The administrator for DHFL has approached the appellate tribunal against the National Company Law Tribunal’s (NCLT) May 19 order directing the committee of creditors (CoC) to consider an offer made by the jailed promoter of the company Kapil Wadhawan.
The Times of India citing banking sources mentioned in a report that following NCLT directions would undermine all the progress achieved towards the resolution of the case. Lenders further said that there was no question of doing a one-time settlement with Wadhawan because that would involve the RBI withdrawing the case from NCLT, providing a bank guarantee for expenses incurred by the administrator and 90% of the voters agreeing to a proposal that was not a valid one in the first place.
“The letter written by Wadhawan is not a formal proposal. Its objective was to stymie the resolution process,” the daily quoted a banker as saying. While it would be easy for lenders to vote and reject a proposal by the former promoter, the whole process would have taken a fortnight as there are different classes of creditors, including some who dissented on the Piramal bid. The NCLT bench would also be completing its term in early June and if the matter came up before a new bench, the resolution could get further delayed.
Bankers said that lenders had earlier considered Wadhawan’s letter for settlement. The letter wherein he offered principal repayment in full in seven-eight years was considered by lenders and rejected without being put up for a vote as it did not find any merit with the lenders, the publication mentioned citing bankers. Bankers say that it is clear that Wadhawan intends to delay the resolution as much as possible through litigation. Given the circumstances, they felt it would be better to exhaust the avenues for appeal to ensure that new impediments do not come up in future.
Section 29A of the insolvency and bankruptcy law prevents defaulting promoters from being part of the resolution process. But lenders can do a one-time settlement with the promoter after withdrawing the matter from the bankruptcy process under section 12A. In case of DHFL, since the process has been initiated by the RBI, it is the central bank that will have to make an application to withdraw. The RBI had earlier informed the tribunal that it had superseded the board owing to “governance concerns and defaults”.
