RBI files resolution application against Reliance Capital Ltd

The Reserve Bank of India has filed an application for initiation of Corporate Insolvency Resolution Process (CIRP) against Reliance Capital Ltd. The central bank has initiated the insolvency process under the Insolvency and Bankruptcy Code (IBC), 2016.

The application has been filed at the Mumbai Bench of the Hon'ble National Company Law Tribunal (NCLT).

As per Rule 5 (b) (i) of the FSP Insolvency Rules, an interim moratorium shall commence on and from the date of filing of the application till its admission or rejection, RBI said in a statement.

RBI in a notification said, "Reserve Bank has today (December 02, 2021) filed an application for initiation of CIRP against Reliance Capital Ltd., under Section 227 read with clause (zk) of sub-section (2) of Section 239 of the Insolvency and Bankruptcy Code (IBC), 2016 read with Rules 5 and 6 of the Insolvency and Bankruptcy (Insolvency and Liquidation Proceedings of Financial Service Providers and Application to Adjudication Authority) Rules, 2019 ("FSP Insolvency Rules") at the Mumbai Bench of the Hon'ble National Company Law Tribunal."

Earlier on November 29, 2021, the Reserve Bank superseded the board of directors of Reliance Capital Ltd. (RCL) and appointed Nageswara Rao Y, ex-Executive Director, Bank of Maharashtra, as the Administrator of the company. The action 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. Later, on November 30, 2021, RBI constituted a three-member Advisory Committee to assist the Administrator in the discharge of his duties. The members of the Advisory Committee are as follows:

Mr Sanjeev Nautiyal, ex-DMD, State Bank of India

Mr Srinivasan Varadarajan, ex-DMD, Axis Bank

Mr Praveen P Kadle, ex-MD & CEO, Tata Capital Limited

Reliance Capital owes Rs 21,781.01 crore, including interest, as of October 31, 2021, to lenders.

Besides, Reliance Capital has welcomed the Reserve Bank's move to resolve the Company's debt in accordance with the IBC Code. As per a regulatory filing of the company on November 29, 2021, "the Company will co-operate fully with the Administrator appointed by the RBI for the expeditious resolution of its debt in the best interests of all stakeholders." It added, "The Company has no outstanding loans from banks and approx 95 per cent of its debt is in the form of debentures."

It said, the complexity of litigation initiated by certain secured and unsecured lenders, resulting in the pendency of over 10 cases in various fora, including the Hon'ble Supreme Court, Mumbai High Court, Delhi High Court and DRT, has effectively stalled the resolution of the Company's debt, despite its best efforts for the past over 2 years.

The Company owns profitable and valuable operating businesses, through its 100 per cent shareholding in RGIC and 51 per cent shareholding in RNLIC (a JV with a global leader, Nippon Life Co. of Japan), which represent the majority of the value of the Company being a Core Investment Company (CIC), besides other financial investments.

The Company looks forward to expeditious resolution of its debt and continuation as a well-capitalized going concern through the IBC process, in the overall interests of all its stakeholders, including lenders, customers, employees and shareholders.

With this initiation of the resolution proceedings, Reliance Capital becomes the second NBFC taken to the bankruptcy court by the Reserve Bank of India within two months. Last month the central bank had allowed proceedings against Kolkata based Srei Group.