BANKERS IN A BIND AFTER NCLAT RULING ON DHFL RESOLUTION

Bankers are now in a quandary after the NCLAT recently ruled that the Committee of Creditors' (CoC) decision to approve the resolution plan of DHFL was "illegal”; the plan containing an “illegal” stipulation on recovery of avoidance transactions was not sustainable.

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CoC's core committee, which looked into the recent NCLAT directive, is now caught in a dilemma as its legal advisors are urging it to appeal to the Supreme Court. At the same time, the debenture trustee (representing NCD holders and part of CoC) is opposed to any such move, sources privy to the developments said. The ball is now in CoC's court as it has to take the difficult decision of either adhering to NCLAT's directive or filing an appeal before Supreme Court, they added.

'Avoidance transactions'

Under the Insolvency and Bankruptcy Code (IBC), "avoidance transactions" are recognised as undervalued, fraudulent or extortionate by the previous promoters.

It may be recalled that CoC had, as part of the resolution plan, agreed to Piramal Group (winning resolution applicant) getting all future recoveries of bad loans (amounting to about Rs. 38,000 crore) falling under avoidance transactions and accepted Rs. 1 from Piramals as the value assigned for such a benefit.