NCLT reserves order on RBI’s plea to commence insolvency against Reliance Capital

The dedicated bankruptcy court has reserved its order in a plea filed by the Reserve Bank of India (RBI) against Ltd (RCL). The central bank has filed an application for the initiation of the Corporate Insolvency Resolution Process (CIRP) against RCL under the Insolvency and Bankruptcy Code, 2016.

Before that Ravi Kadam, senior advocate, appearing for the RBI informed the Mumbai bench of the National Company Law Tribunal (NCLT) that under the IBC, only the regulator has the power to initiate CIRP against financial services providers.

“YES Bank was a subscriber to the Non-Convertible Debenture (NCDs) to the tune of Rs 987 crore, issued by the company on October 30, 2017. The default occur on the same after which all other events got triggered,” argued counsel for RBI.

Earlier on November 29, RBI superseded the board of RCL and appointed former Bank of Maharashtra executive director Y Nageswar Rao as an administrator of the company. Advocate Rohan Rajadhyaksha appeared for the administrator in the case.

Darius Jehangir Kakalia, Partner of law firm Mulla & Mulla & Craige Blunt & Caroe, appeared for the promoter of Reliance Capital and informed the tribunal that they are supporting the petition filed by the central bank.

The division bench presided over by Justice Pradeep Narhari Deshmukh and technical member Kapal Kumar Vohra reserved the order. The tribunal is expected to pronounce its order in the second half on Monday.

The action by the central bank was taken “in view of the defaults by RCL in meeting the various payment obligations to its creditors and serious governance concerns which the board has not been able to address effectively,” RBI said in a press release.

Reliance Capital is the holding company for majority stakes held in insurance firms, an asset reconstruction company, a brokerage firm and a partial stake in a commodity exchange.

It controls a 100% stake in Reliance General Insurance, its broking arm Reliance Securities and RBI-registered NBFC Reliance Financial Limited which is engaged in capital market-linked financing activities.

RCL owes its creditors Rs 19,805 crore, a majority of it through bonds under the trustee Vistra ITCL India Ltd.

This is the third NBFC taken to the bankruptcy court by the RBI after Dewan Housing Finance Ltd (DHFL) and Kolkata based Srei Group.


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