DHFL Case: Investor Moves NCLAT against Delisting of Shares; Wadhawan To Challenge NCLT Nod to Piramal’s Resolution Plan
Moneylife Digital Team 28 June 2021
Anup Pathak, a retail investor of Dewan Housing Finance Ltd (DHFL), has filed an appeal at National Company Law Appellate Tribunal (NCLAT) against delisting of the lender’s shares from the exchanges.
 
In his plea, the investor has alleged that the administrator of DHFL and lenders failed to adequately inform investors about the impending delisting, which was part of the Piramal group’s approved resolution plan under the Insolvency and Bankruptcy Code (IBC). 
 
“The respondents either solely or collectively have failed to inform and obtain the consent of the appellant about the acquisition of the equity shares held by shareholders in company at ‘Rs0’ under the resolution plan, by way of reduction in paid up capital,” the petition by Mr Pathak mentions.
 
The plea filed last week requests the NCLAT to set aside order passed by NCLT on 7th June and relist the shares of DHFL.
 
On 7th June, NCLT had approved the resolution plan of Piramal Capital and Housing Finance (PCHFL) which offered to pay Rs37,250 crore to DHFL lenders. In its order copy, which came out 12th June, the NCLT appointed an observer to the monitoring committee to ensure smooth functioning and transition to PCHFL. 
 
In his plea, Mr Pathak has also added that the resolution of DHFL is contravention of Section 230 of Companies Act, 2013, which provides power to compromise or decide with creditor of a company, while stressing that minority shareholders have right to know even if they are not part of committee of creditors (CoC).
 
In January 2021, in a bitterly fought bidding war, PCHFL resolution plan for DHFL was endorsed by 94% votes from the CoC and had emerged the winner. However, many misled retail investors continued to buy DHFL shares (shrugging off warnings), while anticipating a higher value of the company in future. 
 
The share price of DHFL rose more than 70% on BSE to Rs23.06 on 8th June from 19th April. The stock saw significant trading, even hitting upper circuits after the resolution plan was approved by NCLT, encouraging investors.
 
In DHFL’s case, many retail investors were misled to believe that it would remain listed like Ruchi Soya, Alok Industries and Essar even after IBC. Many such retail investors who continued to invest in DHFL shares who have lost large sums of money now feel victimised because of DHFL’s delisting. They claim that DHFL has assets worth over Rs1.05 trillion and a strong loan recovery process can fetch more money than what has been projected by the Piramal Group. 
 
It is, therefore, important that investors heed the warnings and check out all details in the approved resolution plan in IBC cases before they fall for such bait rumours encouraging them to invest in dud shares. 
 
Market experts had also sounded an early warning on DHFL.
 
Zerodha, the discount broker, even used its ‘Nudge’ feature to forewarn its customers that the investment (in DHFL shares) may go to zero and over 50% of its customers were saved from investing in DHFL because of this feature.
 
 
On 11th June, DHFL ended its trading session at Rs16.70, one day after having hit the 10% lower circuit. The BSE and NSE suspended trading in DHFL shares from 14th June morning. 
 
Meanwhile, Kapil Wadhawan, former promoter of DHFL, plans to challenge the approval by the NCLT to the resolution plan of PCHFL. Mr Wadhawan’s counsel JP Sen informed NCLAT about this on 25th June. Sources indicate that a petition challenging the NCLT order is likely to filed this week.
 
On 1st June, Mr Wadhawan, who seems to be using every legal option possible to try to scuttle Piramal’s resolution plan, had moved the Supreme Court asking for a stay on the NCLAT order, which stayed an earlier order of the Mumbai bench of  NCLT asking the CoC to consider the settlement offer Wadhawan put forward.
 
Petitions filed by DHFL’s CoC, the RBI appointed administrator and PCHFL came up for hearing before the NCLAT on 25th June.
 
Last month, the NCLAT had stayed an order by the NCLT, which had directed the lenders to consider the offer made by Mr Wadhawan within a period of 10 days. The stay, which was an interim order, was based on a plea by the CoC of DHFL challenging the NCLT order.
 
Appearing for DHFL administrator, the senior counsel said that since Piramal’s resolution plan has already been approved, the direction by the NCLT to the CoC cannot survive.
 
The NCLAT has adjourned the matter for further hearing to 2nd August. If Mr Wadhawan files his appeal, the full resolution of DHFL could turn to be further delayed. The road ahead remains bumpy because of all these legal hurdles and Piramal’s resolution plan might well take another nine to 12 months to fructify. 
 
Legal experts point out that NCLT had set a dangerous precedent by giving Mr Wadhawan an opportunity given that he stands accused of serious financial fraud and is currently in jail.
 
Meanwhile, even the fixed deposit (FD)-holders and NCD-holders, who are set to lose out significant portions of their investment in DHFL, are unhappy with the approved resolution plan. 
 
Separately, small depositors of DHFL (including fixed deposit-holders and secured NCD-holders) and 63 moons technologies (which has an exposure of Rs 200 crore in NCDs), are also said to be filing appeals for full repayment of their claims. 63 moons technologies stands to lose 65% to 75% of the invested amount if the approved resolution plan takes effect.
 
This might turn out into a long-drawn legal battle and a long wait for justice for lenders and investors in DHFL. 
 
Comments
veena3115
1 month ago
PCHFL's proposal to delist DHFL was accepted by DHFL's creditors in January, 2021.....if that is the case y nse and bse accepted the shares buying options from the traders..... all the traders are not professional traders......we believed theire moves always protect the customers n did the wrong thing without knowing the full fact ....fate what to do.....
Child belive their parents have faith on them whether they throw then also kid smiles because kid knows definitely parent will catch... ulta ayithu illi aste
r_ashok41
3 months ago
In IBC code there should be a provision to penalise the rating agency and give that money to the creditors and make the rating agency more responsible towards what rating they give.In that way customers will be better informed.
Thariyan Tharayil
3 months ago
Thanks to Anup for filing a PIL. As I understand from news sources, NCLT didnt even share the resolution details with Wadhawan. What process it follows to share the details with other type of investors is not known to public. It should be the responsibility of the arbitrator to let know the existing investors on the fate of their investment. When all investors are getting something after haircut, the haircut for equity investors is 100%. Just like Ruchi Soya or Orchid Pharma, 5% of this equity is bound to get relisted at say Rs.10 and then zoom to Rs.2000. Imagine the returns to be made by Piramal that will be holding 95% equity. Banks will also be benefiting from this jump, as some part of their receivables will also be converted to equity. There is no point in relisting the shares now, as it will only hit down circuit and end up at 5paise. A better approach would be to allocate the new equity to existing equity holders proportionately. Thanks to Moneylife for providing a platform to air our grievances.
Thariyan Tharayil
Replied to Thariyan Tharayil comment 3 months ago
Arbitrator should be read as Administrator
komalhema4
3 months ago
Thieves wear coat and suit to loot money from public and out of loot money pay to lawyers
Ramesh Popat
3 months ago
full amt to fd/ncd holders not likely. there will be haircut not less
than 25%. I hold 99 ncd (99k). by trading, my net cost has come down
from 1000 per ncd to 670 average. if haircut is 35%, it will break even.
though interest gone.
tapankumarsanyal
3 months ago
We are interested to get back 100% refund of FD amount with accrued interest immediately as the money invested based on credit rating as well as backed by NHB and RBI supervision. Let the company and the behind the screen political masters fight within themselves for taking over control of DHFL and legal battles over the matter continue, but the hard earned money of the Sr Citizens must be refunded before death.
myimpscandocs
3 months ago
Can we have FD refunds any idea when can we get it.
hudafshaikh
3 months ago
Seems that DHFL shareholders have finally woken up - hopefully, now ED will jump into action and take the DHFL resolution professional in custody for the fraud that has been going on at DHFL for the past year and half -


saharan.rakesh
3 months ago
Secured NCD holders must get full amount of their investments
dvkrishna2013
Replied to saharan.rakesh comment 3 months ago
s u r right. all secured NCD holders should get full amount. is every individual should be a part of case filing.
paresh.dhal1958
3 months ago
I m a new investor, I started trading from First Lockdown with the intentions that get some engagement and earn. I want to know how much money SEBI, NCLT, NSDL or any Brokerage firm lost ? I have 5000 shares @23:82 I lost ?119100/-.
In our country mostly peoples think Share Market is ZUA ( Gambling ) but not correct. I had some shares of Vijaya Bank but, after merger I got Bank of Baroda shares.
After this, I feel also it is Zua.
NCLT should direct the new one to take Cow with Calf ( retail investors ).

Justice should be handled with mercy.

It is just like : ???? ??? ??? ?? ?? ????? ???? ?? ???? ??? ?? ???? ??????.
?? ?????? ??? ???? Finance Minister ?? Interfere ???? ?????.
??? ?????? ?? ????????? ?? ???????? ?? ?? ???? ?? ?? NCLT ???? ???? ?????.
?? ????? ????? ?????? ???? ?
kanthisudha13
3 months ago
NCD issued is fully secured and should have a say in the receivables and profit the DHFL made this quarter and liquidation of the company if it happens, NCD holders should have the right as it is secured,orbiterly allowing piramal group to grab it is illegal
anilkmahraja
3 months ago
The whole saga revolves around the ratings provided, Auditors nexus with promoter, press talking promoters mind that it is an ALM issue and Ambani and Primal coming in marriage alliance. Landers, sebi, adminstration mere puppets in the hands of the Sadhu Modi
yinsanelyyours
3 months ago
There are a few more points to fight on:
1. The company posted profits for the latest quarter under the administration of RBI. Therefore it was a "going concern" and would have done well with or without Piramal and it is illegal for the company to be sold this cheap and definitely points to something shady - RBI, CoC, NCLT, SEBI et al. And if it's a concern that can write profits then why are shareholders being thrown out?
2. What is happening to the 36% stake of the promoters which are currently pledged with the creditors. Why are the creditors willing to forgo these shares? Or are they really forgoing? Is there some shady arrangement there too?
3. Why did SEBI strategically change the circuit from 5 to 10% just immediately after the results were posted on 5th June? That too after so many months of 5% circuit, why a sudden change just 2 days before SEBI and DHFL and Piramal decide to delist and suspend trading? Were they setting a trap on investors? Were they trying to let a few VIP's escape by giving them a route to sell?

The whole thing smells of fraud. It is so evident. Really need to fight this to the end and weed out this corruption!!!!!
pramodshroff
3 months ago
I will advise MR Pathak to also make BSE & NSE parties as why they continued with trading of the share even after knowing the provisions of delisting and order of NCLT. They should responsible for damages.
shaik.acj
Replied to pramodshroff comment 3 months ago
Very true. Why did NSE and BSE allowed these shares to be traded in the first place if the scripts are going to be delisted? It's a complete frauding of small investors. This whole deal is a scam
pramodshroff
Replied to pramodshroff comment 3 months ago
They should be held responsible for damages.
arvindsrus
Replied to pramodshroff comment 3 months ago
not only them - all the TV channels are also responsible.. it is a collective responsibility
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