Money & Banking

DHFL: RBI initiates corporate insolvency resolution process

Our Bureau Mumbai | Updated on November 29, 2019 Published on November 29, 2019

FILE PHOTO   -  REUTERS

The Reserve Bank of India (RBI) on Friday filed an application for initiation of corporate insolvency resolution process against the financially stressed Dewan Housing Finance Corporation Ltd (DHFL) under the Insolvency and Bankruptcy Code (IBC).

This is the first time that the RBI has invoked IBC for a non-banking finance company after the government notified rules pertaining to Insolvency and Liquidation Proceedings of Financial Service Providers (FSP) and Application to Adjudication Authority.

DHFL owes about Rs 84,000 crore to lenders including banks, insurance companies, mutual funds, pension funds, individual depositors and non-convertible debenture holders.

As per Rule 5 (b) (i) of the FSP Insolvency Rules, an interim moratorium will commence on and from the date of filing of the application till its admission or rejection.

On the insolvency commencement date, the Adjudicating Authority (AA) shall by order declare moratorium for prohibiting: institution of suits or continuation of pending suits or proceedings against the corporate debtor; transferring, encumbering, alienating or disposing off by the corporate debtor any of its assets or any legal right or beneficial interest therein;

The AA shall prohibit any action to foreclose, recover or enforce any security interest created by the corporate debtor in respect of its property; the recovery of any property by an owner or lessor where such property is occupied by or in the possession of the corporate debtor.

Under the Rules, the supply of essential goods or services to the corporate debtor as may be specified shall not be terminated or suspended or interrupted during moratorium period.

On November 20, the RBI superseded the Board of Directors of DHFL owing to governance concerns and defaults by DHFL in meeting various payment obligations. It also appointed R. Subramaniakumar, ex-MD and CEO of Indian Overseas Bank as DHFL's Administrator.

On November 22, the central bank constituted a three-member Advisory Committee to assist the Administrator of DHFL in discharge of his duties. The members of the Advisory Committee are: Rajiv Lall, Non-Executive Chairman, IDFC First Bank; N S Kannan, Managing Director and CEO, ICICI Prudential Life Insurance Company; NS Venkatesh, Chief Executive, Association of Mutual Funds in India.

Published on November 29, 2019
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