DHFL Crisis: Bombay HC Allows Edelweiss AMC's Plea For Disclosure Of All Assets As DHFL Defaults On Payments [Read Order]

Justice AK Menon was hearing an application in a commercial suit filed by Edelweiss AMC, asset management arm of Edelweiss Group along with the suit filed by Reliance Nippon Life Asset Management Limited.

Justice Menon had granted similar relief to Reliance Nippon on September 4 and restrained DHFL from making any payments to secured creditors until October 10, Thursday. DHFL owes Reliance Rs.479 crores.

The plaintiff, Edelweiss AMC, in its capacity as investment manager on behalf of the Edelweiss Mutual Fund subscribed to 6,43,928 secured non-convertible redeemable debentures (NCDs) of face value of Rs.1000/- each issued by DHFL.

DHFL apparently defaulted in payment of interest and principal sum. AMC sought recovery of sum of Rs.69.32 crores said to be due to them as of September 30, 2019.

Senior Advocate Dinayar Madon appeared on behalf of the plaintiff and submitted that a total sum of Rs.64,39,28,000 has been invested and grade I, IV and V NCDs had matured at the end of the date of deemed allotment. Madon referred to media reports from September 2018 onwards indicating liquidity constraints faced by DHFL.

There were allegations against the management of DHFL as well. DHFL committed defaults in its obligations to make payments under the NCDs and this resulted in downgrading of credit ratings, Madon said. On June 5, 2019 CARE published the fact that DHFL had been assigned a "Default Rating". Reasons were also assigned for such a downgrade.

Thus, in the background of such developments, DHFL is said to have conducted a partial stake sale of its holdings in its housing finance division in favour of an investor. Several securitization transactions have been entered into by DHFL which are similar to the case of M/s. Reliance Nippon Life Asset Management Limited. Such securitization was carried out on receivables which are subject matter of pari-passu charge in favour of numerous funds, Madon argued.

Madon also submitted that DHFL has avoided declaring quarterly results and allegedly provided misleading information in relation to its debenture service reserve and its indebtedness.

Justice Menon determined that the plaintiffs are entitled to same relief granted to Reliance-

"I am of the view that the relief granted in Commercial Suit (L) no. 1034 of 2019 would also have to be granted in the present suit. In addition, I am of the view that the plaintiffs herein have made out a case for grant of ad-interim relief in terms of prayer clause (e) of the Interim Application as well."

Thus, restraining DHFL from making any payments to unsecured creditors, Court noted-

"Pending the hearing and disposal of this Suit, this Court be pleased to direct defendant no.1 to disclose on oath the assets and properties which have been transferred and/or securitized by defendant no.1 in the last one year along with prior written approval of defendant no.2, if any, out of the assets and properties mortgaged, charged or hypothecated, as the case may be, in favour of defendant no.2 for payment of debentures"