Vinay Kumar Mittal vs Dewan Housing Finance … on 31 January, 2020


Supreme Court of India

Vinay Kumar Mittal vs Dewan Housing Finance … on 31 January, 2020

Author: L. Nageswara Rao

Bench: L. Nageswara Rao, Hemant Gupta

                                              Non-Reportable

        IN THE SUPREME COURT OF INDIA
          CIVIL APPELLATE JURISDICTION

             Civil Appeal No.654 -660 of 2020
      (Arising out of SLP (C) No.30372-30378 of 2019)

Vinay Kumar Mittal & Ors.
                                          .... Appellant(s)
                            Versus


Dewan Housing Finance Corporation Ltd. & Ors.
                                       …. Respondent (s)


                     JUDGMENT

L. NAGESWARA RAO, J.

1. The above appeals are filed against the interim

orders passed by the High Court of Judicature at Bombay

on 10.10.2019, 17.10.2019 and 13.11.2019. The order

dated 08.11.2019 passed by the Debts Recovery Tribunal-I,

Mumbai following the order of the High Court dated

17.10.2019 is also in challenge in the above appeals. For

the sake of convenience, the facts in Commercial Suit

No.1034 of 2019, filed by Reliance Nippon Life Asset

Management Ltd. are referred to in this judgment.

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Reliance Nippon Life Asset Management Ltd. (hereinafter

referred to as, ‘Respondent No.4’) filed Commercial Suit

No.1034 of 2019 for recovery of a sum of

Rs.479,31,29,113/- along with interest at the rate of 18 per

cent. In a nutshell, the case of Respondent No.4 is that it

subscribed to Non-Convertible Debentures (NCDs) of

Dewan Housing Finance Corporation Limited (DHFL,

hereinafter referred to as, ‘Respondent No.1’) to the tune

of Rs.63,41,72,000/, that were issued through a public

offer. In 2017-2018, Respondent No.4 further subscribed

to NCDs of Respondent No.1, aggregating to Rs.365 crores,

issued on a private placement basis. Respondent No.4

became entitled to early redemption of private placement

NCDs in March, 2019 due to the down grading in ratings of

the NCDs issued by Respondent No.1. Respondent No.1

failed to pay the entire amount towards the early

redemption.

2. By an order dated 30.09.2019, the High Court of

Judicature at Bombay restrained Respondent No.1 from

making further payments disbursements to any unsecured

creditors and secured creditors except in cases where

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payments are to be made on a pro-rata basis to all secured

creditors out of its current and future receivables in

preference to the payments owed to Respondent No.4.

3. By an order dated 10.10.2019, the High Court

directed the continuance of the order passed on

30.09.2019 till the disposal of the motion. Similar orders

were passed in the interim applications filed in the other

commercial suits by orders dated 17.10.2019, 08.11.2019

and 13.11.2019. It was clarified by the High Court on

13.11.2019 that Respondent No.1 shall not be prevented

from making any payments overdue or payable under the

assignment agreements in favour of any or all such banks

or assignees of loans.

4. The Appellants are depositors who invested in fixed

deposits with the Respondent No.1-DHFL. Having been

aggrieved by the interim orders passed by the High Court

and the Debts Recovery Tribunal-I, Mumbai restraining

Respondent No.1 from making any payments towards their

fixed deposits, the Appellants challenged the orders of the

High Court with the leave of this Court.

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5. By placing reliance on Section 36 and 36 (A) of the

National Housing Bank Act, 1987 and Section 45 (q) (a) of

the Reserve Bank of India Act, 1934, Mr. Jayant Bhushan,

learned Senior Counsel appearing for the Appellants

submitted that the repayments of the deposits of the

Appellants should be given preference over the contractual

claims of the debenture holders. Notice was issued by

this Court on 13.12.2019. On that day, Mr. K. V.

Vishwanathan, learned Senior Counsel appearing for the

Reserve Bank of India submitted that the Reserve Bank of

India has filed an application under Section 227 and 239

(2) (zk) of the Insolvency and Bankruptcy Code, 2016

(hereinafter referred to as, IBC) read with Rule 5 and 6 of

the Insolvency and Bankruptcy (Insolvency and Liquidation

Proceedings of Financial Service Providers and Application

to Adjudicatory Authority), Rules, 2019 (hereinafter

referred to as the ‘FSP Rules’) before the National

Company Law Tribunal (hereinafter referred to as, NCLT),

Mumbai to initiate the Corporate Insolvency Resolution

Process (CIRP) against Respondent No.1. Mr. Vishwanathan

also informed this Court that an order was passed by the

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NCLT on 03.12.2019, imposing moratorium under Section

14 of the IBC prohibiting the institution of any suit or

continuation of proceedings or execution of any decree

against the Financial Service provider i.e. DHFL and

transferring, alienating or disposing of any asset of DHFL

and any action to foreclose, recover or enforce any

security interest created by DHFL in respect of its property

with effect from the date of filing the application i.e.

29.11.2019 till the completion of the Corporate Insolvency

Resolution Process.

6. The Reserve Bank of India appointed Mr.R.

Subramaniakumar as the Administrator of Respondent

No.1 under Section 45 (1) (e)(i) of the Reserve Bank of

India Act, 1934 on 20.11.2019. On 29.11.2019, the RBI

filed a petition to initiate the corporate insolvency

resolution process against Respondent No.1 under Rule 5

of the FSP Rules. The NCLT confirmed the name of Mr. R.

Subramaniakumar, Administrator and directed him to

perform all the functions of Resolution Professional and to

complete the insolvency resolution process.

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7. To complete the narration of the facts, it is relevant to

refer to an order dated 03.12.2019 passed by the High

Court on being informed that the Reserve Bank of India

had filed an application for initiation of corporate

insolvency resolution process. The High Court took note

of the fact that the moratorium shall operate from the date

of the filing of the application i.e. 29.11.2019. The High

Court granted liberty to the parties before the Court to

approach the NCLT for redressal of their grievances.

8. On 03.12.2019, the NCLT directed that a moratorium

as defined under Section 14 of the IBC shall commence

with effect from the date of the application i.e. 29.11.2019.

On commencement of the moratorium, the institution of

any suit or continuation of any proceedings or execution of

any decree against the Financial Service Provider i.e. the

Respondent No.1 herein shall be prohibited. The transfer

alienation or disposal of any asset of the FSP were

forbidden. Any action to foreclose, recover or enforce any

security credit by the FSP in respect of a property was also

debarred. However, the supply of essential goods or

services to the FSP was permitted to be continued in an

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un-interrupted manner and not to be terminated or

suspended by the supplier during the moratorium.

9. The Administrator was permitted to cause a public

announcement intimating the initiation of corporate

insolvency resolution process and calling for admission of

claims as prescribed in Section 15 of the IBC. The NCLT

referred to the Appellants in its order dated 03.12.2019

and directed the Administrator to update the list of

depositors along with the outstanding amounts payable to

each one along with their address and communication

information so that in future their interests can be taken

care of, along with other stake-holders.

10. Consequently, the Administrator made a public

announcement under Regulation 6 of the Insolvency and

Bankruptcy Board of India (Insolvency Resolution Process

for Corporate Persons) Regulations, 2016. On 04.12.2019,

public depositors were included as a class of creditors

under Section 21 (6A) (b) of the IBC. Three names of

insolvency professionals were proposed by the

Administrator and the public depositors were required to

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select one of three persons to act as their authorized

representative.

11. The first meeting of the Committee of Creditors was

held on 30.12.2019, during which it was decided that

Respondent No.1-Corporate Debtor can commence

disbursement of loans to the tune of Rs.500 crores per

month. It was also resolved in the said meeting of the

Committee of Creditors that the interests of the depositors

shall be taken into account, in accordance with the

provisions of the IBC.

12. The Appellants filed an Interlocutory Application

seeking a direction to restrain Respondent No.1 from

commencing its lending operations till the matured

deposits of the depositors are duly paid.

13. Mr. Jayant Bhushan, learned Senior Counsel

appearing for the Appellants expressed his apprehension

that the interim orders dated 10.10.2019 as modified by

the order dated 13.11.2019 might come in the way of

consideration of the claims that are made by the

depositors before the Committee of Creditors and the

Administrator. After hearing the learned counsel for the

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Administrator and the RBI on this point, we are of the

opinion that the claims that are made by the depositors

shall be considered by the Committee of Creditors and the

Administrator without being influenced by the orders

passed by the High Court on 10.10.2019 as modified by

order dated 13.11.2019, as well as the order passed by the

Debts Recovery Tribunal-I, Mumbai on 08.11.2019.

14. Mr. Bhushan further submitted that the decision taken

by the Committee of Creditors on 30.12.2019 by which the

Administrator was permitted to carry on the lending

operations of the first Respondent without paying the

depositors is arbitrary and illegal.

15. After considering the submissions made by Mr. Jayant

Bhushan, learned Senior Counsel for the Appellants, Mr.

Ramji Srinivasan, learned Senior Counsel for the

Administrator and Mr. K. V. Vishwanathan, learned Senior

Counsel for the RBI and in view of the order that we

propose to pass, we deem it not necessary to examine the

merit of the contentions made by the learned Senior

Counsel. The depositors are being represented by the

Authorized Representative before the Committee of

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Creditors. We leave it open to the Appellants to raise all

points and contentions before the Committee of Creditors,

the Administrator and if necessary, the NCLT. In view of

the above, we are not inclined to interfere with the

decision of the Committee of Creditors taken on

30.12.2019. We are informed that there are nearly one

lakh depositors who have invested their life time earnings

with Respondent No.1. Some of the deposits have

matured and some of the depositors are critically ill. We

have no doubt that the concerns of the depositors and

their rights shall be considered in accordance with law.

16. The appeals are, accordingly disposed of.

…………………………..J.
[L. NAGESWARA RAO]

……………………………J.

[DEEPAK GUPTA]

New Delhi,
January 31, 2020.

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