Tag: delhi high court

Reliance Home Finance narrows net loss to Rs 284cr in Jul-Sept, BFSI News, ET BFSI

Personal Finance

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New Delhi, Reliance Home Finance on Thursday reported narrowing of its net loss to Rs 284.49 crore for the quarter ending September. The company had reported a net loss of Rs 574.40 crore in quarter ended in September 30, 2020.

Total income during the July-September quarter of 2021-22 was down by 73 per cent to Rs 70.76 crore, as against Rs 259.11 crore in the same period of 2020-21, Reliance Home Finance said in a regulatory filing.

The company’s independent auditor Tambi & Jaipurkar, in its review report said that the company has defaulted on the payment of borrowing obligations amounting to Rs 8,607.16 crore as of September 30, 2021 and its asset cover has also fallen below 100 per cent of outstanding debentures to Rs 5,967 crore.

The company’s ability to meet its obligation is dependent on material uncertain events including restructuring of loan portfolio, implementation of resolution plan by inter creditor agreement for the resolution of its debt under the ICA and revival of housing finance. The financial results of the company have been prepared by the management on a going concern basis.

“Our conclusion is not modified in respect of this matter,” the auditor said.

The company said it has cash on hand of about Rs 2,220 crore in the form of investment in liquid mutual fund and fixed deposits. However, there is delay in debt servicing on the back of a November 2019 order passed by Delhi High Court, which bars the company from disposing off its assets.

“The company is engaged with its lenders for arriving at the debt resolution plan. In this regard, certain lenders of the company have entered into an Inter-Creditor Agreement (ICA)…The ICA lenders have evaluated, voted upon and selected Authum Investment & Infrastructure as the final bidder on June 19, 2021,” it said.

In view of the resolution process being in the final stages, the accounts of the company have been prepared on going concern basis, it added.



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Forcing minimum claim period of 1 year on bank guarantees wrong, says Delhi HC, BFSI News, ET BFSI

Banking & Finance

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In a ruling that will help infrastructure and construction companies, the Delhi High Court said forcing a minimum claim period of 12 months for bank guarantees is wrongful, rejecting interpretations that existing laws rendered shorter claim periods void.

Ruling on a petition filed by engineering conglomerate Larsen & Toubro Ltd against Punjab National Bank, a single-judge bench of the High Court observed, “It is clear that respondent No 1 (PNB) is erroneously of the view that they are in law mandated to stipulate a claim period of 12 months in the bank guarantee, failing which the clause shall be void under Section 28 of the Contract Act.”

The court directed the lender to take a relook at such agreements.

“It (Section 28) deals with the right of the creditor to enforce his rights under the bank guarantee, in case of refusal by the guarantor to pay, before an appropriate court or tribunal,” Justice Jayant Nath observed in a 43-page order issued on Wednesday. It does not deal with the claim period – a time within which the beneficiary is entitled to claim the guarantee.

Experts said the ruling will particularly benefit infrastructure and construction companies that need to issue bank guarantees while fulfilling contracts for government bodies and public sector undertakings.

“This decision will have far-reaching consequences because it will give both banks and companies the much-needed flexibility in entering into contracts related to bank guarantees,” said Ashish K Singh, managing partner of law firm Capstone Legal.

Anil Goel, founder and chairman of insolvency professional company AAA Insolvency Professionals, said, “Construction companies bidding for projects should have the flexibility to bank guarantee from banks. Multiple options to get it should help them bid for more projects and save costs substantially.”

L&T, in its petition, argued that PNB’s insistence on a bank guarantee (BG) for 12 months, due to misinterpretation of Section 28, has unnecessarily made the company liable to pay commission charges for such extended BG when the principal contract would be for a much shorter period.

Also, companies have to maintain collateral security – or margin money against which a bank guarantee is issued – for supporting an extended claim period, which affects their capability to do business by entering new contracts, L&T said.

Hemant Kumar, group general counsel of L&T, confirmed the passing of an order by the Delhi High Court but refused to divulge any details.

An email query to PNB remained unanswered as of press time Friday.

L&T had made the Indian Banks’ Association (IBA) and the Reserve Bank of India (RBI) parties in the case.

As per the court order, PNB’s stand is due to letters issued by IBA on December 12, 2018, to its member banks, stating that if a bank issues a claim period of less than one year on top of the guarantee period then such a bank guarantee would not have the benefit of Exception 3 to Section 28 of the Contract Act.

Exception 3, inserted as an amendment to the Act in 2013, allowed lenders to limit the period to make a claim up to one year, down from the minimum of three years provided under the Limitation Act.

BGs are provided on a case to case basis depending on banks and individual clients. The margin money varies, but normally it is about 10-20% of the bank guarantee amount, industry insiders said.



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RBI to HC, BFSI News, ET BFSI

Banking & Finance

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New Delhi: The Reserve Bank of India (RBI) Monday told the Delhi High Court that it has given in-principle approval for setting up a small finance bank that will take over the scam-hit PMC Bank soon. A bench of Justices D N Patel and Justice Jyoti Singh granted time to the RBI to file an affidavit on the development in the matter and listed the case for further hearing on August 20.

Senior advocate Jayant Bhushan, representing the RBI, submitted that it has given in-principle approval to Centrum Finance Services Ltd to set up a small finance bank that will take over Punjab and Maharashtra Cooperative (PMC) Bank very soon as the process is near completion.

He said this will ease the trouble faced by the bank’s customers who are unable to withdraw their money.

The court was hearing an application by consumer rights activist Bejon Kumar Misra seeking directions to the RBI to consider other needs of PMC Bank depositors such as education, weddings and dire financial position, not just serious medical emergencies as being done at present.

The application was filed in Misra’s main PIL seeking directions to the RBI to ease the moratorium on withdrawals from the PMC Bank during the coronavirus pandemic.

Advocate Shashank Deo Sudhi, representing Misra, submitted that more than five dates have been given to the authorities and the hard-earned money of the depositors has not been released.

At least senior citizens are allowed to withdraw their money up to Rs 5 lakh as they are suffering from hardship and the depositors are unable to withdraw their own money.

The high court had earlier said that according to the Supreme Court‘s decision on withdrawal of money by depositors of PMC bank for exigencies, exceptions can be carved out for urgent medical and educational requirements.

The court had asked the depositors, whose needs have been highlighted before the court in a PIL, to once again approach the RBI-appointed administrator of PMC bank giving details of their financial needs along for medical or educational reasons within three weeks.

RBI had earlier argued that while it sympathises with the plight of the depositors, everyone would have some or other financial emergency; and if Rs 5 lakh was released to all, as provided in case of medical emergencies, the bank would be in difficulty and depositors would not get their entire deposits back.

RBI had said it was trying to keep the bank functioning in the interests of the depositors and had floated an expression of interest for investing in it and has received some bids.

The PMC Bank has been put under restrictions, including limiting withdrawals, by the RBI, following the unearthing of a Rs 4,355-crore scam.



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HC to RBI, BFSI News, ET BFSI

Banking & Finance

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The Delhi High Court on Monday said that according to the Supreme Court’s decision on withdrawal of money by depositors of scam-hit PMC bank for exigencies, exceptions can be carved out for urgent medical and educational requirements.

A bench of Chief Justice D N Patel and Justice Jyoti Singh asked the depositors, whose needs have been highlighted before the court in a PIL, to once again approach the RBI-appointed administratorof PMC bank giving details of their financial needs along for medical or educational reasons within three weeks.

The bench asked the administrator to look into the applications by the depositors and take a decision within a further period of two weeks and communicate the same to the court before the next date of hearing on February 26.

During the hearing, the Reserve Bank of India (RBI) told the court that the apex court asked it to consider the educational and medical requirements of depositors as per directives issued by the top bank.

RBI said its directives only provide for considering medical emergencies and not educational emergencies which everyone would have.

The bench, however, said the apex court has clearly mentioned both medical and educational emergencies and it was going to go by that.

The court was hearing an application by consumer rights activist Bejon Kumar Misra seeking directions to the RBI to consider other needs of PMC Bank depositors such as education, weddings and dire financial position, not just serious medical emergencies as being done at present.

The application was filed through advocate Shashank Deo Sudhi in Misra’s main PIL seeking directions to the RBI to ease the moratorium on withdrawals from the Punjab and Maharashtra Cooperative (PMC) Bank during the coronavirus pandemic.

Sudhi, during the hearing, contended that the apex court order had come when the situation was normal and now during the pandemic, the depositors have been able to withdraw only a total of Rs one lakh since restrictions on withdrawals from the bank was imposed by RBI in September 2019.

He argued that it was very difficult for depositors to meet their various needs from just Rs one lakh in more than a year.

RBI argued that while it sympathises with the plight of the depositors, but everyone would have some or the other financial emergency and if money to the tune of Rs five lakh was released to all, as provided in case of medical emergencies, the bank would go under and depositors would not get their entire deposits back.

RBI said it was trying to keep the bank functioning in the interests of the depositors and had floated an expression of interest for investing in it and has received some bids.

The PMC Bank has been put under restrictions, including limiting withdrawals, by the RBI, following the unearthing of a Rs 4,355-crore scam.



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Plea in Delhi High Court against Lakshmi Vilas Bank-DBS merger say shareholders shortchanged, BFSI News, ET BFSI

Banking & Finance

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A plea in the Delhi High Court has challenged the scheme of amalgamation of Lakshmi Vilas Bank with Development Bank of Singapore (DBS), contending that its shareholders have been “left in the lurch” and the Centre and the Reserve Bank have failed to protect their interests. The petition was listed before a bench of Chief Justice D N Patel and Justice Jyoti Singh on January 13, but was adjourned to February 19 after the bench was told that the Reserve Bank of India (RBI) has moved a plea in the Supreme Court to transfer all pleas against the amalgamation scheme to the Bombay High Court.

The petition in the Delhi High Court has been filed by lawyer Sudhir Kathpalia, who was also a shareholder in Lakshmi Vilas Bank (LVB) and lost his 20,000 shares in the company due to the amalgamation scheme.

Kathpalia has sought quashing of the clause in the scheme which states that from the date of merger, “the entire amount of the paid-up share capital and reserves and surplus, including the balances in the share/securities premium account of the transferor bank, shall stand written off”.

The petition has said that under the scheme, DBS was not required to give any shares to the LVB investors in return and they were “left in the lurch”.

The amalgamation scheme was approved by the RBI on November 25, 2020 and the merger took place on November 27, 2020.

The petition has contended that the Centre and RBI have failed to protect the interests of the shareholders.

It has also claimed that DBS was chosen for the merger without inviting bids from other banks and financial institutions.

It has alleged that the “scheme of amalgamation was irregular, arbitrary, irrational, unreasonable, illegal and thus, void”.



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