DHFL becomes first financial services firm to be taken to NCLT
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“The Reserve Bank has today filed an application for initiation of corporate insolvency resolution process against DHFL 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 Rules, 2019," the central bank said in a statement.
R. Subramaniakumar, the RBI-appointed administrator for DHFL, will take over the lender’s affairs once his appointment is approved by the NCLT.
DHFL is the first financial services firm to be sent to the bankruptcy tribunal after the government notified the rules for referring financial services providers (FSPs) on 15 November. Unlike insolvency proceedings for companies from other sectors, an FSP creditor or debtor cannot approach the tribunal—the firm has to be referred by a regulator.
Under the new powers granted to RBI in the Union budget, it can take over administration of privately-held financial services companies. It can also remove auditors, call for an audit of any group company, and have a say on the compensation of the top management of an NBFC.
On 22 November, RBI set up a three-member advisory committee to assist Subramaniakumar in order to ensure that the debt-laden company’s asset quality does not worsen. This came after its decision to supersede DHFL’s board on 20 November.
According to the RBI order cited by DHFL in a 20 November regulatory filing, a statutory inspection of the mortgage lender conducted by the National Housing Bank with reference to its position as of 31 March 2018 revealed serious deterioration in its finances.
According to the new FSP insolvency rules, an interim moratorium will start from the date of filing of the application till its admission or rejection.
DHFL had public deposits of Rs.6,188 crore as on 6 July, down from Rs.10,166.72 crore as on 31 March 2018. #casansaar (Source - LiveMint)
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