Bombay HC bars DHFL from paying creditors, asks for asset details

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Mumbai | Published: October 11, 2019 4:02:30 AM

The Bombay High Court (HC) on Thursday passed an ad-interim order, restraining Dewan Housing Finance (DHFL) from making payments or disbursements to any secured or unsecured creditors until further orders.

“DHFL should file a reply to Edelweiss’ application within four weeks,” Justice AK Menon of the Bombay HC said.

The Bombay High Court (HC) on Thursday passed an ad-interim order, restraining Dewan Housing Finance (DHFL) from making payments or disbursements to any secured or unsecured creditors until further orders. DHFL has also been directed by the court to disclose all assets and liabilities.

Thursday’s order is an extension of a previous order passed by the HC on September 30, in response to an application filed by Reliance Nippon Life Asset Management seeking to recover dues from the non-banking finance company (NBFC). The earlier order had restrained DHFL from paying dues to creditors till October 10.

The court directed DHFL to disclose all its assets and liabilities in response to a petition filed by Edelweiss Asset Management. Edelweiss had moved the court on Monday, seeking to recover dues worth Rs 70 crore from the NBFC. Edelweiss’ application also sought the appointment of a court receiver to oversee the operations of the company.

“DHFL should file a reply to Edelweiss’ application within four weeks,” Justice AK Menon of the Bombay HC said.

Edelweiss has been given two weeks from the date of filing of DHFL’s reply to submit a rejoinder. The next hearing will take place after the filing of Edelweiss’ rejoinder.

On September 28, Reliance Nippon Life Asset Management had moved the Bombay HC seeking to recover dues worth Rs 478 crore from DHFL. During an earlier hearing, Reliance Nippon Life’s counsel had told the court that the mutual fund had a cheque worth Rs 200 crore due in May, which was not honoured. The plea sought the immediate payment of the Rs 200-crore amount, after which the rest of the dues could be paid on pro-rata basis.

The September 30 order, passed by the HC in response to the application, stated that until the final disposal of the Reliance Nippon Life’s plea, DHFL would “be temporarily injuncted and restrained from making further payments and/or disbursements to any unsecured creditors of the Defendant no.1 (DHFL), and secured creditors of Defendant no. 1, except in cases where payments [are to be] made on pro-rata basis to all secured creditors… without the sanction of this Hon’ble Court”. The order, however, did not prohibit payment of staff salaries or other costs and office expenses.

The total liabilities of DHFL stood at Rs 83,873 crore as on July 6. Of this, borrowings from banks through term loans, cash credit and working capital demand loans stood at Rs 27,527 crore. The company’s largest borrowing was through non-convertible debentures, including masala bonds, to the tune of Rs 41,431 crore. The company’s total assets stood at Rs 89,476 crore, along with Rs 1,752 crore in cash and investments.

Last month, the stressed financier disclosed a resolution plan on the exchanges, according to which 2.3% of the debt exposure across each category of facility will be converted into equity, assuming a conversion price of Rs 54 per share. According to the plan, after the debt to equity conversion, lenders would hold 51% in the company.

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