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Explained: The resolution process of DHFL debt and why it is important

The Nation Company Law Tribunal (NCLT) has approved the Piramal Group's Rs 37,250 crore bid for debt-ridden Dewan Housing Finance Ltd (DHFL). What hurdles has the process faced?

Written by Karunjit Singh , Edited by Explained Desk | New Delhi |
June 8, 2021 10:15:44 am
DHFL is among the largest mortgage lenders in the country (File photo)

The Mumbai bench of the Nation Company Law Tribunal (NCLT) on Monday approved the Piramal Group’s Rs 37,250 crore bid for debt-ridden Dewan Housing Finance Ltd (DHFL). The NCLT gave a conditional nod to the bid, which has received approval from 94 per cent of creditors pending the outcome of a Supreme Court decision on Kapil Wadhawan’s offer to fully settle Rs 91,000 crore in outstanding debt. The Indian Express examines the resolution process of DHFL and why it is important.

Why is this resolution important?

DHFL which is among the largest mortgage lenders in the country, was the first financial services company to be notified for insolvency resolution under Section 227 of the Insolvency and Bankruptcy Code by the Reserve Bank of India. The corporate insolvency resolution process under the Insolvency and Bankruptcy Code is not applicable to financial service providers or banks, so the government had notified rules for the insolvency proceedings of financial service providers in November 2019 to enable the insolvency process of DHFL, which had defaulted on payment obligations.

The Reserve Bank of India initiated insolvency proceedings against DHFL after replacing the board of directors of the company in November 2019 citing governance concerns and defaults by DHFL in meeting various payment obligations.

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Who were the bidders?

Besides the Piramal group, the Oaktree group, Adani group, and Hong-Kong-based SC Lowy had also placed bids for DHFL in four rounds of bidding. The Piramal Group’s bid of Rs 37,250 crore with an upfront payment of Rs 12,700 to creditors emerged as the winning bid in January after receiving approval from 94 per cent of the Committee of Creditors (CoC).

What hurdles has the process faced?

DHFL promoter Kapil Wadhawan had in November 2020 offered to pay 100 per cent repayment of Rs 91,158 crore to all creditors. Wadhawan raised issues about the suitability of the bid by the Piramal group, suggesting that the bid by the company was not attractive as its resolution plan was dependent on the ability to merge DHFL with Piramal Capital and Housing Finance Ltd (PCHFL) and raised the question on if the resolution plan would proceed if such a merger was not approved by regulators.


In May, the Competition Commission of India approved the merger of DHFL with PCHFL.

The Mumbai bench of the NCLT, however, directed the CoC to assess the offer made by Kapil Wadhawan. The RBI and the CoC challenged the order as unlawful before the National Company Law Appellate Tribunal (NCLAT) which stayed the order allowing the resolution process for DHFL to continue.

Kapil Wadhawan moved the Supreme Court to challenge the stay order on the evaluation of his offer for the resolution of DHFL.


Government officials told The Indian Express that the insolvency law was clear and that an acceptance of Wadhawan’s offer was not possible without approval from the RBI which had initiated the process.

“Any withdrawal of an insolvency process under Section 227 of the IBC would require the approval of the regulator which is the RBI in this case and the RBI has already stated that it has no intention of allowing the withdrawal of the insolvency proceedings,” said a government official who did not wish to be quoted.

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First published on: 08-06-2021 at 10:15:44 am
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