NCLAT rejects the order of NCLT

NCLAT rejects the order of NCLT

NCLT had initiated insolvency proceedings against Dewan Housing Finance Limited in 2019

The National Company Law Appellate Tribunal (NCLAT) has set aside the order of the National Company Law Tribunal, Mumbai. It directed the administrator of Dewan Housing Finance Corporation Ltd. (DHFL) to place the second settlement proposal sent by Kapil Wadhawan, former promoter of DHFL, before the Committee of Creditors (CoC).

The order came on a batch of petitions filed by the Union Bank of India (on behalf of the CoC), DHFL's administrator and Piramal Capital & Housing Finance (successful resolution applicant) challenging the NCLT's order.

While setting aside the NCLT order, a bench of judicial member M Venugopal and technical members VP Singh and Dr Ashok Kumar Mishra held, "The exercise was beyond the jurisdiction of NCLT's Adjudicating Authority (AA), hence unsustainable and liable to be set aside."

It observed that the directions passed by NCLT came despite the fact that the CoC had already approved the resolution plan submitted by DHFL by an overwhelming majority. The AA had reserved the plan approval application filed by the administrator for orders.

Citing the Supreme Court precedent set in an earlier case; the NCLAT observed that after the CoC had approved the resolution plan there was no scope for negotiations between the parties.

"Once the Resolution Plan is approved by a 100 percent voting share of the CoC, the jurisdiction of the AA was confined by the Insolvency and Bankruptcy Code (IBC)," the bench ruled.

NCLT had initiated insolvency proceedings against DHFL in 2019 on the application filed by the Reserve Bank of India (RBI) claiming a default in repayment of the External Commercial Borrowing (ECB) loan to the State Bank of India (SBI).

In 2021, on an application filed by Wadhawan seeking orders to have his second proposal considered, the NCLT recorded that the proposal offered by him was substantially higher than the value of the highest bidder. Hence, it required consideration.

It allowed Wadhawan's application and held that there was procedural irregularity in not considering a settlement proposal, which was around 150 per cent higher in value of the approved Resolution Plan.

The order was set aside by NCLAT recently.

Solicitor General Tushar Mehta with advocates Raunak Dhillon, Animesh Bisht, Saloni Kapadia, Madhavi Khanna, Shubhankar Jain, Isha Malik and Fatema Kachwalla appeared for the CoC.

Advocates Ashish Bhan, Ketan Gaur, Chitra Rentals, Aayush Mitruka, Kaustub Narendran, Samriddhi Shukla, Lisa Mishra and Vishal Hablani appeared for Piramal.

Advocates Liz Mathew, Sonali Jain, Rohan Rajadhyaksha and Naveen Rath appeared for the Administrators.

Advocates Ashish Kamat and MF Philip appeared for the RBI.