The Reserve Bank of India (RBI) on Friday filed insolvency application against cash-strapped Dewan Housing Finance Corporation Ltd (DHFL) at Mumbai bench of the National Company Law Tribunal (NCLT).
The central bank has filed an application for initiation of corporate insolvency resolution process against DHFL under Section 227 of the Insolvency and Bankruptcy Code (IBC), 2016," RBI said in a press release.
With this, DHFL has became the first financial service provider to face the bankruptcy court under the new bankruptcy rules. On November 15, the corporate affairs ministry had notified these rules to deal with the resolution of financers apart from banks.
As per the RBI release, an interim moratorium will commence from the date of filing of the application till its admission or rejection. Reports suggest that the RBI has filed the plea on the basis of State Bank of India's (SBI) report on DHFL default.
On November 20, RBI superseded the board of the housing finance company and appointed former banker R Subramaniakumar as the administrator in its place in wake of governance concerns and defaults by DHFL in meeting various payment obligations. The central bank also appointed a three-member committee to assist the administrator of DHFL, ahead of referring the troubled mortgage lender to a bankruptcy court.
The committee comprises of IDFC First Bank's Non-Executive Chairman Rajiv Lall, ICICI Prudential Life Insurance's Managing Director and Chief Executive N S Kannan, and mutual funds' association AMFI's Chief Executive N S Venkatesh.
DHFL is one of the biggest defaulters in the country that owes over Rs 1 lakh crore (over $14 billion) to its debtors.
Last Friday, the newly appointed CEO Vajinath M Gavarshetty had assumed his office. Gavarshetty, the former chief general manager of State Bank of India, was appointed on the recommendations of the core committee of lenders as well as the firm's internal committee. In February this year, former CEO Harshil Mehta had resigned from his post.
Ahead of the announcement, share price of DHFL closed Friday's trade at Rs 20.70, up 4.28 per cent, on the Bombay Stock Exchange.
Edited by Chitranjan Kumar