From Rothschild to tea vendors, the curious mix of DHFL creditors

Mumbai: Dewan Housing Finance Corp. Ltd (DHFL), India’s first non-bank lender to face bankruptcy proceedings, has a curious mix of operational creditors. On one end of the spectrum, there’s investment bank Rothschild & Co. India Pvt. Ltd. And then, on the other end of the spectrum are neighbourhood tea shops and florists, all claiming that their dues haven’t been cleared by the company, according to documents reviewed by Mint.

They are all part of the 454 claims adding up to ₹119 crore that have been put up before the Reserve Bank of India-appointed administrator for DHFL under the category of operational creditors. The largest claim is from audit firm Pathak H.D. & Associates Llp for ₹29.5 crore and the smallest is from florist Yuvraj Phool Bhandar—for ₹240.

Under the Insolvency and Bankruptcy Code (IBC), operational creditors are those who are seeking to recover their dues for goods or services that they have provided.

Notably, 21 tea and one coffee joint have claimed DHFL owes them, in total, a little less than ₹1 lakh and have filed claims with the administrator. To be sure, all these claims are being verified, according to the list available on DHFL’s website.

Also featuring in the list of creditors are water suppliers Shree Enterprises (Packaged Drinking Water) with a claim of ₹5,580 and Fresh Water Service ( ₹3,408).

These claims have been submitted to DHFL’s administrator R. Subramaniakumar, a former managing director and chief executive of Indian Overseas Bank.

Industry experts said that while IBC has given operational creditors a fighting chance to recover dues, submission of proper proof is key, which makes the chances of recovering dues quite thin.

“The corporate insolvency resolution process (CIRP) allows small business establishments a good shot at recovery from defaulting companies and thus the insolvency code has allowed them an avenue for recovery. However, submitting proof could be a cumbersome task for small establishments in the informal sector,” said Sutanu Sinha, a senior resolution professional.

According to Sinha, once operational creditors submit their claim along with supporting documents, the resolution professional (RP) tallies them against the records of the company.

“If both match, then the claim is immediately admitted. However, there are instances when an RP can admit a claim, despite its absence from company records, if he finds that the bills are genuine,” said Sinha.

One of the claimants is Ruralshores Business Services Pvt Ltd, a Bengaluru-based business process outsourcing (BPO) company. It has claimed dues of ₹13.32 lakh, of which ₹1.32 lakh has been admitted and the rest is being verified by the administrator.

Nirmal Gangwal, founder of debt restructuring advisory firm Brescon and Allied Partners Llp, said that not only road-side establishments, but even small companies with claims of a few lakhs of rupees find it hard to cope with the professional engagement required to pursue their claims.

“I believe that the government should look to address their problems and ensure that their interests are honoured. If that does not happen, suppliers who provide goods and services on credit will stop doing so, thereby hurting smooth functioning of businesses,” said Gangwal.

DHFL is the first non-bank lender to be referred to NCLT under new rules notified by the government on 15 November. RBI cited governance concerns and payment defaults by DHFL as the reasons for superseding the board.

According to Karan Mitroo, partner at law firm Luthra and Luthra, most operational creditors would usually not recover dues because the proposals by the resolution applicants barely meet the requirements of financial creditors. “In several cases, the proposals don’t even meet the outstanding payable to secured financial creditors. Hence unless the proposal by a resolution applicant has enough to offer monies to both financial and operational creditors, recovery by operational creditors would be difficult under the IBC process,” said Mitroo.