Creditors of Dewan Housing Finance Corporation Ltd (DHFL) did not consider the settlement proposal by its promoter Kapil Wadhawan on its merits or with commercial wisdom, the Mumbai bench of the National Company Law Tribunal (NCLT) said.

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NCLT has asked the committee of creditors (CoC) to put up the offer for its “consideration, decision, voting” within the next 10 days, according to a copy of the order. It said the proposal has not been made available to the fixed-deposit and non-convertible debenture holders who constitute more than 65% of vote share.

The proposal offers more than ₹91,000 crore to the creditors, which is higher than the ₹37,250 crore offered by the winning bidder, Piramal Group, and as such the CoC must consider it, NCLT said.

The promoter has also offered to pay ₹9,062 crore lying with the company upfront to small investors, NCD holders, and fixed-deposit holders.

“Since this settlement proposal is substantially higher/more than 1.5 times of the value of the highest bidder, the same needs due consideration/reconsideration by the administrator/CoC,” it said.

The tribunal also observed that while promoters are barred from submitting a resolution plan under Section 29 A of the Insolvency and Bankruptcy Code (IBC), Wadhawan has submitted a one-time settlement offer and there is no express legal bar against such a submission.

“The contention that no promoter of a company in CIRP, on account of his alleged culpability for the financial health or lack thereof of the corporate debtor, ought to be permitted to submit a settlement proposal is entirely misconceived. Indeed, only a promoter or a stakeholder in the company undergoing CIRP would be in a position to submit a settlement proposal,” the tribunal said.

Wadhawan had written to the CoC of DHFL in October, November and December 2020, offering to settle dues in full.

On Piramal’s offer for DHFL, the NCLT observed that the resolution process is currently at an advanced stage. The tribunal also noted that as applications have also been filed by various entities, it would take some time before the plan is approved for implementation.

“The adjudicating authority directs the administrator to place the second settlement proposal before the CoC for its consideration, decision, voting as a simultaneous process without losing time,” the NCLT said.

According to an SBI official, Wadhawan’s letter was discussed in meetings but was not considered for voting as it was not a formal proposal. Besides, lenders are also not in favour of considering a proposal from a promoter who was behind the financial plight of the company.

In November 2019, the RBI had referred DHFL, the third-largest pure-play mortgage lender, to NCLT for insolvency proceedings. It was the first finance company to be referred to NCLT by RBI using special powers under Section 227 of the IBC.

The company is being investigated by the ministry of corporate affairs from December 2019 through the Serious Fraud Investigation Office. The Enforcement Directorate is also probing the company in connection with loans given by it to certain borrowers.

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