Kapil Wadhawan, the former promoter of Dewan Housing Finance Limited (DHFL), has moved the apex court against a lower court’s interim order, which allowed lenders relief from considering a settlement offer made by him.
On Monday evening, Wadhawan filed a petition in the Supreme Court, challenging the National Company Law Appellate Tribunal’s May 25 interim ruling. The NCLAT had stayed an earlier order from NCLT asking lenders to consider a Rs 91,000 crores settlement offer from Kapil Wadhawan and directed the Mumbai bench of NCLT to expedite the approval of the resolution plan submitted by lenders.
The NCLAT, in an interim judgment last month had said, “We are unable to appreciate the hurry imposed on the Administrator and CoC to consider the Second Settlement Proposal (made by Kapil Wadhawan in December 2020). Regulation 30A of 7 Company Appeal (AT) (Ins.) No. 370 of 2021 CIRP Regulations requires reasons to be given for application under Section 12A of IBC if filed after issue of Expression of Interest. Here the matter had proceeded to the stage where even Resolution Plan had been approved and was before Adjudicating Authority. There would be no end if such reversals are allowed.”
It had then set aside the NCLT order dated May 19 that directed lenders to consider the settlement offer within 10 days. It had also observed that the appeal should not be an impediment for the NCLT to decide on the proposed resolution plan of Piramal Group to acquire DHFL, which was approved by lenders in January.
Wadhawan had argued in NCLT that his offer was a pre-cursor to a withdrawal application under Section 12A of the Insolvency and Bankruptcy Code, but this claim was debunked by the Administrator and the lenders of DHFL.
While appealing against the May 19 NCLT ruling, the administrator of DHFL had submitted that there was no pre-cursor recognized under IBC. Despite the resolution process running for over a year, it had said, Wadhawan had neither submitted a resolution plan nor an application under Section 12 A to withdraw from NCLT. Lenders have already declared DHFL a “fraud” account, and therefore Kapil Wadhawan’s eligibility to even submit any resolution plan would be not allowed as per Section 29A of the IBC.
“The Impugned Order records that it is neither a resolution plan subject to the rigours of Section 29A of the Code nor is it a settlement application under Section 12A of the Code that needs to be moved by the RBI. However, despite the same, the Impugned Order manufactures a new category of a ‘precursor’ to a “one-time settlement” or “OTS” and uses its inherent powers under the NCLT Rules to contravene specific provisions of the Code and re-examine and re-open commercial negotiations on behalf of a promoter whose offers have clearly been held to be not worthy of acceptance by the CoC,” read the appeal.
The Administrator termed Kapil Wadhawan’s settlement offer commercially unsound, adding that its only intent was to “set the stage for litigation,” and to “sabotage the CIRP (corporate insolvency resolution process).” “It is clear that the Second Proposal has been deliberately designed to mislead and deceive stakeholders,” the Administrator said in the NCLAT appeal.
The Committee of Creditors had also said in its appeal against this settlement offer that the NCLT had passed the order without considering any of the submissions in law or made by the CoC, Administrator or RBI.
“It is also the case of the CoC that the Impugned Orders have the effect of derailing the entire CIRP of DHFL (which is already at a very advance stage, with the resolution plan approved by the CoC already pending consideration by the Hon'ble NCLT in the Plan Approval Application) and that the Hon'ble NCLT ought to be directed to pass orders in the Plan Approval Application as per law,” it said.
In its appeal, the CoC said there was no provision of the law, or IBC, which compelled them to consider the settlement offer from Wadhawan.
“The CoC cannot be compelled to consider every proposal which is given by persons who elect not to participate in the CIRP of the Corporate Debtor (as per the prescribed process), ever where such offer is made by promoters of the Corporate Debtor. Such an order compelling the CoC to consider every offer by the promoter who was once in control of the corporate debtor would greatly and gravely hamper the CIRP and cause inordinate delays, and materially as well as adversely impact the sanctity of the process in which the CIRP of the Corporate Debtor has been conducted since its inception,” it said.
Wadhawan in his settlement offer had claimed to fully repay all creditors, while also accusing them of undervaluing the company by accepting offers from other resolution applicants. Lenders had declared Piramal Group the winning bidder for DHFL under the insolvency process, accepting its offer of Rs 37,250 crores to take over the company in January this year.
Kapil Wadhawan is currently in jail, facing charges of money laundering that are under investigation by the Central Bureau of Investigation and the Enforcement Directorate. The RBI-appointed Administrator of DHFL has also separately filed cases of fraud to the tune of Rs 46,000 crores so far against Wadhawan at the NCLT.
First Published: IST