RBI Takes Control of DHFL Board

The Reserve Bank of India superseded the board of troubled mortgage lender Dewan Housing Finance Corp Ltd, citing “governance concerns and defaults” and said it will start insolvency proceedings against the nonbanking finance company.

The central bank appointed R Subramaniakumar, former managing director of Indian Overseas Bank, as administrator and said it will ask the National Company Law Tribunal to appoint him as the resolution professional in charge of the insolvency process.

DHFL has become the first nonbank lender to be sent to the NCLT under the Insolvency and Bankruptcy Code, following a November 15 notification by the corporate affairs ministry. This said that the IBC would cover NBFCs with assets of ₹500 crore or more under Section 227. An interim moratorium will go into force on the date of the application being filed and until it’s admitted.

DHFL is among the most prominent of the nonbank lenders that got swept up in the liquidity crisis that was sparked by the defaults at Infrastructure Leasing and Financial Services in September last year. The central bank was forced to take action after repeated attempts at a rescue by the promoters and lenders have failed. DHFL promoter Dheeraj Wadhawan is also embroiled in a separate case related to terror financing.

After company enters the process and a resolution plan is drawn up, it will have to be approved by the committee of creditors.

DHFL has a diverse set of creditors governed by multiple regulatory authorities, experts pointed out. The inter-creditor agreement that was being negotiated before this latest development had been put on hold as mutual funds were not willing to get on board with that plan.

An advisory committee of three or more experts will be formed within 45 days of admission of the case into the NCLT process. DHFL has total debt of ₹85,000 crore and banks’ exposure is ₹38,000 crore. The committee of creditors that will oversee the process will have 180 days to draw up a resolution plan. If the CoC fails to formulate a plan within 180 days, lenders will have to make additional provision of 20%. The provisioning would rise to 35% if the matter remains unresolved for up to 365 days.

DHFL promoter Dheeraj Wadhawan is being probed by Enforcement Directorate, which has found a web of transactions between real estate firms linked to him and Sunblink, to which his DHFL gave loans worth .₹2,186 crore. Sunblink is being investigated for its property dealings with late gangster Iqbal Memon, alias Iqbal Mirchi, who died in London in 2013.

Wadhawan was named in a case of alleged terror financing against Mirchi. A close aide of Mirchi — Humayun Suleman Merchant — told a special court that he had received ₹5 crore from Wadhawan for facilitating a deal with Sunblink Real Estate, the company at the centre of the probe. Wadhawan was also questioned by the ED on November 5 at the agency’s Ballard Pier office in south Mumbai.

No comments: