notional value of INR 1 to Section 66 recoveries and allow Piramal Capital to retain them was part of its commercial wisdom, exercised after negotiations and reflected in the INR 37,250 crore resolution amount.
- The NCLAT overstepped its jurisdiction under Section 61 of the IBC by interfering with the CoC’s commercial decision, which was approved by the NCLT.
- 63 Moons Technologies Limited (63 Moons), an NCD holder with a 0.2% CoC share, voted in favor of the RP (98.94% majority in its class) and was estopped from challenging it later.
- Recoveries from avoidance applications under Sections 43, 45, 47, 49, and 50 (preferential, undervalued, etc.) benefit the CoC, while Section 66 recoveries accrue to Piramal Capital, as per the RP.
- Decision: The NCLAT’s order dated January 27, 2022, was set aside, and the NCLT’s approval of the RP on June 7, 2021, was upheld. The NCLT was directed to decide pending avoidance applications separately under relevant IBC provisions.
2. Second Category: Appeals by Fixed Deposit (FD) and Non-Convertible Debenture (NCD) Holders
- Issue: FD and NCD holders challenged the RP’s distribution mechanism, claiming it violated their rights to full repayment under the Reserve Bank of India Act, 1934 (RBI Act), and the National Housing Bank Act, 1987 (NHB Act).
- Findings:
- The RP provided full repayment to FD holders with claims up to INR 2 lakhs and liquidation value for claims above that, approved by 86.95% of the CoC.
- Neither Section 36(A) of the NHB Act nor Section 45(QA) of the RBI Act mandates full repayment of deposits; they allow discretionary repayment orders, none of which were issued here.
- FD holders (6.18% CoC share) were dissenting creditors but were bound by the CoC’s majority decision, represented by their authorized representative.
- The RP complied with Rule 5(d)(i) of the FSP Rules, 2019, as Piramal Capital demonstrated its capability to operate as a financial service provider.
- The CoC’s commercial wisdom on distribution is paramount, with limited judicial review under Sections 31 and 61 of the IBC.
- Decision: All appeals by FD and NCD holders were dismissed, affirming the NCLAT’s dismissal of their challenges.
3. Third Category: Appeals by Ex-Promoters (Kapil Wadhawan and Dheeraj Wadhawan)
- Issue: Ex-promoters challenged their exclusion from CoC meetings, denial of RP copies, and rejection of their settlement proposals, alongside the RP’s approval.
- Findings:
- The RBI superseded DHFL’s Board of Directors under Section 45-IE of the RBI Act on November 20, 2019, due to mismanagement, causing the ex-promoters to vacate their offices permanently—distinct from temporary suspension under IBC Section 17.
- Superseded directors, unlike suspended ones under IBC Section 24, have no statutory right to participate in CoC meetings or receive RP copies during CIRP, given their vacated status and ongoing criminal proceedings.
- The RP, approved by 93.65% of the CoC, maximized DHFL’s asset value through a transparent, competitive process, and the ex-promoters’ settlement proposals were irrelevant as they lacked CoC support (89% rejection) and RBI backing under Section 12A.
- Post-approval, the RP becomes a public document under the Indian Evidence Act, entitling ex-promoters to a certified copy, but not during CIRP.
- Decision: Appeals by Kapil and Dheeraj Wadhawan were dismissed. Piramal Capital’s appeal against the NCLAT’s ruling on RP confidentiality post-approval was also dismissed, as the court clarified access rights.
Conclusion
- Outcome:
- First Category: Appeals by Piramal Capital and Union Bank of India allowed; 63 Moons’ appeal disposed of.
- Second Category: All FD/NCD holder appeals dismissed.
- Third Category: All ex-promoter and Piramal Capital appeals dismissed.
- Key Legal Principles:
- The CoC’s commercial wisdom is paramount under the IBC, with minimal judicial interference unless perverse or illegal.
- Avoidance application recoveries are treated differently based on IBC sections, with Section 66 recoveries validly assigned to the SRA here.
- Superseded directors lose participation rights in CIRP, unlike suspended directors, due to RBI Act provisions.
- The Supreme Court restored the NCLT-approved RP, ensuring its implementation while clarifying the treatment of avoidance recoveries and stakeholder rights.
Here is a summary of the main points of the verdict:
Case Background
- The appeals arose from the Corporate Insolvency Resolution Process (CIRP) of Dewan Housing Finance Corporation Limited (DHFL), a housing finance and non-banking financial company (NBFC), under the Insolvency and Bankruptcy Code, 2016 (IBC).
- Piramal Capital and Housing Finance Limited (Piramal Capital) was the Successful Resolution Applicant (SRA), with its Resolution Plan (RP) approved by the Committee of Creditors (CoC) with 93.65% votes and by the National Company Law Tribunal (NCLT) on June 7, 2021.
- The National Company Law Appellate Tribunal (NCLAT) modified the RP on January 27, 2022, regarding the treatment of recoveries from avoidance applications under Section 66 of the IBC, prompting multiple appeals to the Supreme Court.
Main Points of the Verdict
The judgment categorized the appeals into three groups and addressed them as follows:
1. First Category: Appeals Regarding Avoidance Applications
- Issue: The NCLAT had set aside the RP clause allowing Piramal Capital to appropriate recoveries from avoidance applications under Section 66 (fraudulent/wrongful trading), directing reconsideration by the CoC.
- Findings:
- The CoC’s decision to assign a notional value of INR 1 to Section 66 recoveries and allow Piramal Capital to retain them was part of its commercial wisdom, exercised after negotiations and reflected in the INR 37,250 crore resolution amount.
- The NCLAT overstepped its jurisdiction under Section 61 of the IBC by interfering with the CoC’s commercial decision, which was approved by the NCLT.
- 63 Moons Technologies Limited (63 Moons), an NCD holder with a 0.2% CoC share, voted in favor of the RP (98.94% majority in its class) and was estopped from challenging it later.
- Recoveries from avoidance applications under Sections 43, 45, 47, 49, and 50 (preferential, undervalued, etc.) benefit the CoC, while Section 66 recoveries accrue to Piramal Capital, as per the RP.
- Decision: The NCLAT’s order dated January 27, 2022, was set aside, and the NCLT’s approval of the RP on June 7, 2021, was upheld. The NCLT was directed to decide pending avoidance applications separately under relevant IBC provisions.
2. Second Category: Appeals by Fixed Deposit (FD) and Non-Convertible Debenture (NCD) Holders
- Issue: FD and NCD holders challenged the RP’s distribution mechanism, claiming it violated their rights to full repayment under the Reserve Bank of India Act, 1934 (RBI Act), and the National Housing Bank Act, 1987 (NHB Act).
- Findings:
- The RP provided full repayment to FD holders with claims up to INR 2 lakhs and liquidation value for claims above that, approved by 86.95% of the CoC.
- Neither Section 36(A) of the NHB Act nor Section 45(QA) of the RBI Act mandates full repayment of deposits; they allow discretionary repayment orders, none of which were issued here.
- FD holders (6.18% CoC share) were dissenting creditors but were bound by the CoC’s majority decision, represented by their authorized representative.
- The RP complied with Rule 5(d)(i) of the FSP Rules, 2019, as Piramal Capital demonstrated its capability to operate as a financial service provider.
- The CoC’s commercial wisdom on distribution is paramount, with limited judicial review under Sections 31 and 61 of the IBC.
- Decision: All appeals by FD and NCD holders were dismissed, affirming the NCLAT’s dismissal of their challenges.
3. Third Category: Appeals by Ex-Promoters (Kapil Wadhawan and Dheeraj Wadhawan)
- Issue: Ex-promoters challenged their exclusion from CoC meetings, denial of RP copies, and rejection of their settlement proposals, alongside the RP’s approval.
- Findings:
- The RBI superseded DHFL’s Board of Directors under Section 45-IE of the RBI Act on November 20, 2019, due to mismanagement, causing the ex-promoters to vacate their offices permanently—distinct from temporary suspension under IBC Section 17.
- Superseded directors, unlike suspended ones under IBC Section 24, have no statutory right to participate in CoC meetings or receive RP copies during CIRP, given their vacated status and ongoing criminal proceedings.
- The RP, approved by 93.65% of the CoC, maximized DHFL’s asset value through a transparent, competitive process, and the ex-promoters’ settlement proposals were irrelevant as they lacked CoC support (89% rejection) and RBI backing under Section 12A.
- Post-approval, the RP becomes a public document under the Indian Evidence Act, entitling ex-promoters to a certified copy, but not during CIRP.
- Decision: Appeals by Kapil and Dheeraj Wadhawan were dismissed. Piramal Capital’s appeal against the NCLAT’s ruling on RP confidentiality post-approval was also dismissed, as the court clarified access rights.
Conclusion
- Outcome:
- First Category: Appeals by Piramal Capital and Union Bank of India allowed; 63 Moons’ appeal disposed of.
- Second Category: All FD/NCD holder appeals dismissed.
- Third Category: All ex-promoter and Piramal Capital appeals dismissed.
- Key Legal Principles:
- The CoC’s commercial wisdom is paramount under the IBC, with minimal judicial interference unless perverse or illegal.
- Avoidance application recoveries are treated differently based on IBC sections, with Section 66 recoveries validly assigned to the SRA here.
- Superseded directors lose participation rights in CIRP, unlike suspended directors, due to RBI Act provisions.
- The Supreme Court restored the NCLT-approved RP, ensuring its implementation while clarifying the treatment of avoidance recoveries and stakeholder rights.
- https://onceinabluemoon2021.in/2025/02/23/the-dhfl-scam-a-simulated-hoax/
- https://onceinabluemoon2021.in/2025/02/16/dhfl-scam-circus-the-great-hotchpotch/
- https://onceinabluemoon2021.in/2025/03/10/the-great-anachronism-putting-the-cart-before-the-horse-the-dhfl-scam/
- https://onceinabluemoon2021.in/2025/01/28/the-dhfl-scam-an-absence-that-exists/
ii. Why doesn’t the Supreme Court bench led by Justice Bela Trivedi and Justice S. C. Sharma legally sue the NCLAT for its “excessive jurisdiction” in the January 27, 2022 verdict, in light of the perspective presented in the April 1 verdict given by the SCI?
iii. How can a company i.e., Piramal Capital and Housing Finance Limited (PCHFL), which no longer exists as a standalone entity but instead (non-)exists merely as a subsidiary of Piramal Enterprises Ltd. (PEL), effectively combat or “emerge victorious” in any process of litigation? It seems that apparently a non-entity is rendered existent through this very judicial process. How could this be achieved?
iv. We would like to sincerely inquire: did Mr. Ajay Piramal and Co. possibly/allegedly/probably satisfy the itching palms of a biased, Saffronized, greedy judiciary to influence the outcome of the DHFL cases in their favour? Previous instances should be referenced. Mr. Ajay Piramal has earlier made his close association with the BJP evident through his alleged involvement in the Flashnet Scam (an alleged quid pro quo affair) and his 85 crore donations (potential bribes?) to the BJP via unconstitutional electoral bonds.
v. How can Mr. Ajay Piramal’s company depend solely on the approval order from the lowest quasi-judicial body, the NCLT, regarding Mr. Piramal’s plan to claim ownership of DHFL? This question arises considering that he and the RBI-appointed CoC previously disregarded the NCLT’s “controversial” order from 19.05.2021, which called for a reconsideration of the Wadhawans’ proposal(s) for full repayment. Was it a contempt of court on the part of Mr. Piramal and the CoC?
vi. How did Mr. Piramal secure a swift stay order on the NCLAT’s second verdict dated 27.01.2022 on April 11, 2022, while individuals like Stan Swamy, G. N. Saibaba, Bilkis Bano, Sanjiv Bhatt, Umar Khalid, Sharjeel Imam, and many others, convicted in false or baseless cases, have never experienced justice? Moreover, the BJP has reportedly infiltrated the databases of these individuals, who were/are denied justice through extensive use of Pegasus software. Does this not resemble an Orwellian state, where “all animals are equal, but some are more equal than others“?
The Supreme Court’s verdict from 1st April appears to serve as a justification for an alleged politically orchestrated financial abuse, wherein countless innocent DHFL victims were treated as mere laboratory guinea pigs, solely to further legitimize the flawed, heavily amended and incoherent framework of the IBC (2016), especially since the DHFL CIRP was labeled a “test case.”
Has the judiciary been surrendered to wealthy cronies, where justice is nothing but a commodity that could be bought or sold, leaving the common masses in a state of uncertainty and enduring the oblivious risks of unending, unjustified deprivation?
Appendix: What is Still To be Done? What Could Still be Done?
Dear DHFL Victims,
It is still too soon to lose hope. Once all the domestic remedies are exhausted, we will seek recourse to the United Nations’ Human Rights Bodies, specifically the Office of the High Commissioner for Human Rights (OHCHR).
We have observed that the Indian judiciary, allegedly in collusion with the government, is delaying justice in the DHFL issue by resending the case to the NCLAT to “start from scratch.” This likely suggests that after 12 years, Mr. Piramal’s entitlement claim over DHFL, based on an alleged adverse possession, will be automatically “legalized.” Furthermore, this deferral seems intended to hinder DHFL victims from seeking recourse through international justice.
The protracted or lengthy judicial process demonstrates that IBC is far from a “quick solution” for financial crises, as the victims of DHFL have endured a five-year wait, culminating in an utterly frustrating and unsatisfactory outcome with the Supreme Court’s verdict on April 1st.
If this is the case, the DHFL victims should increasingly engage in the ongoing non-violent, web-based civil disobedience movement by leveraging nearly all social media platforms and web resources under the OBMA’s umbrella, as outlined in the following post:
https://onceinabluemoon2021.in/2025/03/30/once-in-a-blue-moon-academia-obma-our-initiatives/
Apart from this online movement, the DHFL victims can collaborate with event managers to organize physical demonstrations featuring slogans, placards, posters, songs, plays, performances, hunger strikes, and more.
Let this post-verdict frustration become an occasion for renewed resistance, and not helpless mourning!
Remember, we are not alone in this; we should be united, facing every challenge that comes our way together.
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