A two-judge bench of the Delhi High Court on 29th April 2020 stayed an interim order granted by a single-judge bench restraining any coercive action against mortgage lender Indiabulls Housing Finance Ltd. for failing to pay its dues to non- convertible debentures holders.
The bench consisting of Justice Siddharth Mridul and JusticeTalwant Singh listed the date for final arguments on the case to be 4th May 2020.
“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 at Trilegal, and represented the Association of Mutual Funds in India in the appeal.
The temporary order restricting forced action against Indiabulls Housing Finance Ltd. for its incompetency to reimburse bondholders had increased fears among mutual fund owners that more borrowers could take the same alternative.
The Securities and Exchange Board of India, Indiabulls Housing Finance Trusteeship Services Ltd, and Association of Mutual Funds in India on 28th April 2020 moved to the Delhi High Court against the interim order.
On the final date of the hearing, Senior Advocate Rajiv Nayar, appearing for Indiabulls Housing Finance Limited, had depended on the Reserve Bank of India’s 27 March 2020 circular that gave freedom to all banks and financial institutions to allow a postponement of three months on payment of installments of all term loans that were outstanding between 1 March 2020 and 31 May 2020 conditioned to the borrower making such a requisition.
Indiabulls Housing Finance Ltd. had stated that it has become unfeasible for the company to execute recoveries of debt owed to it by various institutions owing to the regulatory measures announced by the State, consequential to the disruption caused due to the account of the COVID-19 pandemic outbreak.
Disagreeing with the relevancy of the circular, Senior Advocate Neeraj Malhotra, appearing on behalf of the Securities and Exchange Board of India, had put forward the view that it does not exert influence on the companies’ liabilities arising from non-convertible debentures. Indiabulls Housing Finance Ltd., which was founded in 2005 and is the second-largest housing finance company, has also been involved in a similar altercation with a rating agency, Investment Information and Credit Rating Agency, and had taken it to the court, which later reiterated the short-term credit rating and outlook for the company at A1+ in April 2020. The agency, has, however, demoted the long-term rating outlook for Indiabulls Housing Finance Limited to negative from its previous stable rating.
Meanwhile, the Delhi High Court has decided to hear "all kinds of urgent matters" during the lockdown period owing to the coronavirus, and not restrain its hearings through virtual platforms to 'very urgent matters' after a suggestion made by the Delhi High Court Bar Association.
Besides fresh urgent cases, when urgency arises in pending matters, these will also be considered on a case-to-case basis virtually.
