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RBI moves insolvency court for DHFL debt resolution

On November 20, the RBI superseded the board of directors of DHFL and initiated the bankruptcy proceedings “owing to governance concerns and defaults by DHFL in meeting various payment obligations”.

By: ENS Economic Bureau | Mumbai | Published: November 30, 2019 2:55:24 am
With the DHFL case now in the NCLT, an “interim moratorium will commence on and from the date of filing of the application till its admission or rejection”. 

With the DHFL case now in the NCLT, an “interim moratorium will commence on and from the date of filing of the application till its admission or rejection”.

The Reserve Bank of India (RBI) on Friday filed the insolvency resolution process against Dewan Housing Finance Corporation (DHFL) at the National Company Law Tribunal (NCLT) for recovery of Rs 83,873 crore. DHFL is the first company from the financial sector to be referred to the NCLT after the government recently notified the financial sector provider (FSP) insolvency rules.

With the DHFL case now in the NCLT, an “interim moratorium will commence on and from the date of filing of the application till its admission or rejection”.

On November 20, the RBI superseded the board of directors of DHFL and initiated the bankruptcy proceedings “owing to governance concerns and defaults by DHFL in meeting various payment obligations”. The RBI has also appointed R Subramaniakumar, former MD and CEO of Indian Overseas Bank, the Administrator to run the firm.

“The RBI has filed application for initiation of corporate ed under Section 227 read with clause (zk) of sub-section (2) of Section 239 of the Insolvency and Bankruptcy Code (IBC), 2016 read with Rules 5 and 6 of the Insolvency and Bankruptcy (Insolvency and Liquidation Proceedings of Financial Service Providers and Application to Adjudication Authority) Rules, 2019,” the RBI said Friday.

As per insolvency rules, on the insolvency commencement date, the Adjudicating Authority should declare moratorium on all payments and transfer of assets. There will be moratorium on the institution of suits or continuation of pending suits or proceedings against the corporate debtor including execution of any judgement, decree or order in any court of law, tribunal, arbitration panel or other authority.

Further, the moratorium will apply on transferring, encumbering, alienating or disposing off by the corporate debtor (DHFL) any of its assets or any legal right or beneficial interest. There will be a temporary ban on any action to foreclose, recover or enforce any security interest created by DHFL in respect of its property including any action under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002. However, the supply of essential goods or services to DHFL should not be terminated or suspended or interrupted during moratorium period.

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