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The Supreme Court on Monday stayed the National Company Law Appellate Tribunal’s (NCLAT) order that ruled a stipulation in the DHFL resolution plan as “illegal”, on recovery of avoidance transactions.
A SC bench headed by Chief Justice of India N V Ramana issued a notice on separate appeals filed by the Piramal Group firm as well as some top banks forming part of the Committee of Creditors (CoC) in the erstwhile DHFL’s resolution matter. The apex court will now hear the appeals on May 5, the bench said on Monday.
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Some CoC members challenge the NCLAT order and want SC to set it asideIt maybe recalled that the Piramal Group had moved the apex court against the NCLAT ruling in the 63 moons challenge. NCLAT had — in the matter of the 63 moons challenge — in January 2022 set aside the term in the DHFL resolution plan permitting Piramal Group (successful resolution applicant) to appropriate recoveries from avoidance transactions.
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DHFL resolution: Fixed deposits holders move Supreme Court
Say NCLAT approval of plan that proposes extinguishing claims without discharging payments in full is unjustPiramal Group, which had acquired DHFL last September, filed the appeal in the Supreme Court on February 16 and the case was registered on February 25.
NCLAT had, in the 63 moons challenge order in January, sent the authorised resolution plan back to the CoC to reconsider this aspect of the valuation of avoidable transactions pertaining to the recoverable belongings.
The CoC, as part of the resolution plan, agreed to Piramal Group getting all future recoveries of bad loans (amounting to about ₹38,000 crore) falling under avoidance transactions and accepted ₹1 from Piramals as the value assigned for such a benefit. 63 moons (one of the creditors with ₹200 crore invested in DHFL NCD’s) had challenged this CoC decision.
63 moons had argued before the adjudicating authorities that the Piramal Group could not appropriate all recovery from the vast amount of DHFL loans listed in ‘avoidance applications’ under Section 66 of the IBC.
NCLAT had ruled this stipulation as “illegal” and noted that all recoveries on avoidance transactions should go for the benefit of only the creditors and not the successful resolution applicant. It also noted that in bidding for DHFL, the Piramal group had not factored in any recoveries from avoidance transactions. In fact, it was argued that there would be minimal recovery and, hence, a value of one rupee was ascribed to this large outstanding.
Under the IBC, “avoidance transactions” are recognised as undervalued, fraudulent or extortionate by the previous promoter
Top banks too went in appeal
In March this year, several top banks forming part of the CoC in the erstwhile DHFL’s resolution matter had knocked the doors of the Supreme Court in appeal against the NCLAT order that had given the entire set of financial creditors a seemingly better deal than what the CoC had agreed for in the resolution plan.
The banks that went for an appeal against the NCLAT’s January 2022 order include Union Bank of India (on behalf of itself), State Bank of India, Bank of India, Canara Bank, Punjab National Bank and the Central Bank of India.
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