IndiaCyril Amarchand Mangaldas (Firm) acted as the legal counsel to Committee of Creditors (CoC) of Dewan Housing Finance Corporation Limited (DHFL) on DHFL’s corporate insolvency resolution process. The CoC of DHFL comprises of banks, financial institutions, and authorised representatives acting on behalf of a large number of debenture holders (both institutional and retail) and public deposit holders (several thousand of each). The Firm advised the CoC since the inception of the CIRP and through a bidding process designed to maximise value and successfully represented the CoC before the NCLT resulting in the approval of the Resolution Plan.
The Banking & Finance, and Disputes Practices of Cyril Amarchand Mangaldas advised CoC of DHFL on the Transaction. Mr. Cyril Shroff, Managing Partner, provided strategic advice to the team. The Insolvency & Bankruptcy Team was led by L. Viswanathan, Partner; Amey Pathak, (the Relationship Partner on the Transaction); Richa Roy, Partner; and Abhijeet Das, Partner, with support from Surbhi Pareek, Principal Associate advised and represented the CoC in respect of insolvency and bankruptcy transactional, process and execution aspects.
The Disputes team was led by Indranil Deshmukh, Partner; Animesh Bisht, Partner; Raunak Dhillon, Partner; with support from Saloni Kapadia, Principal Associate.
DHFL is the very first non-banking financial company (NBFC) undergoing corporate insolvency resolution process (“CIRP”) under the provisions of the Insolvency and Bankruptcy Code, 2016 (“IBC”) read with the Insolvency and Bankruptcy (Insolvency and Liquidation Proceedings of Financial Service Providers and Application to Adjudicating Authority) Rules, 2019 (“FSP Rules”). This is the very first case of insolvency under the IBC against a financial service provider and under the FSP Rules. It is also among the largest accounts to be taken through the IBC process, with a total debt value of INR 87,247.68 crores.
The bidding process as part of the CIRP was designed to maximise value for all stakeholders, following which the resolution plan submitted by Piramal Capital & Housing Finance Limited (“Piramal” and the plan is referred to as the “Resolution Plan”) was approved by the CoC on January 15, 2021 by a significant majority of 93.65% voting share of the members of CoC. Thereafter, on February 16, 2021, the Reserve Bank of India (“RBI”) provided its no-objection for change in control/ ownership/ management in DHFL pursuant to the Resolution Plan in accordance with the FSP Rules. Further, on June 7, 2021, the Resolution Plan has been approved by the National Company Law Tribunal, Mumbai Bench (“NCLT”).
Issues that are specific to multiple diverse classes of creditors, including term lenders (INR and foreign currency), institutional and retail bond holders (domestic, international and masala bond holders), institutional and retail depositors, statutory bodies such as NHB came to the fore and were resolved as part of the CIRP.
Pursuant to the Resolution Plan, Piramal proposes to acquire 100% shareholding and control of the Target Company and make payment towards discharge of the total debt of the DHFL.
This insolvency was initiated by the RBI following the notification of the FSP Rules, pursuant to which the framework for the insolvency of systemically important non-banking finance companies was subsumed under the IBC framework. The erstwhile board of DHFL was superceded prior to the initiation of the CIRP under the terms of the RBI Act.
Other parties involved in the Transaction included
JSA (Co Counsel to the CoC of DHFL)
SBI Capital Markets Limited (Transaction advisors to CoC)
EY (Transaction advisors to DHFL)
The Transaction was approved by the NCLT on June 7, 2021.