63 moons technologies has decided to challenge the order passed by National Company Law Tribunal (NCLT), permitting Piramal group to take over beleaguered Dewan Housing Finance Ltd (DHFL) under the Insolvency and Bankruptcy Code (IBC).
In a release, 63 moons says it believes that the current resolution plan is contrary to law and against the interest of all DHFL's creditors including non-convertible debenture (NCD) holders.
The administrator of DHFL has filed applications for recovery of almost Rs45,000 crore under section 66 of the IBC against DHFL's promoters and other persons on account of their fraud against the creditors.
It says, "Our contention is that this amount of Rs45,000 crore must come to the defrauded parties, which are the creditors. Instead, the resolution plan is drafted in such a way that it favours the resolution applicant (buyer), in this case Piramal group, allowing it to reap the benefits of recoveries from the promoters.
"Ascribing a value of Re1 to the recoveries of fraud where claims are in excess of Rs45,000 crore creates unjust enrichment of the buyer (Piramal) at the cost of creditors. Piramal has bid only for the current value of DHFL, which does not include these amounts that were taken away fraudulently. Hence, all the more reason, the recoveries must come to the creditors only," 63 moons says.
Piramal Capital has already received approval from the Competition Commission of India (CCI) and Reserve Bank of India (RBI) for its Rs34,250-crore bid to take over DHFL. In January this year, the committee of creditors (CoC) had voted in favour of selling DHFL to the Piramal group under the bankruptcy process.
63 moons, which holds more than Rs200 crore of NCDs of DHFL, had filed an application in the NCLT-Mumbai seeking that the fraudulent transaction recovery benefit of about Rs45,000 crore filed by DHFL administrator under section 66 of IBC should come to creditors, including NCD holders who are the actual sufferers of the default, and not to the buyer of the company.
Strangely, the company says, "the current DHFL resolution plans allows the Piramal group to buy the company by paying mere Rs37,500 crore as against the outstanding debt of Rs85,000 crore. Also, in addition to this, the benefits of claims of over Rs45,000 crore are to be appropriated by Piramal fully by ascribing the entire recoverable amount a value of Re1".
63 moons feels the current resolution plan is disappointing for NCD holders in as much as they stand to bear the greatest loss as opposed to any other party involved. "Other members of the committee of creditors (CoC), who comprise mainly of banks, have recourse to personal guarantees of promoters whereas NCD holders do not have any such contractual recourse.
"NCD holders will be left high and dry with a massive 65% to 75% haircut if in future such recoveries from fraudulent transactions are allowed to pass through to the resolution applicants, instead of the creditors," it added.
63 moons says, "...banks are happy with Rs37,500 crore offered by Piramal with a payment schedule spread out over seven years while letting go of the recoveries in relation to claims in excess of Rs45,000 crore which according to us, should legally belong to the creditors."
63 moons says it is awaiting for the copy of the order and will be reviewing its options on the basis of advice from its legal advisors.