Approved Resolution Plan that extinguishes FDs without fully paying deposit holders is legally valid under IBC: NCLAT

Case Details: Vinay kumar Mittal & ors. Vs. Dewan Housing Finance Corporation Ltd & ors. - [2022] 134 taxmann.com 333 (NCL-AT)

Judiciary and Counsel Details

• • M. Venugopal, Judicial Member
    
  • V. P. Singh and Dr. Ashok Kumar Mishra, Technical Member
  • Ramji Srinivasan, Sr. Adv. Ashish Bhan, Ketan Gaur, Ms. Chitra Rentala, Aayush Mitruka, Kaustub Narendran, Ms. Samriddhi Shukla, Ms. Lisa Mishra, Vishal Hablani, Raunak Dhillon, Animesh Bisht, Ms. Saloni Kapadia, Ms. Madhavi Khanna, Shubhankar Jain, Ms. Rajshree Chaudhary and Ashish S. Kamat, M.F. Philip, Advs. for the Respondent.

Facts of the Case

In the instant case, Mr Vinay Kumar Mittal (Hereinafter referred to as “Appellant”) had filed three Appeals on behalf of himself and 444 Individual fixed deposit holders and various charitable trusts who hold fixed deposits of Dewan Housing Finance Corporation Ltd (‘Hereinafter collectively referred as F.D. Holders’) against the impugned order of the Adjudicating Authority approving the resolution plan of Dewan Housing Finance Corporation Ltd (Hereinafter referred as “DHFL”).

The appellant alleged that Adjudicating Authority has approved of the resolution plan without even examining the specific contentions raised by the Appellants that they had deposited their money in trust with DHFL (Respondent No. 1) although, the assets belonging to the Appellants / F.D. Holders.

The appellant contended that DHFL is a housing finance institution registered under Section 29A of the NHB Act, AA approved the resolution plan which proposes extinguishing claim to the Fixed Deposit Holders without discharging their payments in Company full, Hence it contravenes the statutory provisions of the NHB Act and RBI Act.

The appellant contended that all the FD Holders are entitled to the full payment of their claims as NHB Act and RBI Act mandate the full payment of the FD Holders, priority should be given to their claims and they could not be categorised as unsecured financial creditors as the repayment of deposits to FD Holders fall within the ambit of the “ordinary course of business”.

The appellant further contended that the Resolution Plan as approved by the Adjudicating Authority should be quashed and COC is to be directed to modify the resolution plan approving full payments to the FD Holders along with the interest.

NCLAT Held

The Appellate Authority on hearing both the parties ordered that the order of the Adjudicating Authority was not to be set aside as there is no provision neither in the NHB Act nor in RBI Act which mandates that depositors have to be paid in full. There is a non- obstante clause in IBC, 2016 therefore no preferential treatment can be given to the FD Holders as the provisions of IBC will prevail.

Further, all the FD Holders are rightly treated as financial creditors, the ILC report confirmed the same and they also submitted their claims in FORM-C (form prescribed for filing a claim by the Financial Creditor). The FD Holders will be paid in accordance with the distribution mechanism as approved by the COC as the Resolution Plan approved by the COC complies with all the conditions of the Code.

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