Special court discharges DHFL in money laundering case filed by ED

A special court this week discharged Dewan Housing Finance Corporation Ltd (DHFL) in one of the money laundering cases filed by the Enforcement Directorate (ED), holding that the company is entitled to immunity under the Insolvency and Bankruptcy Code, after an approval of its resolution plan. The court said that its earlier officers and directors who were directly or indirectly involved in the commission of the offence shall continue to be prosecuted.

Seeking discharge under Section 32A of the Code, DHFL as a corporate debtor, submitted that terms of a resolution plan were put in place and a monitoring committee was constituted in 2021, which is now responsible for management of the affairs of DHFL. It was submitted that Piramal Finance Limited has undergone Corporate Insolvency Resolution Process following an order of the National Company Law Tribunal, merging DHFL with its company. The court ruled that DHFL, as a corporate debtor, cannot be prosecuted for offences allegedly committed prior to the commencement of the resolution process and change of management.

“The extinguishment of the criminal liability of the corporate debtor is apparently important to the new management to make a clean break with the past and start on a clean slate,” special judge R B Rote said in the order passed on February 2.

The ED had opposed the plea alleging that the proceeds of crime to the tune of Rs 5,050 crore, out of which Rs 4,450 has gone to DHFL and that it falls under the definition of ‘person’ under the PMLA, which can be found guilty of PMLA. The case was filed by the ED in 2020 under Prevention of Money Laundering Act linked to loans given to DHFL by Yes Bank in 2018, during the tenure of DHFL’s earlier promoters, Kapil and Dheeraj Wadhawan. The ED had alleged that undue financial benefits were received by DHFL as part of the conspiracy with the then chief executive of the bank Rana Kapoor.