BS: DHFL crisis: Lenders to meet Thursday to discuss resolution plan

10 July 2019: The consortium of 31 lenders to the troubled Dewan Housing Finance (DHFL) are meeting Thursday to discuss a resolution plan for the third largest pureplay mortgage lender, sources said Wednesday.

The lenders, which had last met on July 1, are still in the process of signing an inter-creditor agreement for the company, a must to decide on a resolution plan under the June 7, revised NPA circular from of the monetary authority.

“The meeting is to discuss and decide on a resolution plan for DHFL,” a senior banker told PTI.

At the July 1 meeting, lenders had decided to sign the inter-creditor agreement by July 5 but could not do so yet.

“The process signing the mandatory inter-creditor agreement is still on. A majority of the banks have signed the agreement,” said another banker.

According to the Reserve Bank’s revised framework for NPA resolution, dated June 7, if a borrower is reported to be in default by any of the lenders, other lenders should undertake a review of the account within 30 days from the default, which will be called as review period.

During the review period, banks may decide on a resolution plan and wherever a plan has to be implemented, all lenders will have enter into an inter-creditor agreement within those 30 days to provide for ground rules for finalisation and implementation of a resolution plan.

The Wadhawan family, who owns a little over 39 percent in the company, has been looking at various ways of coming out of the stress which first came to light late last year following the IL&FS bankruptcy. These include selling stakes in group entities, inclduing in the flagship to the extent of giving up half of their stake.

DHFL has seen a rash of rating downgrades last month after it defaulted on Rs 1,150 crore to its bondholders due on June 4. This led to a downgrade of its Rs 850-crore commercial papers to ‘default’ by three rating agencies.

Following this on June 11, it had paid Rs 962 crore of the Rs 1,150 crore debt towards interest on NCD repayment, but again on June 25, it failed to fully redeem another CP worth Rs 225 crore.

DHFL owes nearly Rs 90,000 crore to banks and other financial institutions, according to its FY18 annual report.

Meanwhile, DHFL denied reports in a section of the media that Deloitte has resigned as its auditor.

When contacted a company spokesperson said, “these are absolutely unfounded rumours.

The Business Standard reported

ET: Gitanjali RP seeks to implead ED

10 July 2019: The resolution professional (RP) of Gitanjali Gems, a jewellery retailer promoted by absconding Mehul Choksi, is seeking to implead the Enforcement Directorate (ED) and the Serious Fraud Investigation Office (SFIO) in the insolvency resolution case since certain assets are still held by the investigation agencies.

On Tuesday, Ankita Singhania, an advocate, appearing for the RP, informed the Mumbai bench of the National Company Law Tribunal (NCLT) that investigation agencies, including ED, CBI and SFIO, had attached properties of Gitanjali Gems and later the attachment was lifted on certain assets, but the RP is keen to implead the two government agencies to ascertain the details of assets owned by the company.

The Economic Times reported

ET: SBI probe flags Rs 5,500 crore deals among Anil Ambani companies

10 July 2019: A probe commissioned by SBI has flagged transactions worth Rs 5,500 crore in the books of Reliance Communications and two other Anil Ambani-led Reliance Group entities for further investigation, four people with direct knowledge of the matter told ET. The probe into fund flows at RCom, Reliance Telecom and Reliance Telecom Infrastructure has examined related-party transactions, apparent evergreening of loans and seemingly preferential dealings with entities at which a few Reliance Group employees were directors. The Reliance Group was formerly known as the Anil Dhirubhai Ambani Group.

The probe, which looked at transactions between May 2017 and March 2018, examined over 100,000 entries. Funds flows involving three large entries are particularly under the scanner as the SBI-led lenders’ group suspects fund diversion. The lenders are now looking to initiate a deeper probe to ascertain the authenticity of the dealings of these three entities, said one of the persons. SBI had engaged accounting firm BDO in November 2017 to study the fund flows.

“The report has been tabled before the committee of creditors and questions based on the findings of the report have been raised with the management,” said one of the persons. “The probe came across several transactions which had no logic whatsoever. A deeper analysis showed that these were just adjustment entries made by the company. An indepth investigation is needed to track the flow of these funds.”

A spokesperson for SBI said the bank does not “comment on individual accounts and their treatment”. An RCom spokesperson said the company was undergoing insolvency and queries needed to be put to resolution professional Anish Nanavaty, who didn’t respond to ET.

RCom entered the bankruptcy process in May, when the appellate tribunal vacated a stay on insolvency proceedings against it.

Based on conversations with people who have seen the report, ET understands that a little-known entity, Netizen, received capex advances of Rs 4,000 crore in May 2017 through transactions emanating from Reliance Group companies. What raised suspicion was the size of the amount, which was later set off against liabilities.

“Ideally, the auditors of the company should have reported this transaction in the company’s financials, but they haven’t done so. The way the entity (Netizen) has been defined, it doesn’t technically fall within the purview of a related party,” said another person close to the development. Pathak HD & Associates was the auditor for Reliance Communications.

Questions were also raised on inter-corporate deposits of Rs 600 crore paid to another group company. As per the initial probe, this may have been a preferential transaction that was not carried out at an arm’s length. At least a dozen transactions of alleged evergreening of loans through the letter of credit route worth .`500 crore with three-four banks are also under scrutiny.

“A dozen transactions clearly hint towards banker facilitation in evergreening of loans by using multiple letter of credit transactions — these should be looked at in further detail,” said one of the persons who has seen the initial probe report. Reliance Group companies have a debt of over Rs 1 lakh crore with RCom accounting for Rs 49,193 crore, followed by Reliance Telecom at over Rs 24,306 crore.

Anil Ambani said recently that his group was fully committed to meeting all future debt-servicing obligations in a timely manner through asset sales that are already at various stages of implementation.

Global auditing firm PwC had recently informed the ministry of corporate affairs about certain alleged irregularities in the books of accounts of Reliance Capital and Reliance Home Finance, part of the same group. The irregularities, which involved alleged diversion of funds and transactions between the two firms and other group companies, came to light while PwC was auditing the books of the two companies for the first quarter ended June, ET had reported earlier.

The Economic Times reported

CNBCtv18: NCLAT dismisses HDFC’s insolvency plea against RHC Holding

10 July 2019: The National Company Law Appellate Tribunal (NCLAT) on July 10 dismissed a petition by HDFC to initiate insolvency proceedings against RHC Holding, an entity promoted by billionaire brothers Malvinder Mohan Singh and Shivinder Mohan Singh.

A two-member bench headed by Chairman Justice SJ Mukhopadhaya upheld the order of the principal bench of the National Company Law Tribunal (NCLT) which had rejected HDFC’s plea.

The appellate tribunal said it found “no merits” in HDFC’s petition and said that non-bank financial lenders come under the purview of the Reserve Bank of India (RBI) and should seek remedies from the central bank, not the bankruptcy court.

Passing an order on December 6, 2018, the NCLT had observed that RHC Holding was a non-banking financial company and does not come under the purview of the Insolvency and Bankruptcy Code (IBC).

HDFC had then approached the appellate tribunal to challenge the NCLT’s ruling.

The mortgage lender had moved the NCLT to recover an amount of Rs 41 crore.

RHC Holding, promoted by the Singh brothers, had taken a loan of Rs 200 crore from HDFC in April 2016. RHC Holding had paid the interest for the first quarter on time but later started defaulting on its dues.

According to HDFC, even after adjusting the proceeds from the sale of pledged shares, an amount of Rs 41.09 crore remained due.

To recover the remaining amount, HDFC filed an insolvency plea against RHC Holding before the NCLT.

The NCLAT had in January this year issued notices to RHC Holding and other parties and directed them to file their replies.

As reported on CNBCtv18