DHFL can pay banks and NBFCs with which it has securitisation deals: High Court
The order came after a clutch of lenders approached the court.
The order came after a clutch of lenders, including the State Bank of India (SBI), Bank of Baroda, Standard Chartered Bank, Canara Bank and IDFC First Bank, approached the court. Two NBFCs, Aditya Birla Home Finance and Aditya Birla Finance, were also among the firms that joined the high-street lenders.
On Wednesday, Justice AK Menon, while modifying his earlier order, said that DHFL shall make payments to banks and NBFCs with which it has securitisation and loan assignment agreements.
“Several applications have been filed by banks and NBFCs to modify the order to vacate the earlier restraining order on any payment,” said Justice Menon in his oral order. “The counsel for Reliance Nippon Life Asset Management has made it clear that as long as DHFL maintains the ratio of 1.1-time security cover, they have no objection on such payments.”
Senior Counsel Janak Dwarkadas, who appeared for SBI and other public sector banks, argued that they have paid money to purchase those loans, and that those are not the assets of DHFL anymore. “DHFL is merely a collection agent and they will get a fee as a service provider,” argued Dwarkadas. “About Rs 37,000 crore loan has been assigned by the mortgage provider to banks and a charge has been created on it.”
The lenders’ primary argument was that the October 10 order of the Bombay High Court applied only to creditors, and they can’t be classified as one as they own the pool of assets securitised by DHFL. “The High Court… in the case filed by Reliance Nippon Life Insurance passed orders on September 30 and October 10 restraining the company from making payments to any of its secured/ unsecured creditors, including payments to any fixed deposit holders," DHFL had said earlier in a filing.
DHFL had further said in the same exchange filing that it continues to have strong collections and adequate liquidity to pay its fixed deposit holders. However, as a consequence of the two orders and pending further directives from the Bombay High Court, the company was unable to make these payments.
On November 5, DHFL had urged SBI and Union Bank of India to help lift a moratorium on repayments so that it could begin repaying its depositors.