NCLT allows RCap administrator’s plea on implementation of resolution plan

The plea was filed on 7 March following concerns over the implementation of the resolution plan that was approved by the NCLT last month. The administrator had said great prejudice would be caused to the company if the petition was not allowed.

On 27 February, the NCLT gave its nod to Hinduja Group’s IndusInd International Holdings to take over the debt-laden Reliance Capital under the corporate insolvency resolution process of the IBC. The Hinduja entity’s final resolution plan was worth ₹9,650 crore and was approved by a majority of lenders.

The plan has to be implemented within 90 days of the date of the order which came on 27 February.

However, since certain regulatory approvals were pending in the matter, lenders to RCap had urged the Hinduja Group entity to secure the necessary clearances from the Insurance Regulatory and Development Authority (IRDA), the Securities and Exchange Board of India, and the Competition Commission of India.

“Given the circumstances, the question arises whether Hinduja, the entity behind IIHL, will adhere to the stipulated timelines for payment. Legal precedents suggest that the NCLT has consistently prioritized the completion of resolution processes within the mandated timelines to ensure the viability of the distressed entity and safeguard the interests of the creditors,” said Sonal Alagh partner at Alagh & Kapoor Law Offices. 

“Thus, Hinduja’s commitment to meeting the deadlines will likely be influenced by the NCLT’s directive, reinforced by the legal obligation to fulfill the terms of the approved resolution plan.”

Alagh added that while the regulatory approval process may pose challenges to the timely execution of resolution plans, the NCLT’s intervention in this case underscores the importance of adhering to approved timelines. It reaffirms the tribunal’s role in facilitating the smooth execution of insolvency and bankruptcy proceedings, with an emphasis on protecting the interests of creditors and ensuring the revival of distressed entities. 

As developments unfold, stakeholders will be keenly observing the NCLT’s decisions, which are poised to have significant implications on the future of Reliance Capital and the broader insolvency resolution framework in India.

The Reserve Bank of India had given its approval for Reliance Capital’s takeover in November.

The lenders are concerned that since the clearance of the regulatory approvals may take time, their payment is likely to take a backseat.

The administrator also submitted that certain errors had inadvertently crept into the tribunal’s 27 February order, and it had filed a plea seeking corrections. Under India’s Insolvency and Bankruptcy Code, NCLT has the power to correct an order.

NCLT’s 27 February order states that IRDA approval was required for a change in the control of Reliance General Insurance Co. Ltd, Reliance Health Insurance Co. Ltd, and Reliance Nippon Life Insurance Co.

The administrator, in its plea, said “The resolution applicant shall send an application to the IRDAI for RGIC, RNLIC and RHICL, for purposes of implementation of the resolution plan. And in connection with the said implementation, any approvals required from IRDAI upon acceptance of the Letter of Intent, the administrator and the Committee of Creditors shall provide assistance in getting such approvals.”

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Published: 13 Mar 2024, 07:32 PM IST