Citing governance concerns and payment defaults, the Reserve Bank of India on Wednesday superseded the Board of Directors of Dewan Housing Finance Corporation Limited (DHFL) and said it intends to shortly initiate the process of resolution of the company.
The RBI also appointed the R. Subramaniakumar, ex-MD and CEO of Indian Overseas Bank, as the "Administrator under Section 45-IE (2) of the Reserve Bank of India Act, 1934".
"In exercise of the powers conferred under Section 45-IE (I) of the Reserve Bank of India Act, 1934, the Reserve Bank has today superseded the Board of Directors of DHFL owing to governance concerns and defaults by DHFL in meeting various payment obligations," RBI said in a statement.
The Reserve Bank also intends to shortly initiate the process of resolution of the company under the Insolvency and Bankruptcy (Insolvency and Liquidation Proceedings of Financial Service Providers and Application to Adjudicating Authority) Rules, 2019 and would also apply to the NCLT for appointing the Administrator as the Insolvency Resolution Professional, the central bank said.
This makes DHFL the first non-banking lender to be referred by RBI to NCLT under the new November 15 notification of the government.
In a notification on November 15, the government allowed financial services providers to come under the purview of the Insolvency and Bankruptcy Code. As per these guidelines, these companies will be eligible only if they have assets of at least Rs 500 crore and are referred by RBI.
Debt-laden DHFL has been under the fire after several allegations of misappropriation of funds, fraud allegations surfaced against the company. It is currently one of the largest defaulters in the country and owes debtors nearly Rs 1 lakh. It debtors include banks, mutual funds and fixed deposit holders as well.
On Wednesday, DHFL told the Bombay High Court that it intends to repay its depositors and asked for modifications to an earlier order that restricted it from making payments. The Bombay HC will hear the matter again on November 28.
This is the 10 October order where the court barred DHFL from making any payment to unsecured creditors, which included fixed deposit holders. On November 13, DHFL was allowed by Bombay HC to make payments to bankers that they had securitized deals with. However, there was no relief for FD holders. DHFL owes FD holders Rs 6,188 crore.