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Debt Recovery Tribunal stops DHFL from making payments

Move comes a day after Bombay HC told DHFL to pay banks, NBFCS with securitisation deals

, ET Bureau|
Updated: Nov 15, 2019, 07.35 AM IST
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DRT believes that DHFL is not in a position to pay the principal amount of debentures and/or interest on its due date.
MUMBAI: The Pune bench of the Debt Recovery Tribunal (DRT) has stopped DHFL from making any further payments to any of its unsecured creditors, passing an order on an application filed by Catalyst Trustee, the custodian of the indebted home financier’s bond holders.

“The defendant …(DHFL) is temporarily… restrained (from) making further payments to any of its unsecured creditors, save and except in cases where the payments are to be made on a pro-rata basis to all secured creditors…,” the DRT said in the order, of which ET has seen a copy.

A day earlier, the Bombay High Court allowed DHFL to make payments to banks and NBFCs that have securitisation arrangements with the stressed mortgage financier. “The order passed by the DRT will not have any bearing on the order passed by the Bombay High Court since the latter has allowed DHFL to pay money to lenders where it is acting as a recovery agent after DHFL assigned its loans to the banks,” said a lawyer involved in the case.

“Now, all the banks will have to go to DRT to seek the same clarification since the DRT has appointed a commissioner to monitor and supervise the affairs of DHFL,” said the person.

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The presiding officer of DRT, Deepak Thakkar, also directed the trustees to appoint a commissioner to monitor and supervise the transactions of DHFL. Catalyst moved the local court as it must recover Rs 26,861 crore worth of debt securities. There are about 85,000 debenture holders.

“It is necessary to protect the interests of the applicant as I find that the balance of convenience tilts in favour of the applicant,” the DRT judge said in the order. The next date of hearing at DRT is scheduled on December 6.

DRT believes that DHFL is not in a position to pay the principal amount of debentures and/or interest on its due date. The default started occurring from 4th August 4, 2019 until the date before the filing of the original application. The home financier has acknowledged the liability.

Munaf Virjee, managing partner of law firm ABH Law, which is representing DHFL, declined to comment. Advocate Rohit Gupta, who appeared for the trustee, argued that it has no difficulty if DHFL is collecting the legitimate dues from the borrower. “However, there shall not be any preference in making the payment to unsecured creditors, ignoring secured creditors,” Gupta argued.

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