A tug-of-war has broken out between the National Housing Bank (NHB) and other lenders vis-a-vis the corporate insolvency resolution process (CIRP) over the scam-hit Dewan Housing Finance Corporation Ltd (DHFL).

While the NHB is asserting its right to receive proceeds from the ongoing CIRP on a preferential basis as per the Act governing it, lenders say the NHB has conceded pari-passu (equal footing) charge for its ₹2,350-crore refinance exposure to DHFL.

According to Section 16(B)(1) of the NHB Act, sums received by a borrowing institution in repayment or realisation of loans and advances financed or refinanced, either wholly or partly by NHB, shall, to the extent of the accommodation granted by it and remaining outstanding, be deemed to have been received by the borrowing institution in trust for NHB, and shall accordingly be paid by such institution to NHB.

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By Section 16(B)(2) of the NHB Act, where any accommodation has been granted by NHB to a borrowing institution, all securities held, or which may be held, by such borrowing institution on account of any transaction in respect of which such accommodation has been granted, shall be held by such institution in trust for NHB.

“HFCs avail of refinance from NHB against the loans given by them to individual home loan customers. So, whenever a loan is serviced and if there is a refinance outstanding on that loan from NHB, the HFC has to repay to NHB to the extent of refinance,” said a former senior NHB official.

So, if an HFC has a home loan portfolio of ₹100 crore, it can take refinance of an equal amount. If the HFC receives ₹2 crore as repayment from its borrowers, this amount has to be held in trust by it as it is NHB’s money.

‘Preferential rights’

“NHB is claiming preferential right over its ₹2,350-crore exposure. But that is being opposed by DHFL’s Administrator and the Committee of Creditors. One of the parties may contest this. So, that may further stretch the process (CIRP),” said a senior banker.

The Ministry of Corporate Affairs (MCA) had initiated investigation in December 2019 into the affairs of DHFL under Section 212(1) of the Companies Act, 2013 through the Serious Fraud Investigation Office (SFIO), as per the notes to accounts of DHFL’s first quarter financial results.

Further, the Enforcement Directorate also initiated investigation in connection with the loans given by the company to certain borrowers. The Central Bureau of Investigation also started investigation in connection with loans granted by the company.

Apart from this, the CBI is also investigating into the amounts invested by Provident Fund in the fixed deposits of the company.

Meanwhile, there is no consensus among the CoC on the unsolicited bid from the Adani Group to buy DHFL’s assets.

While some CoC members are of the view that this bid should be considered, others fear that existing bidders may back out.

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