Supreme Court Upholds Piramal's Resolution Plan For DHFL, Sets Aside NCLAT Order

The Supreme Court today (April 1) approved the Resolution Plan proposed by Piramal Capita and Housing Finance for the erstwhile Dewan Housing Finance Corporation Ltd(DHFL).

The Court held that funds recovered from the fraudulent transactions at Dewan Housing Finance Corporation Ltd (DHFL) will go to Piramal Capital & Housing Finance Ltd.

The Court set aside the NCLAT order, which directed the creditors of Dewan Housing Finance Corporation Limited (DHFL) to reconsider the resolution plan proposed by Piramal Capital and Housing Finance. 

The bench of Justice Bela Trivedi and Justice SC Sharma was hearing the challenge to the 2022 NCLAT order, which set aside the order passed by the NCLT directing the Administrator of DHFL to place its Second Settlement Proposal sent by Mr. Kapil Wadhawan before the Committee of Creditors for its consideration. 

The bench held that NCLT will freshly reconsider the applications relating to the allocation of proceeds from avoidance transactions worth Rs. 45,000 crore. 

Notably, under the IBC 2016, 'avoidance transactions' are specific transactions conducted by a corporate debtor prior to insolvency proceedings that are deemed detrimental to the interests of creditors. These include (1) Preferential transactions; (2) Undervalued transactions; (3) Fraudulent transactions and (4) Extortionate Credit transactions. 

The key point of contention arose when the Piramal Group's resolution plan ascribed the value of Rs.1 only for the recoveries from the avoidance transactions of the corporate debtor. 

The bench upheld the resolution plan which was approved by the COC in 2021, as per which a national value of Rs.1 was assigned to potential recoveries of Rs.45,000 crores. 

What Led To The NCLAT Order? 

Dewan Housing Finance Corporation Limited, one of India's leading housing finance companies, went into insolvency proceedings in November 2019 for being in debt of Rs. 90,000 crores. 

During the proceedings, the Resolution Plan submitted by the 'Piramal Group' was approved by a majority of 93.65% votes in favour of the Resolution Plan, which was pending adjudication before the Adjudicating Authority under Section 31 of the Code, when the Adjudicating Authority passed an order directing the CoC to consider the 'Second Settlement Offer' of Mr. Kapil Wadhawan, the former promoter of DHFCL. CoC had approved Piramal Group's takeover for Rs. 37,250 crores. 

Union Bank of India filed an appeal before NCLAT, Delhi on behalf of the CoC of DHFL against the order passed by the Adjudicating Authority- NCLT Mumbai, which passed an order directing the Administrator of DHFL to place the Second Settlement Proposal sent by Mr. Kapil Wadhawan before the CoC for its consideration, decision and voting.

By an earlier order, the Adjudicating Authority had directed the Administrator to place the first Settlement Proposal before the Coc, however that proposal did not receive any reply. Both these orders of the Adjudicating Authority were challenged in this appeal.

During the pendency of this appeal, the Adjudicating Authority passed an order approving the Resolution Plan. 

The NCLAT bench of Justice M. Venugopal (Judicial Member), V.P. Singh (Technical Member) and Dr. Ashok Kumar Mishra (Technical Member) observed : 

"Considering the ratio of the Judgement of the Hon'ble Supreme Court in the case of Ebix Singapore (supra), "there was no scope for negotiations between the parties once the CoC has approved the Resolution Plan. Thus, contractual principles and common law remedies, which do not find a rope in the wording or the intent of the IBC, cannot be imported in the intervening period between the acceptance of the CoC Approved Resolution Plan and the Approval by the Adjudicating Authority."

Thus, the NCLAT set aside the order passed by the Adjudicating Authority on the ground that it was beyond jurisdiction and hence was unsustainable in law.

Appearance : 

Counsels for CoC of DHFL : SG Tushar Mehta, Sr Advocate Navin Pahwa and Cyril Amarchand Mangaldas (Mr. Raunak Dhillon, Partner, Ms.Madhavi Khanna, Principal Associate, Ms. Aishwarya Gupta, Principal Associate, Ms. Niharika Shukla, Senior Associate, Mr. Jeezan Pakhliwal, Associate)

Counsels for PCHF : Sr Advocates AM Singhvi, Balbir Singh and Trilegal team 

Counsels for Kapil Wadhawan: Agarwal Law Associates led by Senior Advocate Kapil Sibal 

Counsels for 63 Moons Technologies : Sr Advocate Santosh Kumar Paul and Advocate Misha Rastogi 

Case details : PIRAMAL CAPITAL AND HOUSING FINANCE LIMITED (FORMERLY KNOWN AS DEWAN HOUSING FINANCE CORPORATION LIMITED) v. 63 MOONS TECHNOLOGIES LIMITED & OTHERS | CIVIL APPEAL NOS. 1632-1634 OF 2022

Citation : 2025 LiveLaw (SC) 374

Click to read judgment