RCap’s administrator moves NCLT for faster payments from Hinduja’s IIHL

“Great ‘prejudice’ will be caused to Reliance Capital if the application is not allowed,” the administrator has said in its petition, which Mint has seen. 

The tribunal last week approved IIHL’s ₹9,650-crore resolution plan to acquire Reliance Capital, following a two-year legal battle by the Hinduja Group. 

The plan has to be implemented within 90 days of the date of the order (27 February).

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

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

“The lenders are concerned that since the clearance on the regulatory approvals may take further time, their payment is likely to take a backseat,” said a counsel on condition of anonymity, adding that such approvals could take anywhere between three months to a year.

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.

NCLT will take up the matter for hearing on 11 March.  

Under India’s Insolvency and Bankruptcy Code, NCLT has the power to correct an order under section 60(5), read with Rule 154 and 11 of NCLT rules, to rectify or correct any inadvertent error in an order.

NCLT’s 27 February order states that Irdai 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.

However, the administrator’s plea seeks rectification of the order to say: “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.” 
Sonal Alagh , Partner, Alagh & Kapoor Law said “From a legal standpoint, the case presents a compelling scenario. The NCLT, a judicial authority established to resolve civil corporate disputes/insolvencies, holds the power to enforce resolution plans approved under the Insolvency and Bankruptcy Code (IBC). The primary concern for the tribunal will be to balance the interests of all stakeholders involved, including the debtor company, its creditors, and the resolution applicant, in this case, IIHL.”

Alagh added that 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. 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.

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Published: 07 Mar 2024, 03:14 PM IST