The Supreme Court will hear the appeal filed by the Piramal Group this Friday, against a recent NCLAT order that ruled a stipulation in the DHFL resolution plan as “illegal”, with regard to recovery of avoidance transactions.

The hearing is scheduled for March 11, as per the Supreme Court date sheet on its website.

It may be recalled that NCLAT had — in the matter of the 63 moons challenge — in January 2022, set aside the term in the DHFL resolution plan that permitted Piramal Group (successful resolution applicant) to appropriate recoveries from avoidance transactions. 

Piramal 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, sources said. The RBI appointed administrator for DHFL, committee of creditors and 63 moons have been listed as respondents to this appeal.

NCLAT had, in the 63 moons challenge order in January, sent the authorised resolution plan back to the Committee of Creditors (CoC) to reconsider this aspect of the valuation of avoidable transactions that pertain 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.

In its appeal, 63 moons asked whether the Piramal group could appropriate all recoveries from avoidance applications filed under Section 66 of the IBC just because the CoC has agreed to assign a completely arbitrary and unrealistic value of one rupee. It cited a Delhi High Court judgment in Venus Recruiters Private Limited to back its claims, stating that the bankruptcy laws of the countries like the US also advocate creditors benefit, directly or indirectly.

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 promoters.