DHFL — WHEN THE FINANCIAL COMPANY BECAME THE BANKRUPT. THE SUNDAY PERSPECTIVE™
India had learned how to rescue an industrial company. But then a far stranger problem arrived: what happens when the company that needs rescuing is itself part of the financial system?
There was something fundamentally different about the crisis that engulfed Dewan Housing Finance Corporation Limited. When Essar Steel entered insolvency, the problem could be understood in physical terms. There was a steel plant, industrial capacity, workers, suppliers, customers and a mountain of debt attached to an operating business. The central question was whether that enterprise was worth more alive than dismantled. DHFL presented a less visible and, in some ways, more complicated problem. Its most important assets were not factories or machinery but financial relationships—loans extended to households, money raised from institutions and markets, deposits accepted from savers, securities issued to investors and streams of future repayments dependent on thousands of individual borrowers. When DHFL began to fail, therefore, the question was not simply how much the company was worth. It was what would happen to the financial network that existed inside it.
That distinction matters because a financial company lives on a different kind of confidence. A manufacturer can survive a difficult quarter if its factory remains productive and somebody is willing to finance the next shipment of raw materials. A housing financier is more dependent on the belief that money borrowed today can be repaid tomorrow, that funding will remain available, that investors will continue purchasing its securities and that borrowers will continue servicing their loans. The business is built around time. Money enters at one point, is lent out at another and returns gradually over years. The institution sits between those two ends of the transaction, promising one group that it will honour its obligations while relying on another group to honour theirs.
DHFL had built a substantial business around precisely that model. Housing finance was hardly an exotic proposition. India needed homes, families needed mortgages and the formal financial system needed institutions capable of extending credit beyond traditional banks. Housing-finance companies could raise capital, originate loans and transform those loans into long-term financial assets. Their expansion was therefore part of a much larger transformation in Indian finance, in which credit increasingly moved through an ecosystem of banks, non-bank financial companies, bond markets and securitisation structures.
But the architecture that allowed non-bank finance to expand also contained a structural vulnerability. A financial institution can appear enormous because its balance sheet is filled with claims on future cash flows. Those claims have value only so long as borrowers repay, funding remains available and markets believe the institution will honour its obligations. Once confidence begins to disappear, the very balance sheet that made the institution look powerful can become a source of pressure.
By 2018, that pressure was spreading across India's non-bank financial sector. The default of IL&FS in September that year shook confidence in the market for non-bank borrowers, while the Reserve Bank of India subsequently noted the resulting liquidity stress and higher borrowing costs across NBFCs. The RBI responded with measures intended to ease liquidity conditions and strengthen the ability of NBFCs and housing-finance companies to access funding. But for institutions dependent on continuous access to capital, liquidity was not merely a technical market condition.
It was oxygen.
DHFL increasingly found itself at the centre of that stress.
Its difficulties were not simply a matter of having borrowed too much. The more dangerous problem was that the financial structure supporting its business was becoming increasingly difficult to sustain. When lenders and investors become reluctant to provide fresh money, an institution whose assets mature over many years can suddenly find itself facing a mismatch between the patience of its assets and the urgency of its liabilities. A thirty-year home loan does not become thirty years of immediately available cash simply because its financier suddenly needs money.
That is one of the peculiarities of financial-sector distress. A loan book can be enormous and still provide little immediate liquidity. A company can have thousands of borrowers faithfully paying instalments and yet be unable to meet its own obligations when creditors demand payment. The institution becomes trapped between two clocks: the long clock of its assets and the short clock of its liabilities.
Eventually, DHFL's difficulties became severe enough to trigger direct regulatory intervention. On 20 November 2019, the Reserve Bank of India appointed R. Subramaniakumar as Administrator under Section 45-IE of the RBI Act. The RBI subsequently superseded the company's board, citing concerns that the business had been conducted in a manner detrimental to depositors and creditors and that its financial position had deteriorated severely.
That moment changed the nature of the story.
DHFL was no longer simply a troubled company negotiating with its lenders. Its old board was gone. The institution had entered a process in which the regulator and the insolvency machinery would determine what happened next.
Nine days later, on 29 November 2019, the RBI filed an application to initiate corporate insolvency proceedings against DHFL under the newly notified framework for financial service providers. The National Company Law Tribunal admitted the case on 3 December and confirmed the Administrator to perform the functions of a resolution professional. DHFL became the first financial service provider admitted for resolution under the Financial Service Provider Rules notified only weeks earlier in November 2019.
That detail was more important than it initially appeared.
India's Insolvency and Bankruptcy Code had been designed primarily around the failure of companies whose businesses could be separated from the financial system around them. Financial service providers were different. If a steel company entered insolvency, the immediate objective was to preserve its productive enterprise while determining how creditors should be treated. If a financial company entered insolvency, the process had to confront an additional problem: the company was itself an intermediary through which money moved between different parts of the economy.
DHFL could not simply be treated as a warehouse of assets waiting to be auctioned. Its borrowers still existed. Their home loans still existed. Their repayment obligations still existed. Its creditors still had claims. Its depositors still had money at stake. Its securities still existed. The financial relationships accumulated over years did not disappear merely because the company's board had.
That was the strange landscape into which the Administrator stepped.
The objective was not to pretend that DHFL had never existed. It was to preserve enough of the institution's economic value for someone else to take responsibility for its future while determining what could be recovered from its past. The distinction between those two things would become central to everything that followed.
The old DHFL had raised money under one capital structure and built its lending business under another set of assumptions. The resolution process therefore had to determine what value remained inside that legacy while making the business sufficiently attractive for a new owner to take responsibility for what came next.
In an industrial insolvency, the prospective buyer looks at a factory and asks a relatively familiar question: what can this plant produce?
In a financial insolvency, the question is considerably more complicated. What will the loan book generate? How reliable are those cash flows? What infrastructure is required to service them? What regulatory obligations accompany the business? And how much uncertainty remains hidden inside thousands of financial relationships that cannot simply be picked up and moved like machinery?
There was no single valuation capable of answering all of those questions.
The answer had to emerge through the resolution process itself.
That was why the Committee of Creditors mattered so much. Creditors were not merely waiting at the end of the process to collect whatever remained. They were helping determine which future would be possible. Competing resolution applicants had to demonstrate that they could preserve and rebuild value. The creditors, in turn, had to decide which proposal offered the most credible route through the wreckage.
But DHFL introduced another complication that an industrial insolvency did not carry in quite the same form.
Not everyone affected by the resolution stood in the same relationship to the company.
A bank could look at DHFL as a borrower. A bondholder could look at it as an issuer. A depositor could look at it as the institution holding his or her savings. A borrower could look at it as the company servicing a home loan. An investor could look at it as a financial asset. The same company therefore appeared differently depending on where one stood.
That made the idea of a single collective resolution considerably more complicated.
The insolvency framework attempted to deal with that problem through classes and representation. Depositors and other creditors without direct voting power in the same manner as financial creditors could be represented through an authorised representative. The purpose was straightforward: bring a dispersed group into a collective process rather than allow thousands of individual claims to paralyse resolution.
On paper, the mechanism was logical.
In practice, it raised a much harder question—one that would follow DHFL through the courts:
Can a collective decision adequately represent people whose individual financial interests are profoundly different?
That question mattered because DHFL's creditor universe was not simply a collection of sophisticated institutions making investment calculations. For some, the resolution was an exercise in recovery percentages, valuations and present values. For others, the money involved was personal savings. Some creditors were measuring outcomes against financial models; others were measuring them against the amount they would actually receive.
The insolvency system could aggregate those claims mathematically.
It could not make their experiences economically identical.
That tension became sharper as the resolution process moved forward.
Several potential buyers emerged, and the contest ultimately centred on competing proposals for what DHFL's future should look like. The question was no longer whether the old company could simply be restored. By then, that was no longer realistic. The real question was whether another institution could take over the financial business, reorganise its liabilities and extract enough future value to make the rescue worthwhile.
Piramal Capital and Housing Finance eventually emerged with the plan that won the decisive vote.
The number was extraordinary.
93.65 percent.
The Committee of Creditors approved Piramal's resolution plan with 93.65 percent of the voting share. The Administrator subsequently sought approval of the plan after the Reserve Bank gave its no-objection, and on 7 June 2021 the adjudicating authority approved the resolution plan.
At first glance, 93.65 percent looks like the end of the argument.
A resolution plan had been selected. The creditors had overwhelmingly supported it. A buyer had emerged. The financial institution had been given a path forward.
But the number concealed the real complexity of DHFL.
A majority vote can tell you which plan won. It cannot tell you what every person affected by that plan ultimately received. Nor can it answer the deeper question of what exactly has been rescued.
Piramal was not buying a dead factory and restarting its furnaces. It was preparing to take control of a financial business whose most important relationships would continue beyond the insolvency itself. The home loans would remain. The borrowers would remain. The cash flows would remain. The obligations would remain.
What changed was the institution standing at the centre of those relationships.
That is what made DHFL such a consequential experiment for India's insolvency regime. The process had achieved something that would have been difficult to imagine when the crisis began: it had moved a collapsing financial institution toward a new ownership structure without simply dismantling the financial relationships embedded within it.
Yet institutional survival did not automatically settle the question at the level of the individual creditor.
The 93.65 percent vote had answered one question:
Which plan would become the future of DHFL?
It had not answered the question that mattered to those whose money was tied to its past:
What would that future mean for everyone whose money was trapped inside that past?
That was where the real controversy began.
Because once the buyer had been chosen, the argument could move beyond whether DHFL should survive. It could become a far more difficult argument about what survival actually meant, who benefited from it and who ultimately bore the cost of making it possible.
DHFL had found a future.
The people who had financed its past were still waiting to discover what part of that future belonged to them.
THE PRICE OF SURVIVAL
The resolution of DHFL looked, on the surface, like a victory for India's new insolvency regime. A buyer had emerged, the financial business had not been dismantled, creditors had a defined recovery mechanism and the first major insolvency of a financial service provider had been brought through the system. But beneath that institutional success lay a far more uncomfortable question: had the process recovered the maximum value that existed inside DHFL, or had it simply converted uncertainty into a settlement?
That question became particularly important because the resolution plan was not merely a transaction between a distressed company and a new owner. It was a bargain over what the past was worth. Piramal Capital and Housing Finance ultimately secured approval for a resolution plan with an outlay of ₹37,250 crore. The transaction itself involved ₹34,250 crore of consideration paid by PCHFL—about ₹14,700 crore in upfront cash and ₹19,550 crore in 10-year non-convertible debentures—with a separate carve-out consideration of about ₹3,810 crore available to creditors from DHFL's existing cash balance. Piramal had said that most creditors would recover roughly 46 percent of their admitted claims. The acquisition was completed in September 2021, after which DHFL's housing-finance business was integrated into Piramal's financial-services operations.
For the financial system, that was a meaningful outcome. For individual creditors, it was something else entirely.
The difference was visible most clearly among DHFL's fixed-deposit holders. Their aggregate admitted claims stood at about ₹5,375 crore, and the class represented roughly 6.18 percent of the Committee of Creditors' voting share. Under the approved distribution mechanism, depositors with admitted claims up to ₹2 lakh were to receive their deposits in full, while those with larger claims were to receive an amount linked to the liquidation value of the security available for the amount above ₹2 lakh. The structure was therefore not designed to make every depositor whole. It was designed to distribute the available resolution value according to the hierarchy and mechanism approved through the insolvency process. (Indian Kanoon)
That distinction turned a technical insolvency provision into a deeply personal dispute. For an institutional creditor, a recovery percentage could be entered into a spreadsheet. For a retired depositor or a small investor, the same percentage represented money that might never return. The law could classify both as creditors; their economic experience of the collapse could not be made equivalent.
The depositors challenged the distribution. Their argument was not simply that they deserved more money. They argued that DHFL's obligations to depositors were governed by provisions of the Reserve Bank of India Act and the National Housing Bank Act and that those provisions entitled them to full repayment. The litigation therefore moved beyond the question of how much money remained. It reached a more fundamental issue: could the insolvency framework determine the economic fate of financial claims even where another regulatory statute appeared to promise repayment?
In April 2025, the Supreme Court answered that question decisively. It held that the relevant provisions of the RBI Act and NHB Act did not mandate full payment of DHFL's deposits and did not give depositors an absolute right to recover the entire amount through the resolution process. The Court upheld the distribution mechanism and dismissed the appeals brought by the affected fixed-deposit holders and other challenging creditors. (Indian Kanoon)
The judgment mattered because it confirmed something larger than the fate of DHFL's depositors. In a financial-sector insolvency, the existence of a claim does not necessarily mean the existence of enough recoverable value to satisfy that claim in full. Once an institution collapses, the insolvency process has to decide how the remaining economic value is allocated. A contractual expectation of repayment and an actual recovery are not always the same thing.
But the depositors' dispute was only one part of the larger battle.
The more consequential controversy concerned money that might still be recovered from transactions associated with DHFL's earlier management. During the insolvency process, the Administrator pursued several applications involving alleged fraudulent, undervalued or otherwise improper transactions. One of the most important sets of proceedings concerned alleged fraudulent or wrongful trading under Section 66 of the Insolvency and Bankruptcy Code.
The numbers attached to those proceedings were staggering.
An application concerning what came to be described as the Bandra Books entities involved ₹17,394 crore. Another concerned alleged irregularities in loan disbursements connected with SRA projects and involved ₹12,705.53 crore. A further application concerning transactions associated with DHFL's insurance interests and inter-corporate deposits involved another ₹2,150.84 crore. These were not necessarily amounts that DHFL could simply recover as cash; they represented claims and proceedings whose ultimate value depended on litigation, evidence and the ability to establish liability. But their scale transformed the resolution from a simple question of selling a distressed business into a much larger question about what value might still be extracted from its troubled past. (Supreme Court App)
And here the DHFL case became genuinely extraordinary.
The resolution plan assigned a notional value of ₹1 to the Section 66 applications. Under the approved arrangement, recoveries arising specifically from Section 66 proceedings would benefit Piramal, while recoveries under the relevant avoidance provisions were to benefit DHFL's creditors. Piramal would also bear the costs associated with pursuing the Section 66 litigation. The Committee of Creditors accepted that arrangement as part of the larger commercial bargain that produced the resolution offer. The Supreme Court later noted that the competing resolution applicants had also assigned no meaningful value to these uncertain claims and that the Committee of Creditors had considered their recovery sufficiently speculative to accept the arrangement.
This was where the argument became much more sophisticated than the headline numbers suggested.
The issue was not simply whether ₹17,394 crore, ₹12,705 crore or the other amounts were "missing money." They were not pots of cash sitting somewhere waiting to be collected. They were disputed claims arising from transactions that required adjudication. The resolution applicant had to decide what those uncertain claims were worth today, before knowing whether they would succeed tomorrow. A distressed buyer cannot pay the same price for a billion-rupee claim whose recovery is uncertain as it would for a billion rupees sitting in a bank account.
That was Piramal's central economic logic: uncertainty had a price.
The opposing argument was equally powerful. If the alleged transactions had harmed the creditors of DHFL, why should the upside from recovering that value ultimately belong to the new owner rather than the creditors who had suffered the original loss? The dispute was therefore not really about accounting. It was about ownership of future recovery.
The National Company Law Appellate Tribunal initially sided with the challengers on this issue. In January 2022, it held that the provision allowing the successful resolution applicant to appropriate Section 66 recoveries should be set aside and sent the issue back to the Committee of Creditors for reconsideration. (Indian Kanoon)
The Supreme Court ultimately reversed that position.
In its 1 April 2025 judgment, the Court held that the NCLAT had exceeded its jurisdiction by interfering with the commercial bargain struck between Piramal and the Committee of Creditors. It restored the NCLT's 2021 approval of the resolution plan and confirmed that recoveries under Section 66 would accrue to Piramal under the approved plan. At the same time, it directed the NCLT to separately adjudicate the pending applications under the relevant provisions of the IBC. (Indian Kanoon)
That distinction is crucial.
The Supreme Court did not declare that every allegation surrounding DHFL's past had been proved. Nor did it simply convert every disputed claim into recoverable money. What it upheld was the legal architecture of the resolution bargain: the Committee of Creditors had the commercial authority to accept uncertainty in exchange for a defined resolution value, and courts were not free to substitute their own assessment of that commercial decision merely because another allocation might appear preferable.
The judgment therefore produced an unusual outcome. The same insolvency process that was intended to maximise value for creditors also allowed the successful resolution applicant to capture the upside from a particular category of uncertain recovery. That was legally upheld because the uncertainty had been factored into the bargain that produced the resolution amount.
For creditors, the lesson was uncomfortable but important: the value of a claim at the beginning of insolvency is not necessarily the value that belongs to the creditor at the end of it.
There was another layer to the story.
The collapse of DHFL did not simply destroy a balance sheet. It produced allegations of serious financial irregularities involving the former promoters, Kapil and Dheeraj Wadhawan, and generated criminal and regulatory proceedings alongside the insolvency process. The Supreme Court's 2025 judgment records that the RBI had superseded the DHFL board after being satisfied that the company's affairs had been conducted in a manner detrimental to depositors and creditors. The former directors subsequently challenged aspects of the resolution process, including their exclusion from the Committee of Creditors and the treatment of the resolution plan. (Indian Kanoon)
The Court rejected those challenges. It emphasised that the RBI's supersession of DHFL's board meant the directors had vacated their offices before the insolvency process began. Their position was therefore materially different from directors whose powers had merely been suspended under the IBC. They could not claim the same participation rights in the CIRP, although the Court clarified that once the resolution plan had been approved, it became a public document from which they could obtain a certified copy. (Indian Kanoon)
That legal distinction captures the extraordinary nature of DHFL better than almost any balance-sheet number.
The company had effectively passed through two different forms of institutional death. First, the RBI removed its board in an exercise of regulatory power designed to protect the financial system and its stakeholders. Then the insolvency process took over the economic future of the company. By the time the courts were reviewing the resolution, the people who had once controlled DHFL were no longer negotiating from inside the institution. They were challenging decisions made after control had already moved elsewhere.
And yet the ultimate irony of DHFL was that the institution itself survived.
The old corporate structure was transformed. Piramal's housing-finance business merged into DHFL through the approved transaction, and the resulting entity became part of Piramal's financial-services platform. The business continued serving customers, operating branches and originating housing loans. The financial relationships that had made DHFL economically important were therefore preserved even though the company that had created them had effectively disappeared in its original form. (Piramal Finance)
That is why DHFL should not be judged simply by asking whether creditors recovered 100 percent.
They did not.
Nor should it be judged simply by asking whether a financial institution was rescued.
It was.
Both statements are true at the same time.
The insolvency process prevented a disorderly collapse of a major housing financier, transferred the business to a new owner and established a precedent for resolving financial service providers under the IBC. But it also demonstrated the limits of what insolvency can accomplish. A resolution process can preserve an operating institution. It cannot manufacture money that has already disappeared, reverse every bad transaction, erase every loss or guarantee that every stakeholder will emerge whole.
That is the uncomfortable mathematics of bankruptcy.
Someone eventually pays for the destruction of value.
The real question is who pays, how much, and according to which rules.
DHFL forced India to confront that question in a particularly complicated setting because the creditors were not merely banks waiting for repayment. They included depositors, bondholders, institutional lenders and other financial stakeholders, each with different legal positions and different expectations. The resolution process had to turn those competing claims into one collective decision. The courts then had to decide how far they could intervene in that decision without effectively rewriting the bargain that creditors had approved.
The Supreme Court's 2025 judgment ultimately reinforced the principle that has become central to India's insolvency jurisprudence: commercial wisdom belongs primarily to the Committee of Creditors, not to judges deciding what they believe would have been a better bargain. (Indian Kanoon)
That principle may make insolvency faster and more predictable. But DHFL also shows why it can be emotionally and politically difficult.
A creditor may reasonably ask why a claim associated with alleged wrongdoing should produce a future benefit for a new owner. A depositor may ask why a lifetime of savings can be reduced to a fraction of the original claim. An institutional lender may ask why it should accept a haircut when another party acquires the underlying business and eventually makes it profitable again.
The insolvency code cannot make those questions disappear.
It can only establish the rules by which they are answered.
And that is ultimately what DHFL left behind—not simply another failed finance company, but a test of whether India's bankruptcy architecture could distinguish between saving a business and saving everyone who once had money inside it.
It succeeded at the first.
It could not promise the second.
The significance of DHFL therefore lies beyond the fate of one housing financier. It demonstrated that when a financial institution collapses, the object of rescue is not necessarily the company in its old form. It is the economic machinery that still has value: the loan book, the customers, the servicing infrastructure, the cash flows and the possibility of a functioning business under new ownership.
But preserving that machinery requires someone to absorb the losses embedded in the old structure.
In DHFL's case, the courts ultimately accepted that the Committee of Creditors could bargain over those losses, exchange uncertain future recoveries for a more certain resolution value and allow the new owner to assume the risks and rewards attached to parts of the unresolved past. (Indian Kanoon)
That is what makes the DHFL story larger than the company itself.
India had built an insolvency system to answer a seemingly simple question: what should happen when a company cannot pay its debts?
DHFL exposed the harder version:
What should happen when the company that cannot pay its debts is itself one of the places through which the country's money moves?
The answer was not a rescue in the traditional sense. It was something more severe and more modern.
The institution was allowed to die so that the financial business could live.
And when the process was finally over, the most important asset that survived was not DHFL's name.
It was the lesson that in finance, saving the system and saving every participant in the system are two very different things.
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