The promoters of HDIL were arrested by Enforcement Directorate on charges of fraud and money laundering while the prosecution agencies found some evidence against the developers and based on this they were sent to judicial custody.
HDIL Resolution Process: NCLT Allowed Exclusion of 100 Days
NCLT of Mumbai directed the execution professionals to exclude the time from 2019 September to December 2019. The case was called for further hearing in March 2019. It was a relief to the company. Due to this order of NCLT, there was time to complete the CIRP process. Hence, this insolvency court has allowed the exclusion of 106 days from the Corporate Insolvency Resolution Process of Housing Development and Infrastructure Limited. It was part of the HDIL insolvency case.
The promoters had challenged the order of NCLT at the National Company Law Appellate Tribunal (NCLAT), so the time was excluded from CIRP.
The resolution professional said that they were seeking exclusion of 106 days to complete the time bound process flawlessly. Previously, NCLAT had stayed formation of the committed of creditors of the company. Afterwards, the stay was lifted in December. The exclusion process of 106 days allowed by NCLAT and lifting of the stay on the formation of creditors came as a big boost for the company. This relief they were seeking because there is a time limit for the completion of CIRP. In the meantime, the buyers of one of the residential projects who were involved in HDIL insolvency case approached the tribunal requesting them to permit them to appoint a contractor to complete the project on their own.
The Wadhwans, who were arrested on October 3 under PMLA, were sent to the judicial custody in the HDIL Insolvency matter. There was a provision for the accused to seek bail if no prosecution complaint was filed within 60 days of their arrest. However, the prosecution agencies found some evidence against the Wadhwans, and they submitted the same at the PMLA court. If they had not produced the evidence within 60 days, the Wadhwans would have got the bail.
Some other aspects worth noting
In the HDIL Insolvency case, another twist came when the Supreme Court on February 7, 2020, stayed the Bombay High Court order. This order had said that the assets of the HDIL be liquidated to pay dues to PMC Bank or the creditor. The Supreme Court order came after RBI appealed against the Bombay High Court order. Earlier, there was a three-member panel which was set up on the insistence of the HC to liquidate the assets of the developers of the real estate. The promoters Wadhwans are in judicial custody right now. They are behind the bars on the case of defrauding PMC bank which gave the loan to the promoters but the money taken through loan was channelized illegally.
The enforcement directorate filed a charge-sheet in December 2019. The charge-sheet went against the accused, the Wadhwans. The charge-sheet was framed concerning the PMC bank scam that was a multi-crore scam. ED took them in their custody. They were booked under the Prevention of Money Laundering Act. RBI had put PMC Bank under its scanner after it was discovered that the bank officials had conspired with the promoters to protect some surreptitiously made illegal transactions that led to large-scale defaults. This was done by the main accused, the Wadhwans. The loan spectrum of PMC bank’s loan book was 8880 crores. About 75% of it to the tune of 6500 crores was credited to the developers’ account. This amount was above the cap imposed by the RBI. After the scam surfaced, the RBI imposed restrictions on financial transactions of the bank. There was a stop on the withdrawals too which affected the customers of the bank badly. Most of these customers of the bank were clueless as to what they should do so that their problems of not getting cash withdrawal were addressed. 12 people were arrested in connection with the scam.
HDIL Insolvency: is it the end of the road?
The Mumbai based builder is already in deep trouble. Bank of India has filed a case in the court of Insolvency Tribunal over a default of loan taken from the bank. Ironically, HDIL was responsible for the slum-rehabilitation project. The National Company Law Appellate Tribunal NCLAT provided some relief to the promoters after it accepted the plea of the promoter challenging the move. In no time the group joined other builders like Jaypee whose names have been tarnished due to various allegations and corrupt practices. All these builders are facing insolvency proceedings under Insolvency and Bankruptcy Code. Not only Bank of India but other banks such as Dena Bank and Syndicate Bank have come up with charges against the promoters that have triggered HDIL Insolvency. There are J&K Bank, Andhra Bank, Indian Bank and Corporation Bank which were similarly cheated and they have approached the tribunal with petitions that indicates the debt crisis faced by HDIL is much deeper than what it appears.
What’s the Latest?
In the latest development, there will be a creditors committee formed because NCLAT has vacated the stay on the formation of HDIL Committee of Creditors. The developers are BSE and NSE-listed and they have earned a sound reputation and fame in the state of Maharashtra, and that makes it all the more shocking and outrageous. People couldn’t take the fact that all this was coming from a group that was engaged in so many prestigious projects. On the other hand, the scale and magnitude of operation gave the promoters enough weight and aura to ask for huge loans from nationalized banks and the bank officials were charmed to oblige. All these led some bank officials to connive with the Wadhwans in pursuing this scam that has rocked the state and the nation.
