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2020 (2) TMI 636

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..... . 4258/MB/2019 - Dated:- 3-12-2019 - M.K. Shrawat, Judicial Member And Chandra Bhan Singh, Technical Member Ravi Kadam, Ashish Kamat, Suharsh Sinha, Vivek Shetty, Anpazhakan and Majid Mohammed, (RBI Bank Official) for the Petitioner. Rohan Rajadhyaksha for the Respondent. ORDER M.K. Shrawat, This Petition is submitted by General Manager, Department of Regulation, Reserve Bank of India on 29.11.2019 on behalf of Reserve Bank of India on Form No.1 as prescribed vide Sub-Clause (i) of clause (a) of Rule 5 of the Insolvency and Bankruptcy (Insolvency and Liquidation Proceedings of Financial Service Provider and Application to Adjudicating Authority) Rules, 2019 to initiate Corporate Insolvency Resolution Process against Dewan Housing Finance Corporation Ltd. (hereinafter, in short "DHFL")/Financial Service Provider (in short, "FSP") under the Insolvency & Bankruptcy Code, 2016. 2. PROVISIONS OF INSOVENCY CODE vis-à-vis FINANCIAL SERVICE PORIVIDER RULES : Before considering the merits of the Petition, this Bench is of the view that since certain new provisions of the Insolvency & Bankruptcy Code are going to be applied , therefore, at the outset, it is .....

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..... as defined U/r 3 means an Individual appointed by the Adjudicating Authority under Rule 5 (a)(iii) to exercise the powers and functions of the Insolvency Professional/Interim Resolution Professional/Resolution Professional/Liquidator in respect of a Financial Service Provider undergoing Insolvency Proceedings as per the I&B Code. To facilitate the Insolvency proceedings an "Advisory Committee" is to be constituted by the "Regulator" in accordance with Rule 5(c) of these Rules. Vide Section 3 of "Definitions", the definition of "Appropriate Regulator" means "Financial Sector Regulator" as notified by Central Government u/s.227 for a category of "Financial Service Providers". 2.5 Through this Rule there are certain modifications such as wherever the expression "Corporate Debtor" is used in general in this Code, conversely, for the purpose of application of these Rules it shall mean "Financial Service Provider" and wherever the expression "Insolvency Professional", "Interim Resolution Professional" "Resolution Professional" or "Liquidator" occur, now for the app .....

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..... services or risk management, administration, supervision or resolution of a financial service provider; (iii) the terms and conditions of the Members of the Advisory Committee and the manner of conducting meetings and observance of rules of procedure shall be such as may be determined by the appropriate regulator; (iv) the compensation paid to the Members of the Advisory Committee shall be part of the insolvency resolution process costs; (v) the Administrator shall chair the meetings of the Advisory Committee. (d) Resolution plan (i) the resolution plan shall include a statement explaining how the resolution applicant satisfies or intends to satisfy the requirements of engaging in the business of the financial service provider, as per laws for the time being in force; (ii) upon approval of the resolution plan by the committee of creditors under sub-section (4) of section 30, the Administrator shall seek 'no objection' of the appropriate regulator to the effect that it has no objection to the persons, who would be in control or management of the financial service provider after approval of the resolution plan under section 31; (iii) the appropriate regulator shall without p .....

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..... ategories of financial service providers shall be undertaken in accordance with the provisions of the Insolvency and Bankruptcy Code 2016 read with the Insolvency and Bankruptcy (Insolvency and Liquidation Proceedings of Financial Service Providers and Application to Adjudicating Authority) Rules, 2019 (in this notification referred to as the 'Rules') and the applicable Regulations: Sl. No. Category of Financial Service Provider (rule 2 of the Rules) Appropriate Regulator [clause (a) of sub-rule (1) of rule 3 of the Rules) Dealing with third-party assets (rule 10 of the Rules) (1) (2) (3) (5) 1 Non-banking finance companies (which include housing finance companies) with asset size of ₹ 500 crore or more, as per last audited balance sheet. Reserve Bank of India To be notified separately" 3.1 Thus vide this Notification "Non-Banking Finance Companies" including "Housing Finance Companies" with asset size of 500 Crores or more, the proceedings shall be undertaken in accordance with the provisions of I&B Code 2016 to be read along with these Rules by the appropriate Regulator through Administrator and in this case Reserve Bank of India is desi .....

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..... rd of directors of DHFL and appointed "Administrator" Mr. R. Subramaniakumar, vide Press Release 2019-2020/1230 dated 20.11.2019 reproduced below:- "Supersession of the Board of Directors and Appointment of Administrator - Dewan Housing Finance Corporation Limited In Exercise of the posers conferred under Section 45-IE (1) of the Reserve Bank of India Act, 10934, the Reserve Bank has today superseded the Board of Directors of Dewan Housing Finance Corporation Limited (DHFL) owing to governance concerns and defaults by DHFL in meeting various payment obligations. Shri R. Subramaniakumar, ex-MD and CEO of Indian Overseas Bank has been appointed as the Administrator under Section 45-IE (2) of the Act. The Reserve Bank also intends to shortly initiate the process of resolution of the company under the Insolvency and Bankruptcy (Insolvency and Liquidation Proceedings of Financial Service Providers and Application to Adjudicating Authority) Rules, 2019 and would also apply to the NCLT for appointing the Administrator as the Insolvency Resolution Professional. Sd/- Chief General Manager" 4.3 Further, a Three Member "Advisory Committee" has also been constitut .....

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..... of debt granted and date(s) of disbursement USD 240.00 million (Tranche I - USD 110 mio, Tranche II - USD 130 mio) Both disbursed on 27-07-2018 The above amount excludes facilities extended in INR by other branches of State Bank of India located in India and other ECB facilities sanctioned by subsidiaries of State Bank of India. 2. Amount claimed to be in default and the date(s) on which the default occurred USD 2.16 mio (Interest Portion in relation to USD 110 mlo facility) 07.11.2019 [Tranche II is not in default as on date] 3. The latest and complete copy of the financial contract reflecting all amendments and waivers to date (copy attached) 11-05-2018 (Date of Term Sheet) 17-07-2018 (Date of Facility Agreement) 4. A record of default as available with any credit information company As per CRILC Report as on 28.11.2019 5. Copies of entries in a bankers' book in accordance with the Bankers' Books Evidence Act, 1891 Accounts statements attached. 6. List of any documents, correspondence, letters, notices or other communication in order to prove the existence of financial debt, the amounts due and date(s) of default 11-05-2018 (Date of Term Sheet) 17-07-2018 (Date of Facilit .....

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..... fit case which deserves 'Admission' because the existence of 'Debt' and 'Default' has duly been proved so that the Insolvency Proceedings in terms of Rule 6 of Financial Service Providers Rule to be read with Section 227 of IBC can be commenced. 6. At this juncture some of the individual investors and a Counsel representing them have tried to intervene in the proceedings. But then Learned Counsel of the Applicant has placed reliance on a decision of Respected NCLAT, New Delhi in the case of IDBI Bank Ltd. v. Odisha Slurry Pipeline Infrastructure Ltd. [Company Appeal (AT) (Insolvency) No. 51 of 2019 dated 15-1-2019] for the legal proposition that, quote, "Further, we may observe that except the applicant (financial creditor) and the 'corporate debtor', there is no requirement of hearing a third party including Intervenor at the stage of admission. The order is required to be passed as per decision of by the Hon'ble Supreme Court, as quoted above. The appeal stands disposed of with aforesaid observations and directions. No cost." unquote. 7. FINDINGS Heard the Petition/Application in the light of the above submissions, evidences, newly i .....

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..... that "Moratorium" as defined u/s.14 of the Insolvency Code shall commence with effect from the date of Application i.e. 29.11.2019 as prescribed under Rule 5(b)(i) of FSP Rules 2019. On commencement of "Moratorium" the institution of any Suit or continuation of proceedings or execution of any decree against the Financial Service Provider (DHFL) shall be prohibited. Likewise, transferring, alienating or disposing of any asset of the FSP is hereby forbidden. Further, any action to foreclose, recover or enforce any security interest created by FSP in respect of its property is also debarred. However, supply of essential goods or services to FSP shall continue uninterrupted and not to be terminated or suspended during 'Moratorium" by the Supplier. As prescribed u/s.14(4), the Order of "Moratorium" shall have effect till the completion of Insolvency Process. 7.5 The Administrator is hereby directed to cause a public announcement immediately (as per Section 13 of The Code) intimating the initiation of Corporate Insolvency Resolution Process and call for the admission of Claims as prescribed u/s.15 of The Code. 7.6 The public announcement shall cont .....

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