NCLT admits RBI petition for DHFL bankruptcy proceedings

Mumbai: The National Company Law Tribunal (NCLT) on Monday admitted the Reserve Bank's petition to initiate insolvency proceedings againstmortgage player DHFL, making it the first financial services firm to be resolved through the bankruptcy code.

The move came in after the Reserve Bank last Friday referred DHFL to the NCLT Mumbai to resolve the debt crisis at the third largest pure-play mortgage player, which owes close to Rs 1 lakh crore to the system, mostly to banks and retail investors of its debt instruments.

Admitting the petition, a two-member NCLT bench of MK Shrawat and Chandra Bhan Singh said, "the petition deserves admission" without fixing the date for next hearing.

However, the bench was quick to add, "we are not saying it is a fit case or not. But is there another point of view. This should not have a domino effect," as this is the first financial services company coming up for debt resolution through the NCLT route.

Ravi Kadam, the counsel representing the RBI, said under Section 227 of the IBC (notified only on November 15), if the Reserve Bank found it necessary it could notify a financial institution for insolvency.

He further stated that the regulator had appointed R Subramaniakumar, a former head of the state-run Indian Overseas Bank, as the administrator of DHFL on November 20 when it had superseded its board.

Kadam also said the tribunal needs to appoint Subramaniakumar as the administrator/resolution professional for the company, citing the provision of Section 227 which has empowered the RBI to appoint the administrator for NBFC/HFC.

Following the appointment of the administrator, the RBI had on November 22 also appointed a three-member panel comprising IDFC First Bank non-executive chairman Rajiv Lall, ICICI Prudential Life managing director NS Kannan and mutual fund body Amfi chief executive NS Venkatesh as advisors to assist Subramaniakumar in the operations of DHFL during the insolvency resolution process.

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