New Delhi – The Delhi government has ordered the Delhi Financial Corporation winding up, citing its financial non-viability and public interest considerations. This decisive action marks the end of an institution that once served as a crucial lending platform for micro, small and medium enterprises in the national capital.
Official Notification of Delhi Financial Corporation Winding Up
The decision regarding the Delhi Financial Corporation winding up was notified on February 6, following approval by the Delhi cabinet last month. The closure has been formalized through a gazette notification issued under the State Financial Corporations Act, 1951, establishing the legal framework for the institution’s dissolution.
The Delhi Financial Corporation winding up represents a significant development in the capital’s financial landscape, as the DFC had been a key institution extending loans to micro, small and medium enterprises for decades.
Severe Financial Crisis Prompts Delhi Financial Corporation Winding Up
The Delhi Financial Corporation winding up became inevitable after the institution grappled with severe financial stress for a prolonged period. The acute liquidity crunch that necessitated the Delhi Financial Corporation winding up was formally flagged during a meeting of the corporation’s board in November last year.
During this critical board meeting, members were informed that DFC’s share capital had been fully eroded, with accumulated losses mounting to ₹42 crore. This devastating financial position made the Delhi Financial Corporation winding up the only viable option for the government.
Mounting Debt and Eroded Capital
The Delhi Financial Corporation winding up decision was reinforced by the corporation’s inability to service its outstanding loan obligations. Officials revealed that DFC owed ₹80 crore to the Delhi government as of September 2025, a debt that remained unpaid due to severe liquidity constraints.
According to official records that justified the Delhi Financial Corporation winding up, DFC’s entire capital base and reserves stood wiped out, while its net worth had slipped into the red by ₹15 crore. This alarming financial deterioration underlined the depth of the crisis that made the Delhi Financial Corporation winding up unavoidable.
Legal Framework for Delhi Financial Corporation Winding Up
The Delhi Financial Corporation winding up was executed under Section 45 of the State Financial Corporations Act, which stipulates that a financial corporation can be placed in liquidation only through an order of the state government. Exercising these statutory powers, Delhi Lieutenant Governor VK Saxena directed that the Delhi Financial Corporation winding up be implemented.
DFC was originally established under the State Financial Corporations Act, 1951, to function as a state financial institution. The Delhi cabinet considered a proposal last month to close the corporation after thoroughly assessing its financial position and subsequently approved the Delhi Financial Corporation winding up process.
Operational Cessation Following Delhi Financial Corporation Winding Up
According to the gazette notification by the finance department, the Delhi Financial Corporation winding up will take effect from the date of publication of the notification in the Official Gazette. From that date, all regular operations of the corporation will come to an end, including the sanction and disbursement of fresh loans.
Following the Delhi Financial Corporation winding up order, DFC will function only for activities related to its closure, such as realization and recovery of dues, settlement of liabilities, disposal or transfer of assets, and completion of statutory and administrative requirements.
Winding-Up Committee Formation
To oversee the Delhi Financial Corporation winding up process, the government has constituted a specialized winding-up committee. The committee responsible for the Delhi Financial Corporation winding up will be headed by the administrative secretary (Finance), Delhi.
The committee managing the Delhi Financial Corporation winding up includes the administrative secretaries of industries, law and services, the chairman-cum-managing director of DFC, the controller (Treasuries), a representative of the Chandigarh administration, a representative of SIDBI, and the executive director of DFC, who will serve as member secretary.
Powers and Responsibilities of Winding-Up Committee
The committee overseeing the Delhi Financial Corporation wind up has been empowered to seek assistance from any officer, authority or agency of the Delhi government and may invite special invitees as required. With the publication of the notification, all powers of DFC’s board of directors and management will stand vested in the winding-up committee.
The committee authorized to execute the Delhi Financial Corporation wind up has been given custody and control of all assets, records, securities, cash and bank balances, investments and properties of DFC. It will be responsible for recovering dues, including through settlement schemes and legal proceedings, finalizing accounts, completing audits, ensuring statutory compliance and settling all lawful claims.
Asset Disposal and Employee Protection
During the Delhi Financial Corporation wind up process, the committee will identify and dispose of movable and immovable assets in accordance with applicable rules. The order specified that no action prejudicial to employees will be taken except in accordance with law and due process, ensuring worker rights are protected during the Delhi Financial Corporation wind up.
Legal Proceedings and Final Dissolution
All legal proceedings by or against DFC will continue until the completion of the Delhi Financial Corporation winding up process. A separate notification will be issued by the lieutenant governor declaring the final dissolution of the corporation once all assets and liabilities are settled during the Delhi Financial Corporation wind up.
This comprehensive approach to the Delhi Financial Corporation wind up ensures that all stakeholders—including creditors, employees, and borrowers—are treated fairly while bringing an orderly end to an institution that could no longer sustain its operations.
