DHFL default cases land in Supreme Court as fixed-deposit holder files plea

The default by the housing finance company, Dewan Housing Finance Corporation (DHFL), to a slew of investors has landed in the Supreme Court (SC), with a fixed deposit holder moving the apex court seeking dues.

A special leave petition in the SC was filed on Monday and it is expected to be listed in the next few weeks, said a source close to the development. The HFC owes close to Rs 15,000 crore to fixed deposit holders and another Rs 38,000 crore to banks. The total debt of DHFL is estimated at a whopping Rs 88,000 crore, including mutual funds and bondholders. 

DHFL is already facing litigation in the Bombay High Court where its lenders, led by State Bank of India (SBI), Canara Bank, Union Bank and HDFC Bank, are seeking their dues. Another case is filed in the debt recovery tribunal, Pune, which had restrained any payments to the creditors. The debt recovery tribunal (DRT) was moved by Catalyst Trustee, on behalf of DHFL bondholders, seeking dues worth Rs 26,861 crore. 

The SC was moved by one Vijay Kumar Mittal, a Ghaziabad resident and a fixed deposit holder, according to the filings with the SC registry.  The special leave petition has challenged the orders of both the Bombay High Court and the DRT, which had restrained repayments to the fixed deposit holders. 

As several retail fixed deposit holders of DHFL are spread all over India and are not organised, they are unable to take legal action against the company. The petition in the SC will help the small fixed holders to get back their money, said a source.

The Bombay High Court in the petition filed by Reliance Nippon Life AMC against DHFL had passed orders on September 30 and October 10, restraining DHFL from making payments to any of its secured/unsecured creditors, including fixed deposit holders. 

In a statement to the stock exchanges on November 3, DHFL said it was making all payments for maturity and interest on all fixed deposits held with the company, on their respective due dates, and there was no delay in making any payment to any fixed deposit holders until the HC orders. 

On November 13, the HC lifted the restrictions and allowed Indian lenders to receive payments from troubled housing finance firm against securitised assets. Meanwhile, several other aggrieved parties moved the Bombay HC. 

The UP government-owned provident fund trusts of UP Power Corporation Limited (UPPCL) and an insurance credit society of the Indian Air Force employees also moved the HC as interveners in the original commercial suit filed by Reliance Nippon Life AMC. 

The Bombay HC hearing is expected on Wednesday. The two provident fund trusts of the UP government power corporation want their Rs 4,100 crore investments back from DHFL. 

The UP government has ordered a Central Bureau of Investigation probe on the investment made by provident fund trusts in DHFL but no further announcement has been made so far by the premier investigating agency.

Since Monday, nearly 45,000 UPPCL employees are protesting in front of the offices of UP power corporation asking the state government to take the responsibility of repayment after DHFL defaulted.

Last month, a forensic audit initiated by Union Bank of India and conducted by KPMG confirmed the promoters of DHFL had diverted funds from the company worth Rs 20,000 crore and in several cases there was no proper records kept on the end use of funds lent by DHFL to over 40 entities. The regulators led by the RBI and the Sebi have also expedited their probe and plan to examine DHFL auditors during the period 2015 to 2019 asking why they failed to detect the fund diversion in time.  

The DHFL saga first came to light when web-based media outlet, Cobrapost reported that DHFL floated several shell companies to divert funds from the company.  An independent auditor appointed by DHFL — TP Ostwal & Associates — gave the company a clean slate.

Mired in litigation
  • Fixed deposit holders want DHFL to repay dues
  • DHFL says paid dues till HC’s restraining order
  • HC, DRT restrained repayments to lenders/fixed deposit holders
  • DHFL working on resolution plan along with lenders

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