News

November 21, 2019

RBI Takes Control Of DHFL Board; To Urge NCLT To Appoint Resolution Professional In Charge Of Its Insolvency Process


[ By Bobby Anthony ]

dhfl

The Reserve Bank of India (RBI) has taken control of Dewan Housing Finance Corp Ltd’s board, citing “governance concerns and defaults”, and announced that it would ask the National Company Law Tribunal (NCLT) to appoint a resolution professional to initiate its insolvency process.

It may be recalled that DHFL has total debt of Rs 85,000 crore and exposure of banks is Rs 38,000 crore.

According to an RBI statement, the RBI plans to initiate the insolvency process under the Insolvency and Bankruptcy (Insolvency and Liquidation Proceedings of Financial Service Providers and Application to Adjudicating Authority) Rules, 2019, and would also apply to the NCLT to appoint the administrator as the insolvency resolution professional.

Incidentally, DHFL has become the first non-bank lender to be sent to the NCLT under the Insolvency and Bankruptcy Code (IBC), after a notification issued by the Ministry of Corporate Affairs on November 15.

As per the MCA notification, the IBC would cover NBFCs with assets of Rs 500 crore or more under Section 227.

After DHFL enters the process and a resolution plan is drawn up, it will have to be approved by the company’s Committee of Creditors (CoC).

An advisory committee of three or more experts will be formed within 45 days of admission of the case to the NCLT process.

The committee of creditors (CoC) which will oversee the insolvency process will have 180 days to draw up a resolution plan.

If the CoC fails to formulate a plan within 180 days, lenders will have to make additional provision of 20%. The provisioning would rise to 35% if the matter remains unresolved for up to 365 days.



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