DHFL imbroglio. DHFL creditors vote against higher distribution of funds to small investors

Surabhi Updated - December 06, 2021 at 09:53 AM.

NCLT had suggested 40% recovery to small investors similar to that of financial creditors

FILE PHOTO: A woman walks past a signboard of Dewan Housing Finance Corporation Ltd. (DHFL) outside its office on the outskirts of Mumbai, India, Jan. 31, 2019. REUTERS/Francis Mascarenhas/File Photo

The Committee of Creditors of Dewan Housing Finance Corporation Ltd (DHFL) has voted against the proposal for redistribution of funds to small deposit holders.

Sources said 89.19 per cent of the votes by financial creditors, including fixed deposit holders, were cast against the proposal. Only 2.96 per cent of votes were in favour of the proposal while 7.85 per cent abstained from voting.

This will mean that the current distribution pattern for DHFL will continue. Fixed deposit holders will get about ₹1,241 crore, that is 23 per cent of their admitted claims of about ₹5,400 crore.

The National Company Law Tribunal (NCLT), in its order on June 7, had suggested 40 per cent recovery to small deposit holders on the lines of that of financial creditors.

The Committee of Creditors had accordingly proposed higher distribution of funds to small investors, including fixed deposit and NCD holders and pension funds.

Admitted claims

According to the proposal put for voting, the entire admitted claims of Army Group Insurance Fund, Air Force Group Insurance Society and Navy Children School would be paid fully in cash.

Further, it was proposed that all fixed deposit holders will be paid additional amounts in cash in order to ensure that the entire amount paid to them is about 40 per cent of the admitted claims, similar to the recovery to secured financial creditors.

Unsecured NCD holders with investments up to ₹10 lakh were proposed to be repaid 40 per cent of the admitted claims like in the case of fixed deposit holders.

Outgo for lenders

The total outgo for lenders of DHFL on these proposals would have been ₹1,853.21 crore. Voting on the proposals took place between June 20 and June 22.

Both FD and NCD holders had previously expressed unhappiness with the revised proposals.

“Almost all NCD holders will be happy that the proposal got rejected. There are two other issues that NCD holders are mainly concerned about. No one can understand the slabs designed for repayment of NCD holders,” said a person familiar with the development.

Fixed deposit holders as well as NCD holder 63 Moons Technologies plan to challenge the NCLT order in the National Company Law Appellate Tribunal. Provident and pension funds are also likely to challenge the order.

“We are filing a petition challenging the order and to get 100 per cent of our funds back,” said Vinay Kumar Mittal, a lead petitioner in the court on behalf of FD holders of DHFL.

Meanwhile, the CoC approved another proposal to authorise State Bank of India, Union Bank of India and Catalyst Trusteeship to act on its behalf for the implementation of the resolution plan.

Published on June 23, 2021 13:16