Non-Reportable   

IN THE SUPREME COURT OF INDIA

CIVIL APPELLATE JURISDICTION

Civil Appeal No.654 -660 of 2020 (Arising out of SLP (C) No.30372-30378 of 2019)

Vinay Kumar Mittal & Ors. .... Appellant(s)

Versus

Dewan Housing Finance Corporation Ltd. & Ors.  …. Respondent (s)

J U D G M E N T

L. NAGESWARA RAO, J.

1. The  above  appeals  are  filed  against  the  interim

orders passed by the High Court of Judicature at Bombay

on 10.10.2019, 17.10.2019 and 13.11.2019.    The order

dated 08.11.2019 passed by the Debts Recovery Tribunal-I,

Mumbai  following  the  order  of  the  High  Court  dated

17.10.2019 is also in challenge in the above appeals.  For

the  sake  of  convenience,  the  facts  in  Commercial  Suit

No.1034  of  2019,  filed  by  Reliance  Nippon  Life  Asset

Management  Ltd.  are  referred  to  in  this  judgment.

1 | P a g e

Reliance Nippon Life Asset Management Ltd. (hereinafter

referred to  as,  ‘Respondent  No.4’)  filed  Commercial  Suit

No.1034  of  2019  for  recovery  of  a  sum  of

Rs.479,31,29,113/- along with interest at the rate of 18 per

cent.   In a nutshell, the case of Respondent No.4 is that it

subscribed  to  Non-Convertible  Debentures  (NCDs)  of

Dewan  Housing  Finance  Corporation  Limited  (DHFL,

hereinafter referred to as, ‘Respondent No.1’) to the tune

of  Rs.63,41,72,000/,  that  were  issued  through  a  public

offer.  In 2017-2018, Respondent No.4 further subscribed

to NCDs of Respondent No.1, aggregating to Rs.365 crores,

issued on a private placement basis.   Respondent No.4

became entitled to early redemption of private placement

NCDs in March, 2019 due to the down grading in ratings of

the NCDs issued by Respondent No.1.  Respondent No.1

failed  to  pay  the  entire  amount  towards  the  early

redemption.   

2. By  an  order  dated  30.09.2019,  the  High  Court  of

Judicature  at  Bombay  restrained  Respondent  No.1  from

making further payments disbursements to any unsecured

creditors  and  secured  creditors  except  in  cases  where

2 | P a g e

payments are to be made on a pro-rata basis to all secured

creditors  out  of  its  current  and  future  receivables  in

preference to the payments owed to Respondent No.4.   

3. By  an  order  dated  10.10.2019,  the  High  Court

directed  the  continuance  of  the  order  passed  on

30.09.2019 till the disposal of the motion.  Similar orders

were passed in the interim applications filed in the other

commercial suits by orders dated 17.10.2019, 08.11.2019

and  13.11.2019.   It  was  clarified  by  the  High  Court  on

13.11.2019 that Respondent No.1 shall not be prevented

from making any payments overdue or payable under the

assignment agreements in favour of any or all such banks

or assignees of loans.

4. The Appellants are depositors who invested in fixed

deposits  with  the  Respondent  No.1-DHFL.   Having  been

aggrieved by the interim orders passed by the High Court

and  the  Debts  Recovery  Tribunal-I,  Mumbai  restraining

Respondent No.1 from making any payments towards their

fixed deposits, the Appellants challenged the orders of the

High Court with the leave of this Court.  

3 | P a g e

5. By placing reliance on Section 36 and 36 (A) of the

National Housing Bank Act, 1987 and Section 45 (q) (a) of

the Reserve Bank of India Act, 1934, Mr. Jayant Bhushan,

learned  Senior  Counsel  appearing  for  the  Appellants

submitted  that  the  repayments  of  the  deposits  of  the

Appellants should be given preference over the contractual

claims of the debenture holders.   Notice was issued by

this  Court  on  13.12.2019.   On  that  day,  Mr.  K.  V.

Vishwanathan,  learned Senior  Counsel  appearing for  the

Reserve Bank of India submitted that the Reserve Bank of

India has filed an application under Section 227 and 239

(2)  (zk)  of  the  Insolvency  and  Bankruptcy  Code,  2016

(hereinafter referred to as,  IBC) read with Rule 5 and 6 of

the Insolvency and Bankruptcy (Insolvency and Liquidation

Proceedings of Financial Service Providers and Application

to  Adjudicatory  Authority),  Rules,  2019  (hereinafter

referred  to  as  the  ‘FSP  Rules’)  before  the  National

Company Law Tribunal (hereinafter referred to as, NCLT),

Mumbai  to  initiate  the  Corporate  Insolvency  Resolution

Process (CIRP) against Respondent No.1.  Mr. Vishwanathan

also informed this Court that an order was passed by the

4 | P a g e

NCLT on 03.12.2019, imposing moratorium under Section

14  of  the  IBC  prohibiting  the  institution  of  any  suit  or

continuation  of  proceedings  or  execution  of  any  decree

against  the  Financial  Service  provider  i.e.  DHFL  and

transferring, alienating or disposing of any asset of DHFL

and  any  action  to  foreclose,  recover  or  enforce  any

security interest created by DHFL in respect of its property

with  effect  from  the  date  of  filing  the  application  i.e.

29.11.2019 till the completion of the Corporate Insolvency

Resolution Process.   

6. The  Reserve  Bank  of  India  appointed  Mr.R.

Subramaniakumar  as  the  Administrator  of  Respondent

No.1  under Section 45 (1)  (e)(i)  of  the Reserve Bank of

India Act, 1934 on 20.11.2019.  On 29.11.2019, the RBI

filed  a  petition  to  initiate  the  corporate  insolvency

resolution process against Respondent No.1 under Rule 5

of the FSP Rules.  The NCLT confirmed the name of Mr. R.

Subramaniakumar,  Administrator  and  directed  him  to

perform all the functions of Resolution Professional and to

complete the insolvency resolution process.

5 | P a g e

7. To complete the narration of the facts, it is relevant to

refer  to  an  order  dated 03.12.2019 passed by  the High

Court  on being informed that the Reserve Bank of  India

had  filed  an  application  for  initiation  of  corporate

insolvency resolution process.   The High Court took note

of the fact that the moratorium shall operate from the date

of the filing of the application i.e. 29.11.2019.  The High

Court  granted liberty  to  the parties  before  the Court  to

approach the NCLT for redressal of their grievances.      

8. On 03.12.2019, the NCLT directed that a moratorium

as defined under Section 14 of  the IBC shall  commence

with effect from the date of the application i.e. 29.11.2019.

On commencement of  the moratorium, the institution of

any suit or continuation of any proceedings or execution of

any decree against the Financial Service Provider i.e. the

Respondent No.1 herein shall be prohibited.   The transfer

alienation  or  disposal  of  any  asset  of  the  FSP  were

forbidden.  Any action to foreclose, recover or enforce any

security credit by the FSP in respect of a property was also

debarred.   However,  the  supply  of  essential  goods  or

services to the FSP was permitted to be continued in an

6 | P a g e

un-interrupted  manner  and  not  to  be  terminated  or

suspended by the supplier during the moratorium.    

9. The Administrator  was  permitted  to  cause  a  public

announcement  intimating  the  initiation  of  corporate

insolvency resolution process and calling for admission of

claims as prescribed in Section 15 of the IBC.  The NCLT

referred to  the Appellants  in  its  order  dated 03.12.2019

and  directed  the  Administrator  to  update  the  list  of

depositors along with the outstanding amounts payable to

each  one  along  with  their  address  and  communication

information so that in future their interests can be taken

care of, along with other stake-holders.   

10. Consequently,  the  Administrator  made  a  public

announcement under Regulation 6 of the Insolvency and

Bankruptcy Board of India (Insolvency Resolution Process

for Corporate Persons) Regulations, 2016.   On 04.12.2019,

public  depositors  were  included  as  a  class  of  creditors

under  Section  21  (6A)  (b)  of  the  IBC.   Three  names  of

insolvency  professionals  were  proposed  by  the

Administrator and the public depositors were required to

7 | P a g e

select  one  of  three  persons  to  act  as  their  authorized

representative.    

11. The first meeting of the Committee of Creditors was

held  on  30.12.2019,  during  which  it  was  decided  that

Respondent  No.1-Corporate  Debtor  can  commence

disbursement  of  loans  to  the tune of  Rs.500  crores  per

month.   It  was also resolved in the said meeting of  the

Committee of Creditors that the interests of the depositors

shall  be  taken  into  account,  in  accordance  with  the

provisions of the IBC.   

12. The  Appellants  filed  an  Interlocutory  Application

seeking  a  direction  to  restrain  Respondent  No.1  from

commencing  its  lending  operations  till  the  matured

deposits of the depositors are duly paid.   

13. Mr.  Jayant  Bhushan,  learned  Senior  Counsel

appearing for the Appellants expressed his apprehension

that the interim orders dated 10.10.2019 as modified by

the  order  dated  13.11.2019  might  come  in  the  way  of

consideration  of  the  claims  that  are  made  by  the

depositors  before  the  Committee  of  Creditors  and  the

Administrator.   After hearing the learned counsel for the

8 | P a g e

Administrator  and  the  RBI  on  this  point,  we  are  of  the

opinion that the claims that are made by the depositors

shall be considered by the Committee of Creditors and the

Administrator  without  being  influenced  by  the  orders

passed by the High Court on 10.10.2019 as modified by

order dated 13.11.2019, as well as the order passed by the

Debts Recovery Tribunal-I, Mumbai on 08.11.2019.

14. Mr. Bhushan further submitted that the decision taken

by the Committee of Creditors on 30.12.2019 by which the

Administrator  was  permitted  to  carry  on  the  lending

operations  of  the  first  Respondent  without  paying  the

depositors is arbitrary and illegal.  

15. After considering the submissions made by Mr. Jayant

Bhushan,  learned Senior  Counsel  for  the  Appellants,  Mr.

Ramji  Srinivasan,  learned  Senior  Counsel  for  the

Administrator and Mr. K. V. Vishwanathan, learned Senior

Counsel  for  the  RBI  and  in  view  of  the  order  that  we

propose to pass, we deem it not necessary to examine the

merit  of  the  contentions  made  by  the  learned  Senior

Counsel.   The  depositors  are  being  represented  by  the

Authorized  Representative  before  the  Committee  of

9 | P a g e

Creditors.  We leave it open to the Appellants to raise all

points and contentions before the Committee of Creditors,

the Administrator and if necessary, the NCLT.  In view of

the  above,  we  are  not  inclined  to  interfere  with  the

decision  of  the  Committee  of  Creditors  taken  on

30.12.2019.  We  are  informed  that  there  are  nearly  one

lakh depositors who have invested their life time earnings

with  Respondent  No.1.   Some  of  the  deposits  have

matured and some of the depositors are critically ill.  We

have no  doubt  that  the concerns  of  the  depositors  and

their rights shall be considered in accordance with law.  

16. The appeals are, accordingly disposed of.                   

                               ................................J.                                         [L. NAGESWARA RAO]

                                  .................................J.                                              [DEEPAK GUPTA]

New Delhi, January 31, 2020.  

10 | P a g e