63 MOONS TECHNOLOGIES LIMITED, (FORMERLY KNOWN AS FINANCIAL TECHNOLOGIES (INDIA) LTD. Vs. WADHWAN GLOBAL CAPITAL LIMITED

JUDGEMENT

(1.) Dewan Housing Finance Limited (DHFL) issued a prospectus dtd. 25/8/2016 in relation to the issuance of 10,00,00,000/- secured redeemable non-convertible debentures (NCDs) of the face value of Rs.1000.00 each. 63 Moons Technologies Limited (63 Moons), a company previously known as Financial Technologies (India) Ltd. applied for allotment of NCDs pursuant to the above mentioned prospectus. Based on its applications, a first lot of 10,00,000 NCDs with a coupon rate of 9.05% and aggregate face value of Rs.100.00 crores; and a second lot of 10,00,000 NCDs at a coupon rate of 9.25% and aggregate face value of Rs.100.00 crore were allotted. In this manner, 63 Moons was allotted 20 lakh NCDs of the face value of Rs.200,00,00,000.00. Interest was required to be paid on the NCDs annually at the specified coupon rate and the date of maturity was 7 years from the date of allotment.

(2.) In the last week of January, 2019, the news portal, Cobrapost.com (Cobra Post), published an article revealing that a major financial scam had occurred in DHFL and that more than Rs.31,000.00 crores of public money was siphoned off. Thereafter, the Audit Committee of DHFL appointed a firm of Chartered Accountants, namely, T.P.Oswal and Associates LLP, to review the allegations made in the article by Cobra Post and report to the Committee. Around this time, on 3/2/2019, the credit rating assigned to DHFL by Credit Analysis and Research Limited (CARE) was downgraded from 'AAA' to 'AA+'. Similarly, the credit rating assigned to the NCDs by Brickwork Ratings India Private Limited (BWR) was downgraded from BWR 'AAA' to BWR 'AA +'. Meanwhile, in March, 2019, all members of the Audit Committee of DHFL resigned. In August, 2019, the joint Statutory Auditors of DHFL filed a complaint for fraud with the Ministry of Corporate Affairs. Meanwhile, DHFL committed default in servicing obligations on all NCDs issued by it. The Central Bureau of Investigation (the CBI) registered a First Information Report (FIR) No.RC 2192020 E0004 dtd. 7/3/2020 against two of the promoters of DHFL, namely, Kapil Rajeshkumar Wadhawan and Dheeraj Rajeshkumar Wadhawan. The Enforcement Directorate (ED) also undertook investigations. 63 Moons filed Commercial Summary suit No.1332 of 2019 before the Hon'ble Bombay High Court against DHFL for recovery of amounts due under the NCDs. However, a moratorium was imposed by the National Company Law Tribunal, Bombay on 3/12/2019 upon admitting a petition for insolvency resolution against DHFL. Therefore, 63 Moons could not prosecute the summary suit in Bombay.

(3.) In these facts and circumstances, 63 Moons instituted the present suit seeking a judgment and decree against the first to eleventh defendants, jointly and severally, for a sum of Rs.231,60,00,000.00, which consists of Rs.200,00,00,000.00 as principal and Rs.31,60,00,000.00 as interest at 24% per annum until 31/5/2020 along with further interest at 24% per annum from 1/6/2020 till the date of repayment. The first defendant is a limited company, which promoted DHFL. The second and third defendants are the former Chairman and Managing Director and former Director of DHFL, respectively. The fourth defendant is the former Chief Executive Officer (CEO) of DHFL. The fifth defendant is the former Chief Financial Officer (CFO) of DHFL. The sixth and seventh defendants are the credit rating agencies (CRAs) which rated the relevant NCDs. The eighth defendant was the Statutory Auditor from the financial year 2016-2017 to the financial year 2017-2018. The ninth and tenth defendants were the statutory auditors up to the financial year 2015-2016. The eleventh defendant is the Debenture Trustee.