MUMBAI: A special court in Mumbai has discharged the now-defunct Dewan Housing Finance Corp Ltd (DHFL) from a Rs 5,050 crore money laundering case, stating that the company, under new management, is entitled to immunity under the Insolvency and Bankruptcy Code (IBC).
The court made it clear, however, that while DHFL as a corporate entity is discharged, individuals implicated in the case do not receive the same immunity.
On February 2, Special PMLA Court Judge RB Rote determined that DHFL is entitled to statutory immunity after successfully completing its resolution process under the IBC, which offers a structured approach for corporate insolvency and liquidation.
In the order, made public on Wednesday, the court emphasized that according to IBC provisions, once the resolution plan is approved, the corporate debtor is not liable for previous offences.
“The extinguishment of criminal liability for the corporate debtor is crucial for new management to make a clean break with the past and start anew,” the court remarked, referencing Supreme Court rulings.
The court noted that immunity under the IBC does not apply to former officers or directors directly or indirectly involved in the offences committed before the initiation of the Corporate Insolvency Resolution Process (CIRP). They remain subject to prosecution and penalties for any offences committed by the corporate debtor.
Debt-laden DHFL was acquired by Piramal Group in 2021 and incorporated into one of its firms. Key accused in the case include Yes Bank co-founder Rana Kapoor, his family, and former DHFL promoters Kapil and Dheeraj Wadhawan.
The Enforcement Directorate (ED) has alleged that Kapoor received substantial kickbacks related to fraudulent loans extended by Yes Bank to DHFL and its subsidiaries, benefiting himself, his family, and associates through bribery, corruption, and money laundering summing to Rs 5,050 crore.
Karan Kadam, representing DHFL, noted that the applicant Piramal Capital and Housing Finance Ltd (now Piramal Finance Ltd) had undergone the corporate insolvency resolution process under the IBC.
The resolution plan was approved by the National Company Law Tribunal (NCLT) on June 7, 2021, and as part of this plan, the successful resolution applicant was merged into DHFL, preserving the company as the surviving legal entity.
The name of the newly merged entity was officially changed from Dewan Housing Finance Corporation Ltd to Piramal Capital and Housing Finance Ltd on November 3, 2021.
Kadam argued that this resolution plan meets all requirements outlined in Section 32A of the IBC. He also pointed out that the Bombay High Court had discharged DHFL from predicate offences being investigated by the CBI.
However, the ED has contested that DHFL cannot be discharged due to the NCLT’s approval of the resolution plan or the discharge from predicate offences.
The ED argued that though there is a general provision in predicate offences for prosecuting companies, the Prevention of Money Laundering Act (PMLA) specifies that those responsible for a company’s business are also liable for contraventions.
After considering both arguments, the special court ruled that “DHFL is a juristic person.” It further clarified that while Section 70 of the PMLA considers a company guilty of contraventions, the immunity granted under Section 32A of the IBC, which is a later law, holds greater authority.
Thus, the court concluded that the corporate debtor cannot be prosecuted if the conditions under Section 32A of the IBC are met and subsequently discharged DHFL in accordance with IBC provisions.
