"Supreme Court Upholds Piramal's Resolution Plan for DHFL, Sets Aside NCLAT Order, Says 'NCLAT Ought Not to Have Tinkered with the Clause'"
Kiran Raj
The Division Bench of the Supreme Court comprising Justice Bela M. Trivedi and Justice Satish Chandra Sharma held that the Committee of Creditors (CoC), having exercised its commercial wisdom in approving the resolution plan for Dewan Housing Finance Corporation Limited (DHFL), was not to be interfered with by the National Company Law Appellate Tribunal (NCLAT). The Court set aside the NCLAT’s direction requiring reconsideration of the resolution plan and upheld the order passed by the National Company Law Tribunal (NCLT) approving the same. It further clarified that avoidance applications filed under different provisions of the Insolvency and Bankruptcy Code (IBC) are to be adjudicated separately and that the recoveries arising therefrom are to be distributed based on the nature of the application. Recoveries from applications filed under Section 66, which deal with fraudulent transactions, shall be appropriated in favour of the successful resolution applicant, Piramal Capital and Housing Finance Limited, while those under Sections 43, 45, and 50 shall be appropriated in favour of the CoC.
The case originated from proceedings initiated by the Reserve Bank of India (RBI) under Section 227 of the IBC against Dewan Housing Finance Corporation Limited (DHFL), a housing finance company registered under the NHB Act and RBI Act. On 20 November 2019, the RBI, exercising its powers under Section 45-IE of the RBI Act, superseded DHFL’s Board and appointed Shri R. Subramaniakumar as Administrator. A company petition was then filed on 29 November 2019 before the NCLT, which admitted the petition on 3 December 2019, thereby commencing DHFL’s Corporate Insolvency Resolution Process (CIRP).
The Administrator constituted a Committee of Creditors (CoC) on 24 December 2019 after collating claims totaling ₹82,247 crores. Twenty-four Expressions of Interest were received, including from Piramal Capital and Housing Finance Limited. M/s. Grant Thornton (GT) was appointed as Transaction Auditor to examine preferential, undervalued, extortionate, and fraudulent transactions under Sections 43–51 and Section 66 of the IBC. GT identified avoidance transactions worth ₹45,050 crores.
On 16 September 2020, a final Request for Resolution Plan Proposal (RFRP) was issued. Piramal submitted a resolution plan on 16 October 2020, initially valuing retail assets at ₹15,000 crores. Revised offers were submitted on 9 and 17 November 2020, with a final offer of ₹37,250 crores submitted on 22 December 2020.
On 15 January 2021, the CoC approved Piramal’s plan with 93.65% votes. Fixed Deposit (FD) holders and Non-Convertible Debenture (NCD) holders, including 63 Moons Technologies Limited, voted in favour through their Authorised Representative.
An application was filed by the Administrator before the NCLT under Section 31 of the IBC seeking plan approval. 63 Moons challenged Clause 2.13.3, which allowed the resolution applicant to appropriate any recoveries from Section 66 proceedings. On 7 June 2021, the NCLT approved the resolution plan and dismissed 63 Moons’ objections, noting that the CoC, comprising 77 financial creditors, had decided in its commercial wisdom to assign these recoveries in exchange for upfront payment.
Subsequent appeals were filed before the NCLAT. The NCLAT, by its judgment dated 27 January 2022, directed that the clause in the resolution plan allowing appropriation of recoveries from Section 66 applications should be set aside and the matter be reconsidered by the CoC.
The learned counsels for the petitioners contended that the CoC had the exclusive domain over commercial decisions and that the NCLAT had erred by interfering in the resolution plan. It was submitted that Clause 2.13.3 assigning a nominal value of ₹1 to Section 66 recoveries was valid and formed part of the overall commercial consideration of ₹37,250 crores. It was further argued that the value of potential recoveries was speculative, and the clause ensured a higher upfront recovery for creditors.
Counsel for 63 Moons and other respondents argued that the clause was illegal, as benefits from avoidance applications under Section 66 are statutorily meant for creditors. Reliance was placed on Venus Recruiters Private Limited v. Union of India.
FD and NCD holders argued that the resolution plan violated statutory provisions under the NHB Act and RBI Act, which require full repayment of public deposits.
The ex-promoters contended that they were wrongly excluded from the resolution process despite being entitled under Section 24 of the IBC to receive notice and copies of resolution plans. It was further contended that valuation of avoidance applications at ₹1 was arbitrary.
The CoC, represented by the Solicitor General and Senior Advocates, submitted that decisions were based on commercial rationale, post detailed negotiations, and that regulatory bodies including the RBI had not objected. It was submitted that participation of ex-promoters was barred due to supersession under the RBI Act.
The Supreme Court observed that all issues raised regarding the clause in question and the treatment of recoveries under Section 66 had already been dealt with earlier in the judgment. It stated: “Suffice it to say that when majority of the creditors in their wisdom, and after negotiations with the PRA as to how and in what manner the Corporate Resolution Process should be undertaken, had explored the feasibility and viability of the RP, while approving the same, and when the said Plan was also approved by the NCLT, the NCLAT ought not to have tinkered with a Clause of the said Plan with regard to the treatment of Recoveries from the Applications under Section 66 of the IBC.”
On the right of ex-directors to participate in CoC proceedings, the Court observed that supersession of DHFL’s Board by RBI had different legal consequences than mere suspension under IBC. It held: “The effect of Supersession is permanent in nature, whereas the effect of Suspension is temporary in nature.”
The Court cited Vijay Kumar Jain v. Standard Chartered Bank, acknowledging the right of suspended directors to receive copies of resolution plans. However, it distinguished the present case, stating that the ex-promoters had vacated office upon RBI’s supersession order and thus had no such right.
It further recorded: “They, as the members of the superseded Board of Directors, could not have made any claim to have a copy of proposed RPs submitted by the PRAs during the CIRP proceedings.”
The Court clarified that while suspended directors under IBC can attend CoC meetings (without voting), superseded directors under RBI Act are completely removed from office. It held that in the present case, “the Appellants – KW and DW, who were the Directors of DHFL at the relevant time, having deemed to have vacated their offices on the supersession of the Board of Directors under the RBI Act, could not have claimed any right to attend the meetings of CoC or to participate in the CIRP proceedings...”
Regarding the valuation of Section 66 claims, the Court accepted the CoC’s discretion, stating: “The CoC had explored the feasibility and viability of the resolution plan in its commercial wisdom... the NCLAT ought not to have tinkered with a Clause...”
The Supreme Court set aside the judgment passed by the NCLAT and restored the NCLT’s approval of the resolution plan:
“The impugned judgment and order dated 27.01.2022 passed by the NCLAT in Company Appeal Nos. 454-455 and 750 of 2021 is set aside, and the judgment and order dated 07.06.2021 passed by the Adjudicating Authority/ NCLT granting its approval to the Plan Approval Application, and thereby approving the Resolution Plan, is upheld.”
The Court then clarified the procedure for adjudication of avoidance applications and the applicable statutory provisions under which the NCLT must act:
“However, it is clarified and directed that the NCLT shall decide the Avoidance Applications filed by the Administrator under Section 43, 45, and 50, and shall separately decide the Applications under Section 66, and it shall pass the orders in accordance with the powers conferred upon it under Section 44, 48, 49, 50, and under Section 66, as the case may be.”
The Court also clarified how the recoveries arising from the respective categories of avoidance applications are to be appropriated:
“The recoveries/benefits that may follow from such Applications shall be appropriated in favour of the CoC in case of Avoidance Applications under Section 43, 45 and 50, and in favour of SRA–Piramal Capital in case of Applications under Section 66 of IBC.”
The appeals filed by Piramal Capital and Housing Finance Limited and by Union Bank of India challenging the NCLAT’s interference with the resolution plan were allowed:
“The Civil Appeal Nos. 1632–1634 of 2022 filed by the Piramal Capital and Housing Finance Limited and the Civil Appeal Nos. 2989–2991 of 2022 filed by the Union Bank of India stand allowed.”
The appeals filed by 63 Moons Technologies Limited concerning the resolution plan and the treatment of avoidance recoveries were disposed of:
“The Civil Appeal Nos. 3694–3695 of 2022 filed by 63 Moons Technologies Limited stands disposed of.”
Finally, the Court dismissed the remaining appeals filed by depositors, fixed deposit holders, employee trusts, and other objectors:
“The Appeal arising out of D. No. 6037 of 2022 filed by Raghu K.S. & Others, Civil Appeal Nos. 2413–2415 of 2022 filed by Vinay Kumar Mittal & Others, Civil Appeal No. 2396 of 2022 filed by Uttar Pradesh State Power Sector Employees Trust and Civil Appeal No. 2402 of 2022 filed by Uttar Pradesh State Power Corporation Contributory Provident Fund Trust, Civil Appeal Nos. 8123–8125 of 2022 filed by Senbagha Vivek A & Another and Civil Appeal No. 6286 of 2022 filed by THDC India Limited Employee Provident Fund are dismissed
Advocates Representing the Parties
For the Appellants: Abhishek Manu Singhvi, Senior Advocate; Balbir Singh, Senior Advocate; Dhruv Mehta, Senior Advocate; Maninder Singh, Senior Advocates
For the Respondents: Kapil Sibal, Senior Advocate; Santosh Kumar Paul, Advocate; Nakul Diwan, Senior Advocate
For the CoC: Tushar Mehta, Senior Advocate; Navin Pahwa, Senior Advocate
Case Title: Piramal Capital and Housing Finance Limited (Formerly Dewan Housing Finance Corporation Limited) v. 63 Moons Technologies Limited & Others
Neutral Citation: 2025 INSC 421
Case Number: Civil Appeal Nos. 1632–1634 of 2022
Bench: Justice Bela M. Trivedi, Justice Satish Chandra Sharma
[Read/Download order]
