Money & Banking

‘Provisions of the resolution plan submitted by Oaktree not in compliance with law’

Our Bureau. Mumbai | Updated on January 08, 2021

Continuing the war of letters over Dewan Housing Finance Corporation Ltd, Ajay Piramal, Chairman, Piramal Enterprises Ltd, has written to the Reserve Bank of India Governor Shaktikanta Das, contending that certain provisions of the resolution plan submitted by Oaktree Capital are not in compliance with law and that it should be disqualified from the voting process.

In the letter sent earlier this week, Piramal is understood to have also said that Oaktree’s bid will not help DHFL comply with capital adequacy requirements post implementation of the resolution plan.

“We sincerely request you to take the above on record and take necessary actions to direct the Administrator and the Committee of Creditors to forthwith reject the Other Resolution Plan and disqualify it from the voting process under the CIRP,” said Piramal in the letter.

Piramal has pointed out that Oaktree intends to infuse only ₹1,000 crore in DHFL through either equity, non-convertible debentures (NCDs) or subordinated debt, and that, too, over a 12-month period after the approval of the National Company Law Tribunal. “ is evident that the Other Bidder (Oaktree) is undertaking only a balance sheet restructuring and there is no other concrete Tier I capital infusion on day one to enhance ‘real’ capital adequacy for the business to meet true minimum capital adequacy requirements for the business,” said Piramal in his letter, adding that the proposed infusion of ₹1,000 crore seems to be only from a scoring perspective as provided in the evaluation matrix prescribed under the CIRP.

“Failure to meet the capital adequacy provisioning requirements will result in the business of DHFL being in contravention of applicable laws in this regard,” he has further said, adding that Oaktree’s resolution plan is non-complaint with the requirements of Sections 30(2)(e) of the IBC and cannot be presented to the CoC for its approval under Section 30(3) of the IBC.

Point-by-point rejoinder

Meanwhile, in a media statement on Friday, Piramal gave a point-by-point rejoinder of Oaktree’s contentions, and said: “The Piramal bid for DHFL offers the lenders the highest upfront cash recovery, has the highest score on the COC evaluation matrix, is fully compliant with all regulatory norms, and is fully and immediately implementable.”

“Oaktree is bringing in minimal equity into DHFL. The initial equity being brought in is a mere ₹1 lakh,” it further said.

Oaktree had also written a similar letter addressed to DHFL’s Administrator and lenders urging that its additional offer should be considered.

Published on January 08, 2021

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