The Bombay High Court discharged Dewan Housing Finance Corporation Limited (DHFL) under the Insolvency and Bankruptcy Code (IBC) in a Central Bureau of Investigation (CBI) case against its former directors Kapil and Dhiraj Wadhawans.
A single bench of justice Sandeep Shinde reserved the judgment on October 28 and pronounced it on November 16. The question before the court was whether IBC lays down a direction to absolve the Corporate Debtor (DHFL) of all criminal offences prior to commencement of the Corporate Insolvency Resolution Process (CRIP) although appeals are pending.
The court was hearing DHFL’s plea challenging an order dated August 20 by the special CBI court declining to discharge the company under IBC in a case filed by CBI against its erstwhile directors, the Wadhawans.
On November 20, 2019, the Reserve Bank of India (RBI) superseded the board of directors of DHFL owing to governance concerns and defaults in meeting various payment obligations. On November 29, 2019, RBI filed a company petition under IBC’s Insolvency Rules to initiate the corporate insolvency resolution process (CIRP) against DHFL.
On December 3 of that year, the National Company Law Tribunal directed commencement of the moratorium period of IBC and confirmed the appointment of an Administrator.
On March 7, 2020, CBI registered an FIR against DHFL, its directors and Rana Kapoor, founder of Yes Bank, for cheating under various sections of the Indian Penal Code and the Prevention of Corruption Act. On June 25, a charge sheet was filed and meanwhile the Administrator invited resolution plans from bidders.
In June, 2021, Piramal Capital’s Resolution Plan was approved and an interim monitoring committee was appointed. In September 2021, Primal Capital and Housing Finance Limited merged into DHFL pursuant to the reverse merger as contemplated under the Resolution Plan. Soon, the National Stock Exchange of India and the BSE were apprised that consequent to the reverse merger, DHFL shall issue such a number of equity shares to shareholders of Piramal Enterprises Limited.
The court held, “Subsequent events indisputably caused change in management and control of Corporate Debtor. The immunities sought by the Corporate Debtor though conditional; have been fulfilled and satisfied. Thus, in my view, immunities under IBC cannot be denied to Corporate Debtor.”
The bench quashed the special CBI court order and said, “The Judge has committed an error by permitting the prosecution of the Corporate Debtor to the Wadhawans who were ousted from the board of directors by the RBI two years ago.”
