Piramal’s takeover of DHFL to be contested by 63 moons
63 moons technologies, which holds non-convertible debentures worth more than ₹200 crore of DHFL is set to challenge the NCLT order
The National Company Law Tribunal’s (NCLT) order allowing the Piramal Group to take over DHFL has is all set to be challenged.
63 moons technologies, which holds non-convertible debentures (NCDs) worth more than ₹200 crore of DHFL, is at the forefront of the move to contest the NCLT resolution plan under the Insolvency and Bankruptcy Code (IBC). 63 moons believes that the current resolution plan is contrary to law and against the interest of all DHFL’s creditors including NCD holders.
63 moons is unhappy saying that the DHFL Administrator’s application for recovery of ₹45,000 crore under Section 66 of the IBC against DHFL’s promoters and other persons on account of their fraud against the creditors is lopsided and overlooks the interests of creditors including NCD holders.
63 moons contend that ₹45,000 crore must come to the defrauded parties, which are the creditors. The Resolution Plan, however, has been drafted in such a way that it favors the resolution applicant (Piramal Group), allowing it to reap the benefits of recoveries from the promoters.
Ascribing a value of ₹1 to the recoveries of fraud where claims are in excess of ₹45,000 crore creates unjust enrichment of the buyer at the cost of creditors.
Piramal Group has bid only for the current value of DHFL which does not include these amounts that were taken away fraudulently. 63 moons contends that the recoveries must come to the creditors only.
63 moons has taken a stand that the fraudulent transaction recovery benefit of approximately ₹45,000 crore should come to creditors, including NCD holders, as they are the actual sufferers of the default, and not to the buyer of the company.
The current DHFL resolution plans allow the Piramal Group to buy the company by paying a mere ₹37,500 crore as against the outstanding debt of ₹85,000 crore.
Furthermore, the benefits of claims of over ₹45,000 crore are to be appropriated by Piramal fully by ascribing the entire recoverable amount a value of ₹1.
63 moons is of the view that NCD holders will end up being the greatest loser since members of the Committee of Creditors, comprise mainly of banks, have recourse to personal guarantees of promoters. NCD holders do not enjoy any such contractual remedy. It also feels that it will set a bad precedence for the future if such recoveries from fraudulent transactions are allowed to pass through to the resolution applicants instead of the creditors.
Piramal Group has offered to pay banks ₹37,500 crore over seven years while letting HNCD holders high and dry. 63 moons plans to review its options in consultation with its legal advisors after getting a copy of the NCLT order.