The committee of creditors of Dewan Housing Finance Limited (DHFL) has voted against the proposal to reconsider the resolution fund distribution plan in favour of small investors, two people in the know told CNBC-TV18.

DHFL lenders had decided to put to vote the resolution to consider a higher payment to the Army Group Insurance Fund, Navy Children School group of investors, Air Force Group Insurance Society, Fixed Deposit Holders, unsecured NCD holders and small secured NCD holders as well, according to the minutes of the last lenders meeting reviewed by CNBC-TV18. The voting was held after the National Company Law Tribunal suggested the lenders consider allotting more money to these small investors.

“About 89 percent of the CoC (committee of creditors) voted against the resolution to increase the payout to smaller investors. About 6 percent or so abstained from voting, so very few were actually in favour of the resolution. We will now submit the decision to the NCLT today itself,” said a senior executive involved in the process on the condition of anonymity as the results of the voting are not public yet.

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However, what came as a surprise was that even the Fixed Deposit holders voted against this resolution to increase the payout to small investors including them. “Perhaps they wanted more than what was being offered,” opined one of the executives involved in the matter.

CNBC-TV18 has learnt that FD holders may move a higher court in the matter, and want no less than full repayment.

Had the CoC passed the resolution to reconsider the distribution of resolution funds, the secured financial creditors would have to forgo Rs 1853.21 crores from their expected recovery sum which would be about 5.4 percent of the resolution plan value, CNBC-TV18 has learnt. With the increased payout being turned down, secured financial creditors including banks now hope to recover close to 43 percent of their claims.

While okay Piramal Group’s Rs 37,250 crores resolution plan for DHFL on June 7, the NCLT had also suggested that lenders consider a redistribution of funds citing earlier judgements like the Essar Steel case. NCLT asked the CoC to report back to the court on its decision regarding the redistribution of funds in two weeks’ time from the date of the order.

The court “suggested” that the creditors' committee “enhance the percentage of the payment made in the plan (at about 23 percent for FD holders) and the same should be increased to the level of Secured Financial Creditors i.e. approximately 40% the Financial Creditors would be getting in this plan.”

“Its generally considered that investment in Fixed Deposit, NCDs are low-risk investment than investing in equity shares, therefore, these small investors should not be put to more risk, take more hair cut than the stronger financial institutions viz Banks, Financial Institutions and accordingly for this limited purpose we direct the COC to reconsider their distribution method, distribution amongst various members of CoC within two weeks from today and report the same to this Adjudicating Authority,” the court had said.

It also suggested that the “ARMY Group” be treated as a separate class, subclass of creditors and be repaid Rs 39 crores of their claims in full, “considering the nature of duties performed by them…it would be appropriate for the members of the CoC to reconsider and to repay their entire admitted claim without any hair cut thereby expressing our deep concern, gratitude and respect to the Army Personnel.” Following this observation from the court, other Navy, as well as Air Force groups who had made investments in DHFL, also reached out to the lenders to increase their payment in a similar fashion.

With the lenders rejecting the proposal to increase the payout or change the agreed on the distribution of resolution funds, FD holders and other small investors will face a setback.

The FD holders have been fighting to recover all their savings in the bankrupt company since the day it was admitted into the NCLT. They voted against the Piramal Group resolution plan for DHFL as they were dissatisfied with the proposed repayment, even though it proposed to repay small FD holders with upto Rs 2 lakh savings the entire sum of principal amount they had invested in full. FD holders have a 6.18 percent voting share in the CoC, and are being offered only the liquidation value as dissenting creditors according to IBC provisions.

According to the plan which was approved by the CoC, which will now remain unchanged, the FD holders would recover about 23 percent of their Rs 5,299.19 crore of admitted claims. The CoC has proposed to increase the recovery to 41.31 percent, which would have resulted in the FD holders getting Rs 2,189.01 crores. This was Rs 975.74 crores more than what was initially proposed. However, this proposal has now been rejected by the CoC.

This means that FD holders will now only get a little over Rs 1200 crores as initially proposed, unless a higher court rules otherwise.

The Administrator of DHFL is expected to present the results of the voting decision to the NCLT today.

(Edited by : Abhishek Jha)

First Published:Jun 23, 2021 12:16 PM IST