On wednesday, the Bombay High Court allowed a plea by a group of banks, which include State Bank of India, seeking to change its earlier order stoping payments by mortgage financier DHFL to them. The high court said that the payments to banks and NBFCs, for any kind of any securitisation or similar agreement, will be allowed.
In the month of October, Justice A K Menon had restrained the Dewan Housing Finance Corporation (DHFL) from paying to any kind of unsecured creditors until the next order comes. Financial Institutions, including SBI, Union Bank of India, Bank of Baroda, HDFC and others, filed an intervention plea before Justice Menon on Wednesday, asking to modify the order.
The Banks claimed that they didn’t come under the definition of unsecured creditors as they are the owners of the assets provided as security by DHFL.
Before the order passed by High court in October, DHFL was paying them regularly. They also mentioned in the plea that if it was not amended the security loans may become NPAs.
Granting this Plea, Judge said that any payment due to the securitization or similar agreement to the banks and NBFCs are now allowed.
After this order, the DHFL is allowed to make payments in future and also the ones which were due after October 10, when it got restricted by the High court, judge added.
In October, the Court had extended the restriction on the DHFL for making any more payments or disbursements to any unsecured creditors until next orders while granting a plea of Reliance Nippon Asset Management (recently renamed Nippon India Mutual Fund).
It was not alone in asking for restriction on DHFL, Kotak Mahindra Asset Management and Axis Asset Management also asked for the temporary restraint on the DHFL to stop it from making further payments to creditors, except certain payments made on a pro-rata basis to secured creditors.
The beleaguered home financier owes Rs 83,873 crore as of July 6, 2019 to banks, the National Housing Board, MFs and bondholders, including retail bondholders. As of July 6, the DHFL’s secured debt was Rs 74,054 crore while the unsecured debt stood at Rs 9,818 crore.
The 39% stake holder of the company, which is Wadhawan Family is trying to find out the ways to come out of this situation. The family has been into the limelight after the IL&FS bankruptcy. These methods included selling stakes in group entities, including in the flagship to the extent of giving up management control.
After the judgment by the HIgh court it is big relief to the State bank of India and other banks which are known as the creditors of DHFL, as they would be able to realised the loans now and it would not affect their business.
