New Delhi, April 29: A division bench of the Delhi High Court on Wednesday stayed an interim order of a single-judge bench that had prohibited coercive action against mortgage lender Indiabulls Housing Finance Ltd (IHFL) for failing to pay its dues to non- convertible debentures (NCD) holders.
The two-judge bench comprising Justices Siddharth Mridul and Talwant Singh has now listed the case for final arguments on 4 May, The Mint reported.
“Thanks to the division bench’s order today, debt-based mutual funds should be much relieved as they will continue to be able to compel payments from their borrowers. If mutual funds remain healthy and continue to receive payments, the general public who hold units in mutual funds will have at least one less reason to worry in these troubled times and will be secured in terms of the value and liquidity of their investments,” said advocate Shankh Sengupta, a partner in law firm Trilegal, and who represented the Association of Mutual Funds in India (Amfi) in the appeal.
The interim order restraining coercive action against IHFL for its inability to repay bondholders had raised fears among mutual funds that more debtors could take the same recourse.
The Securities and Exchange Board of India (SEBI), IDBI Trusteeship Services Ltd. and Amfi on Tuesday moved the Delhi high court against the interim order.
On the last date of hearing, senior advocate Rajiv Nayar, appearing for IHFL, had relied on the central bank’s 27 March circular that gave liberty to all banks and financial institutions to allow a moratorium of three months on payment of instalments of all term loans outstanding between 1 March and 31 May, subject to the borrower making such a request.
IHFL had said that it has become impossible for the company to effect recoveries of debt owed to it by various institutions due to the regulatory measures announced by the Centre, consequent to disruption on account of the covid-19 outbreak.
Disputing the applicability of the circular, senior advocate Neeraj Malhotra, appearing for SEBI, had said that it does not affect companies’ liabilities arising from NCDs. IHFL has also been involved in a similar tussle with rating agency Icra and had taken it to court, which later reaffirmed the short-term credit rating and outlook for the company at A1+ in April. The agency, however, downgraded the long-term rating outlook for Indiabulls to negative from stable.