63Moons moves NCLT against Piramal ascribing ₹1 value to DHFL’s ‘recoverable’ assets

PALAK SHAH Mumbai | Updated on April 26, 2021

63Moons Technologies has dragged Piramal Capital and Housing Finance to the National Company Law Tribunal (NCLT) for ascribing ‘₹1’ value to the assets or transactions of Dewan Housing Finance Corporation (DHFL) that, it says, have a recovery potential of more than ‘₹40,000 crore’.

DHFL, one of India’s largest housing finance companies, is in the midst of insolvency proceedings and Piramal’s Request for Resolution Plan (RFRP) to acquire the company was approved by the committee of creditors (COC) this year.

63Moons, the erstwhile promoter of commodity bourse MCX, has accused Piramal of trying to illegally pocket the money that is likely to be recovered from the debtors of DHFL. 63Moons, which is an admitted financial creditor of DHFL, has also challenged before the NCLT the approvals given by the CoC and the Resolution Professional to Piramal. A hearing was conducted this month.

‘Unreasonable value’

“Instead of assigning fair value to (Section 66 of the IBC) transactions, which are worth more than ₹40,000 crore, Piramal has assigned ₹1 for any recovery made. The original RFRP was modified as per meeting of COC on September 10, 2020. Subsequently, Piramal, to the detriment of the interest of DHFL creditors, ascribed a grossly arbitrary and unreasonable value,” the petition by 63Moons says.

BusinessLine’s email query to Piramal remained unanswered.

However, Piramal has argued in the NCLT that there was no clause mentioning such an amount be used for the benefit of creditors. Senior counsel Navroz Seervai, appearing for 63Moons, told the NCLT that Piramal’s RFRP had such a clause, which read: “Any positive monetary recovery received as a result of orders passed in relation to the avoidance transactions shall be distributed, net of costs and expenses including taxes, to the financial creditors pro-rata to the extent of the debt.”

63Moons has argued that recoveries from reversal of transactions (of DHFL) in terms of section 66 of Insolvency and Banking Code (IBC) would solely benefit Piramal.

When an entity is insolvent, certain transactions are to be avoided as per the IBC, otherwise it will affect its financial position. These transactions are called avoidable transactions. It is to maximize value of assets and its equitable distribution to all stakeholders. IBC requires three types of avoidable transactions like preferential transactions, undervalued transactions and extortionate credit transaction.

In case of DHFL avoidable transactions arise as erstwhile promoters are accused of fraud, money laundering and other illegal acts.

Sources close to the resolution process of DHFL said that 63 Moons’ exposure to financial debt of DHFL is only Rs. 200 crores, as against an aggregate of almost Rs. 90,000 crores of all lenders combined. "DHFL insolvency process is being run by an RBI appointed administrator. Piramal's resolution plan has been overwhelmingly approved by DHFL’s creditors and it has been scrutinized and approved by relevant regulators (RBI and Competition Commission of India). The petition by 63 Moons is being contested, not only by Piramal but also the Committee of Creditors of DHFL and the RBI appointed administrator," said a source close to the resolution process.

Published on April 25, 2021

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