India Markets close in 2 hrs 16 mins

RBI refers stressed DHFL to NCLT for insolvency proceedings

FE Bureau
rbi, bombay hc

The Reserve Bank of India (RBI) on Friday referred stressed mortgage lender Dewan Housing Finance Corporation (DHFL) to the Mumbai bench of National Company Law Tribunal (NCLT) for insolvency proceedings. According to the new Financial Service Providers (FSP) Insolvency Rules, an interim moratorium will start from the date of filing of the application till its admission or rejection.

A moratorium would now commence on all legal suits, including pending ones. Also, transferring, encumbering or disposing of assets of the mortgage lender would not be permitted during this period. DHFL will also not be able to foreclose, recover or enforce any security interest created with respect to its property and any action under the Securitisation and Reconstruction of Financial Assets and Enforcement of Securities Interest (SARFAESI) Act .

The only exception to the moratorium would be any transaction that is specified by the central government in consultation with financial regulators. Additionally, this moratorium would not apply to bank guarantees.

There are two separate cases in the Bombay High Court, and an ongoing hearing at Debt Recovery Tribunal (DRT), Pune, against DHFL.

Edelweiss AMC, Kotak Mahindra AMC, Axis Asset Management and Reliance AMC had moved the Bombay HC seeking a direction to DHFL to disclose all its assets and liabilities and also to temporarily prevent it from making payments/disbursements to secured and unsecured creditors.

In another case, 63 Moons had moved Bombay HC seeking repayment of over Rs 200 crore by DHFL.

With RBI referring DHFL to the Mumbai bench of the NCLT, a moratorium will be effective on all these cases too.

The Bombay HC on Thursday adjourned hearing on the pleas filed by mutual funds (MFs) against DHFL to December 2.

The central bank on November 20 had superseded the board of DHFL and appointed R Subramaniakumar, the former CEO, Indian Overseas Bank (IOB), as the administrator. Following this, the RBI constituted a three-member advisory committee to assist the administrator of DHFL in discharge of his duties on November 22. The advisory committee consists of Rajiv Lall, non-executive chairman, IDFC First Bank; NS Kannan, managing director and CEO, ICICI Prudential Life Insurance; and NS Venkatesh, CEO, Association of Mutual Funds in India (AMFI).

The RBI's decision on DHFL came after the government on November 18 empowered the regulators under Section 227 of the Insolvency and Bankruptcy Code (IBC), allowing them to refer cases of stressed financial service providers with assets of at least `500 crore to the NCLT. DHFL is the first financial services company to be sent to the bankruptcy tribunal after the government notified the rules for referring financial services providers (FSPs) on November 18.