Amidst the ongoing Covid-19 pandemic and job losses, the National Company Law Tribunal (NCLT) has asked lenders of Dewan Housing Finance Corporation Ltd (DHFL) to reconsider the distribution of funds to fixed deposit holders and provident funds within two weeks.

Considering the number of small investors and senior citizens who had deposited their hard-earned money and who now face a financial crisis due to the pandemic, the Resolution Plan should provide for an increased share for them, the NCLT said in its order dated June 7.

“It’s generally considered that the investment in the fixed deposit, NCDs are low-risk investment [compared with investing in equity shares]. Therefore, these small investors should not be put to more risk, take more hair cut than the stronger financial institutions viz banks, financial institutions.

“Accordingly, for this limited purpose, we direct the Committee of Creditors (CoC) to reconsider their distribution method amongst various members of the CoC within two weeks from today and report the same to this Adjudicating Authority,” the NCLT said.

‘Up to the lenders’

Legal experts said that the NCLT has only made a request to the CoC and the final decision will be taken by the lenders. “If CoC agrees to give more to the FD holders, then it could set a precedent for other insolvency cases,” said a legal expert.

Nakul Sachdeva, Partner, L&L Partners (formerly Luthra & Luthra Law Offices), said it seems that the NCLT, on compassionate grounds, has requested the CoC to reconsider the distribution of funds while holding that the plan is in accordance with the law.

However, many of the fixed deposit holders and the NCD holders plan to appeal in the National Company Law Appellate Tribunal seeking full recovery of their deposits.

While approving the resolution plan for DHFL, the NCLT, however, made it clear that there is no additional monetary obligation for the Piramal Group to pay anything more than what it has committed in the Resolution Plan, which is ₹37, 250 crore. “It is only an inter se distribution of resolution money amongst various creditors,” the NCLT said. Significantly, the NCLT has also told the CoC to reconsider the claim of the Army Group Insurance Fund and pay the full admitted claim amount of ₹39 crore, which amounts to just 0.0001 per cent of the total plan.

Army group

The suggestion by the NCLT came “considering the nature of duties performed by them who are protecting the nation, sacrificing their lives, difficult working conditions and human service to keep peace of the country.”It would be appropriate for the members of the CoC “to reconsider and repay their entire admitted claim without any hair cut thereby expressing our deep concern, gratitude and respect to the Army Personnel,” it said.

The NCLT also noted that the Army Group did not challenge/oppose the plan and has only sought a sympathetic view of the CoC.

Related Topics
comment COMMENT NOW