The committee of creditors (CoC) of the beleaguered Dewan Housing Finance Ltd (DHFL) has voted against a proposal that sought to increase payouts to fixed depositors and non-convertible debenture(NCD) holders in the company. A proposal to repay the Rs39 crore claim by the Army Group Insurance Fund in full has also been rejected, as per documents shared in the Smartroom portal. From the copy of the results Moneylife has accessed, an overwhelming 89.19% of the financial creditors have voted against the proposal while a mere 2.96% voted in favour of the proposal and 7.85% abstained from voting. At least 66% of the financial creditors must vote in favour of such a proposal for it to be passed.
The voting on the proposal to raise payout to retail depositors and unsecured NCD-holders ended at 9pm on Tuesday night.
The proposal had sought to increase fixed depositors recovery to 41% from 23% earlier, while in case of unsecured NCD-holders, the proposal recommended the recovery rate be increased from 5% to 41%. The first resolution was rejected since the cumulative votes cast in favour of the resolution by the CoC is less than 66% of the total voting rights as required under Sec 30(4) of IBC (Insolvency and Bankruptcy Code, 2016). Surprisingly, the fixed deposit-holders and unsecured NCD-holders have also voted against the proposal which would have given them more money.
From the large secured lenders (banks) only IDBI (with 1.15% voting share) has voted in favour of the proposal while all other large banks (including several public sector banks) have voted against it. Accepting the proposal would have meant that other large creditors would get back lesser money (around 5% difference).
There was another resolution put up for voting which sought to to authorise representatives of State Bank of India, Union Bank of India and Catalyst Trusteeship to act on their behalf for further actions in the DHFL case and including the implementation of Piramal Group's resolution plan for DHFL.
However, strangely, a majority of CoC has cast their votes (81.98%) in favour of this resolution while a mere 7.31% rejected this proposal and 10.71% abstained from voting. The second resolution is approved since the cumulative votes cast in favour of the resolution by the CoC is more than 51% of the total voting rights as required under Sec 21(8) of the Code.
Earlier, Catalyst Trusteeship, the debenture trustee for DHFL NCDs had sought a vote from the NCD holders
(from 20th to 22nd June) on both these resolutions from the NCD-holders.
Earlier in January this year, fixed depositors and unsecured NCD-holders had voted against the Piramal group plan, making them dissenting financial creditors in the scheme.
While the National Company Law Tribunal (NCLT) had earlier this month approved Piramal group's plan to acquire DHFL under IBC, it had requested the creditors
to consider increasing the payments to smaller creditors and full repayment of invested money for the Army Group Insurance Fund on compassionate grounds.
In its order, the Tribunal had said small investors should not face more risk than institutions. Considering the number of small investors and senior citizens who had deposited their hard-earned money and who now face a financial crisis due to the pandemic, the resolution plan should provide for an increased share for them, the order said while nudging the CoC.
“Accordingly, for this limited purpose, we direct the CoC to reconsider their distribution method amongst various members of the CoC within two weeks from today and report the same to this Adjudicating Authority,” the NCLT said in its order.
Experts had pointed out that if the CoC had agreed to give more to the FD-holders, then it could have set a precedent for other insolvency cases in future. The DHFL case has seen many sharp twists and turns in the past one month.
So far, Piramal group has already received regulatory approvals from the Reserve Bank of India (RBI), Competition Commission of India (CCI) and the NCLT. Piramal group is said to be earnestly involved in the process of implementing the resolution plan, which is expected to be completed by August 2021.
The Bombay Stock Exchange (BSE) and National Stock Exchange (NSE) have already suspended trading in DHFL
shares from 14 June 2021.