Posted on 20th January, 2025 (GMT 18:35 hrs)
ABSTRACT
The article “A Reflexive Question-Answer Session on the DHFL Scam” critically analyzes the events leading to DHFL’s bankruptcy proceedings. The Wadhawan brothers, DHFL’s leaders, maintained in mid-2019 that the company had sufficient cash flows and faced only temporary liquidity issues, despite credit rating agencies downgrading its AAA rating. It distinguishes between insolvency (inability to meet financial obligations) and bankruptcy (a legal declaration) and questions the legitimacy of invoking the Insolvency and Bankruptcy Code in late 2019. The proceedings, initiated by the Bombay High Court after Reliance Nippon Life Insurance’s petition, are portrayed as potentially unjustified, with undue blame placed on DHFL’s management and questionable roles played by the legal system and credit agencies. It further reflects on Mr. Ajay Piramal’s role in the alleged “adverse possession” of the DHFL by citing key verdicts and events in this connection. It also addresses a few miscellaneous questions that deal with debt capitalism and the installation of black sheep to disorganize or destabilize the DHFL movement.
I. Introduction: Setting the Stage for Q & A
As the DHFL Victims eagerly await the “final” (?) verdict of the Supreme Court of India on the DHFL cases, there still remains questions, unaddressed points and crucial areas of controversy that must be brought into the limelight before the DHFL victims’ legitimate concerns are mercilessly relegated by the agents or fellows of the ruling party. This post shall attempt to give possible answers to few such pertinent questions in a somewhat precise and logically coherent manner for the sake of ensuring distributive justice for the DHFL victims and claim accountability from the profit-mongering perpetrators of financial abuse.
II. The Question-Answer Session
Question 1:
a) Did Wadhawan brothers declare themselves as insolvent?
b) Did Wadhawan brothers declare themselves as bankrupt?
Answer 1(a): Not at all. In fact, in a CNBC TV interview on 7th June, 2019, Kapil Wadhawan stated that DHFL continued to get cash flows and is hence not an “in-solvent” company by any means. Instead, he criticized the role of the credit rating agencies in such a situation, given that DHFL held the AAA rating as a NBFC for decades. Wadhawans (according to their statements) were also selling down retail assets for meeting payment obligations because of the then ongoing downgrade in the NBFC sector as a whole, which was not only restricted to the DHFL alone. Yet, the DHFL was in a solvent position with no immediate need for undergoing a resolution process. Despite this, it was sent under the ill-conceived, manifold amended Insolvency and Bankruptcy Code (IBC, 2016) in November-December 2019.
In fact, the same appears to be predetermined in so far as Mr. Ajay Piramal, the alleged adverse possessor of the DHFL, had predicted “two major shocks in the NBFC sector” just a day before (28th January, 2019) the Cobrapost published its findings on the anatomy of the DHFL scam on 29th January, 2019. How did he know beforehand?
DHFL Well On Track To Pay NCD dues, says Chairman Kapil Wadhawan; Ratings Downgrade Criticised VIEW HERE ⤡ (As reported on 7th June, 2019 ©CNBC TV-18)
Answer 1(b): Bankruptcy was never a viable concern in the DHFL, as the difficulties confronting DHFL, particularly the anticipated funds crunch or a “temporary liquidity concern”, could have been possibly mitigated through the Wadhawan brothers’ numerous endeavours and assurances for total asset recovery instead of facing the “forced bankruptcy” that they eventually did. This is clearly reflected in several of their settlement proposals, which promised 100% repayment to all creditors. However, these offers went unheeded by the influential (with possible ruling political lobbies?!) members of the RBI-appointed Committee of Creditors (CoC), where the Wadhawans were intentionally excluded from the entire Corporate Insolvency Resolution Process (CIRP), going contrary to the established code.
Of All the Superrich Wilful Defaulters, Why the Wadhawans alone? VIEW HERE ⤡
THE GREAT NON-WILFUL ABSENTEES IN THE RBI-APPOINTED CoC FOR DHFL VIEW HERE ⤡
DIFFERENCE BETWEEN INSOLVENCY AND BANKRUPTCY: Insolvency is a financial state where an individual or company cannot pay their debts on time. It can be categorized into two types: Cash-flow insolvency occurs when a debtor has sufficient assets to cover their debts but lacks the liquid funds to meet immediate obligations. Balance-sheet insolvency happens when a debtor’s total liabilities exceed their total assets, indicating a negative net worth. Bankruptcy, on the other hand, is a legal process initiated when an insolvent individual is formally declared unable to meet their debt obligations. This process often follows unsuccessful attempts to resolve financial difficulties through less formal means. While insolvency refers to the financial condition of being unable to pay debts (the first step), bankruptcy is the legal proceeding that addresses this condition (the second step).
Question 2: What particular event caused the DHFL to go into bankruptcy, then? A court must have designated their status to be pertaining to nothing other than “bankruptcy”?
Answer: Yes, it was the Bombay High Court (HC) that acted on the same after Reliance Nippon Life Insurance, which is owned by Mr. Anil Ambani, filed a case against the DHFL’s the then administration. Following that, in September-October 2019, the Bombay HC stopped all payments to DHFL’s small investors for an indefinite time, amplifying the uncertainty within. Note that the DHFL was meeting its payment obligations till then without fail. However, certain third parties intervened in what could have otherwise simply been a decision pertaining to the investor-company dyad within the DHFL.
THE CHRONOLOGY OF THE DHFL SCAM VIEW HERE ⤡
It is to be highlighted that Mr. Anil Ambani himself has declared himself as “bankrupt”, which the Wadhawans clearly did not do so despite the grave nature of the allegations. What made or compelled such a bankrupt tycoon to take the trouble of declaring a profitable, ongoing concern, viz., DHFL, as “bankrupt” in the court of law? The possible answer might be provided through the following note:
CONFESSIONS OF THE FLESH: THE MITAKSARA RELATIONS AMONG THE AMBANIS AND PIRAMAL: The Ambani brothers, Mukesh and Anil, navigate their father’s estate through coparcenary rights established by the Mitaksara code of property inheritance. While reports suggest that the brothers are not on “good terms,” one might speculate whether this discord is merely a simulated façade. It raises the intriguing possibility that Mr. Anil Ambani’s Reliance Nippon intervened to displace the Wadhawans, positioning Mr. Mukesh Ambani’s close secondary kin, Mr. Ajay Piramal, to acquire DHFL as a strategic reward for his previous “services” to the current ruling party of India (which views Mr. Mukesh Ambani as a close companion), so that any property, assets or shares acquired by Mr. Piramal will now also strategically fall under the joint Mitaksara ownership umbrella of the Ambani-Piramal family? Such a correlation between kinship and private property relations must be invoked to analyze this scenario, given such a commitment to “What comes into the family, stays in and with the family“! Such inquiries deserve thoughtful consideration! “Shed thou no blood, nor cut thou less nor more/But just a pound of flesh” (Act Four, Merchant of Venice), and yet, the blood along with flesh of DHFL victims have been shed recurrently! (SEE ALSO: UNIFORM CIVIL CODE FOR THE HINDUS? REALLY SO? VIEW HERE ⤡)
Question 3: Why was the DHFL CIRP considered as a “test case”? For what reason?
Answer: That’s a crucial point that warrants careful consideration. The DHFL insolvency was repeatedly labeled as a “test case” or “litmus test” for a clear purpose: to validate or legitimize the former Finance Minister Mr. Arun Jaitley’s “dream project” framework, viz., the IBC (2016), thereby enhancing the current ruling party’s image. Consequently, the DHFL small depositors were unjustly subjected to the role of mere laboratory guinea pigs for experimentation, as even previously regarded “safe” fixed deposits faced substantial haircuts—an unimaginable scenario in the Indian economy until then, especially given that DHFL did not operate as a Ponzi scheme or a chit fund by any standard.
DHFL Victims in the Laboratory State of IBC: “Litmus Test”? VIEW HERE ⤡
DHFL insolvency a test (and very difficult) case for the IBC VIEW HERE ⤡ (As reported on 21st November, 2019 ©Moneycontrol)
DHFL a test case whose successful resolution is critical for banking sector VIEW HERE ⤡ (As reported on 12th January, 2021 ©Business Standard)
‘Test case’ shemozzle means Adani still in the race for bankrupt finance company VIEW HERE ⤡ (As reported on 26th May, 2021 ©Adani Watch)
Question 4: Did not Mr. Ajay Piramal acquire the DHFL assets by adhering to the rule of law?
Answer: I would like to answer that question in three consecutive parts, dealing with the seminal aspects towards addressing the issue.
A. Firstly, the entire trajectory of Mr. Piramal was and IS filled with a multitude of legal hurdles. When, despite the NCLT’s verdict on 19/05/2021, ordering the CoC to reconsider the Wadhawans’ full repayment proposal and answer it within a period of 10 days, Mr. Piramal along with the RBI-CoC rushed hastily to the NCLAT and got instant justice (like instant noodles!) within just a few days (on 25th May, 2021) that stayed the previous NCLT order. Did not this constitute a contempt of court, given that the Piramal-CoC combine did not bother even a little bit to adhere to the 10 day timeline stipulated by the NCLT before approaching the next appellate tribunal? There’s more to this. The NCLAT, on 27th January 2022, declared the DHFL CIRP and Piramal’s resolution plan to be contrary to law, full of material irregularities (in the exercise of powers by the Resolution Professional) and void to that extent. Mr. Piramal went ahead to the Supreme Court of India to get a verdict of “blanket stay” (similar to what he wanted to do in the National Green Tribunal following the Digwal pollution) in his favour without addressing the legitimate, table-turning concerns of the NCLAT. This might be the second instance of an alleged contempt of court.
B. Now, it’s important to highlight that Mr. Piramal “acquired” (we shall problematize this “act of acquiring” further in point C) DHFL’s assets worth ₹45,000 crore for merely a rupee, a transaction that sparked a prominent challenge from 63 Moons Technologies and ultimately led to the January 2022 ruling by the NCLAT mentioned previously. What legal grounds enabled Mr. Piramal to achieve this outcome? The answer is: The lowest quasi-judicial body NCLT’s order on June 7, 2021, sanctioning or approving Piramal’s Resolution Plan. Although the NCLAT contested the NCLT’s initial ruling in favour of the Wadhawans from May 2021 as “excessive jurisdiction” (wherein the RBI-CoC said that if the said NCLT order is given its way, it would set up a “bad precedent”! Whether good or bad, the fact remains the fact and one must call spade as spade!) it refrained from doing so regarding the subsequent approval order just a month later. What accounts for this inconsistency? If Mr. Piramal overlooked the NCLT’s challenging decision in May 2021, why did he choose to acknowledge the NCLT’s approval plan in June 2021? Could it be that these actions were meticulously orchestrated to align with his corporate ambitions, possibly reflecting his longstanding political ties to the BJP via the Flashnet Scam, the Electoral Bonds scam and so on?
C. Mr. Piramal’s possession of DHFL may be viewed as an example of potential or alleged adverse possession that contravenes tort law. Can I forcibly claim to occupy your house while the status of you owning the house is still pending hearing at the court of law? I cannot, right? It is noteworthy that he proclaimed himself the owner of this company at a time when the entire DHFL case was (and continues to be) sub judice or under adjudication. How can this be justified? Could it be that despite the initial adverse acquisition of DHFL by Piramal’s company, Piramal Capital and Housing Finance Limited (PCHFL), which eventually faced numerous legitimate legal hurdles, Mr. Piramal devised a strategic plan to merge PCHFL with his existing Piramal Enterprises Ltd. (PEL), thereby absolving PCHFL of accountability for any previous alleged misdeeds? Furthermore, the provision of QUO WARRANTO in the Indian Constitution is yet to be invoked to contest Mr. Piramal’s dubious “ownership claim” of DHFL, given that his entitlement to it has been legally called into question by our OBMA’s research itself. Did Mr. Piramal, as a secondary kin of BJP’s favoured tycoon Mr. Mukesh Ambani, “get his way” inside and outside the judiciary multiple times because of his 85 crore donations, rather bribes, to the crony oligarchical BJP? Is he the one of the “chosen ones” in India’s presently deranged political economy, along with Mr. Ambani and Mr. Adani? Note that Mr. Adani was involved in the DHFL bidding war as more or less a dummy bidder, who left the race at a crucial juncture, culminating in Mr. Piramal “swiftly” (not for long!) winning the deal.
TORT LAW: A tort is a civil wrong, distinct from a breach of contract, that causes harm or loss to an individual, leading to legal liability for the person who commits the wrongful act. The primary aim of tort law is to provide relief to the injured party by awarding damages as compensation for the harm suffered. This branch of law encompasses various wrongful acts, including negligence, intentional infliction of harm, and strict liability offenses. Unlike criminal law, which seeks to punish offenders on behalf of the state, tort law focuses on resolving disputes between individuals or entities, ensuring that victims receive appropriate compensation for their injuries or losses.
QUO WARRANTO: In India, a writ of quo warranto, meaning “by what authority” in Latin, is a legal action to determine if a person is lawfully entitled to hold a public office. Issued by the Supreme Court or High Courts, it investigates the legitimacy of one’s office and can result in removal if the entitlement is invalid. Anyone can file this writ, regardless of personal interest. It applies to issues like holding incompatible offices or lacking authority but cannot address private or political matters. Courts may deny issuing it at their discretion.
Question 5: Shifting our focus a little bit….What was the role of an alleged, self-proclaimed “National Convener” for DHFL Victims, who hailed from Mumbai? Did he manage to organize and agitate the DHFL victims in the long run?
Answer: It is far from being the case. in fact, he successfully managed to delay insightful action in the DHFL case by the affected parties, viz., the lakhs of DHFL victims (FD and NCD Holders), by acting probably/allegedly as the installed undercover agent of Ms. Charu Sandeep Desai, the Representative of the Public Depositors in the DHFL-CoC. This so-called “national convener”, a pathological liar, did not ever substantially contribute to the DHFL movement, either in digital mode or in the grassroots, despite his rhetorical “empty” promises made to many of our own OBMA activists. He even collected money from the victims under the false pretext of “leading them to justice”! Such installed “black sheep” elements have intended to disintegrate the functional stability of the DHFL movement by following the policy of “bheda” (divide and rule). However, the OBMA, in an entirely self-funded manner, has tried its level best to expose most of the crucial points centering the unfolding and scaffolding of this scam since 2021 with utmost perseverance by utilizing the fifth pillar of democracy at the optimum level.
Black Sheep: The Adversaries of the DHFL Victims’ Movement VIEW HERE ⤡
Be Aware of Divisive Forces: UNITY IS STRENGTH VIEW HERE ⤡
The Tussles of David and Goliath: Crony Oligarch vs Financially Abused VIEW HERE ⤡
Question 6: In one of the latest OBMA blog posts⤡, there was an “identification parade” of whoever have profited or gained from creating or manufacturing the DHFL crisis, which includes the ruling party, the chosen corporate tycoon, the news and social media, the religious gurus, the medical professionals, lawyers and so on. Now, why was the future of the innocent DHFL victims put at stake for the profiteering benefits of these small groups? What is the underlying intention here?
Answer: That’s an excellent question, I must say. It is without a doubt a game-plan part of the broader designs of the monstrous neoliberal, pre-debt-or, canni-ballistic capitalism that feeds itself by un-feeding many. This task is achieved through the installation of puppet authoritarian regimes like this BJP, and also through the parallel actors known as “Economic Hitmen”⤡, who work to increase these debt traps (via extortion or manipulation), these rampant bankruptcies so that there is a constant pooling of profits for fragile private capital. This is how the DHFL scenario could be viewed at present.
Question 7: Do you still have faith in the Indian Judiciary⤡ at present, especially in the context of the DHFL Scam cases as they stand right now?
Answer: I do get your genuine concern on this matter. Yes, my faith in the Indian judiciary has eroded over the past few years, primarily due to the breaking down of the demarcation line between the political executive and the judiciary, rendering a somewhat “Saffronized” judicial system in the Republic of India. The manifold human rights concerns in India further make me worried beyond measure. Over and above that, the DHFL cases are being dealt with by a bench consisting of Justice Bela M. Trivedi⤡ and SGI Tushar Mehta⤡ (despite the latter being recently rebutted by the apex court in the course of another hearing⤡), both of whom are well-known for their open support in favour of the existing NDA regime headed by the BJP.
This complicates matters further, as I anticipate “confirmation bias” in the framing of the upcoming judgement on the DHFL cases, which is unlikely to be in favour of the DHFL victims. However, this is not the time to lose hope but keep on pressurizing the concerned institutions as much as possible through all the available channels and mobilize the DHFL victims. Hence, we all must keep the fight “on” in order to ensure justice for ourselves!
III. Conclusive Points
In conclusion, what follows from the above discussion? Let us list them one by one:
i) Misclassification of Insolvency and Bankruptcy:
- DHFL was solvent per Kapil Wadhawan’s public statements and financial activities despite the fact that they have done activities with legal conflicts, viz., opening fraudulent accounts under the name of “Bandra Books” to siphon off money, getting involved in terror-funding channels to bribe the BJP and so on.
- Despite this, DHFL was subjected to the IBC process, potentially unjustified.
ii) Questionable Role of the Judiciary and Creditors:
- Reliance Nippon’s legal action and subsequent intervention by the Bombay HC accelerated DHFL’s path to insolvency.
- The exclusion of Wadhawan proposals by the RBI-appointed CoC raises concerns about fairness and transparency.
iii) Corporate Political Nexus:
- The acquisition by Ajay Piramal raises suspicions of undue political and corporate influence, particularly due to ties with the ruling party, i.e., the BJP.
- Alleged adverse possession and fast-tracked judgments in Piramal’s favour hint at systemic biases or partisan considerations.
iv) Test Case for Legitimizing incoherent IBC Framework:
- DHFL’s insolvency was used to validate the IBC (2016), with small depositors bearing disproportionate losses of their life-savings.
- The label of “test case” indicates lab-state experimental misuse at the cost of vulnerable stakeholders.
v) Obstruction of Grassroots Mobilization:
- Alleged infiltration and inefficiency by self-proclaimed leaders somewhat hindered effective organization of DHFL victims.
- OBMA’s holistic efforts have been pivotal in exposing these issues and advocating for justice through all-out attacks on the identified enemies.
vi) Broader Economic Implications:
- The DHFL crisis reflects neoliberal strategies that prioritize corporate profits over public welfare.
- Such crises are tools of “debt capitalism,” exploiting vulnerable investors for elite gain.
vii) Need for Accountability:
- The absence of judicial and corporate accountability perpetuates injustice.
- Comprehensive systemic reform and attaining transparency in financial governance are critical to preventing similar future scenarios.
SEE ALSO:
Once in a Blue Moon Academia 
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