NCLT directs RBI, DIPP to expedite approvals for Hinduja’s takeover of Reliance Capital

The National Company Law Tribunal (NCLT) on Monday instructed the Reserve Bank of India (RBI) and the Department of Industrial Policy and Promotion (DIPP) to expedite approvals necessary for Hinduja-owned IndusInd International Holdings Ltd (IIHL) to complete its acquisition of the insolvent Reliance Capital.

A bench comprising Justices Virendrasingh G. Bisht and Prabhat Kumar emphasized the critical nature of these approvals for the release of funds in favour of the corporate debtor, Reliance Capital, as part of the resolution plan. "We direct RBI and DPIIT to expedite the consideration of the application filed by the applicants/corporate debtor," the bench said.

This directive followed a petition by the Hindujas seeking an extension of the timeline set by the tribunal in its 23 July order for implementing the resolution plan for Reliance Capital. The Hindujas had argued for additional time to navigate the complexities of the plan's execution.

The tribunal also noted that certain approvals from the Securities and Exchange Board of India (Sebi) and the Insurance Regulatory and Development Authority of India (Irdai) had lapsed and required renewal.

Senior counsel Abhishek Manu Singhvi, representing the Hindujas, informed the bench on Monday that IIHL had already deposited ₹2,750 crore (equity component) into the Committee of Creditors (CoC) designated escrow account, in compliance with the NCLT's previous order. Singhvi requested a six-to-eight-week period to report on the progress of the resolution plan's implementation.

However, Gaurav Joshi, senior advocate for the administrator, opposed any further extensions, advocating instead for a conditional two-week extension with close monitoring of the process. He stressed the significant financial stakes involved and warned against delays.

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Regarding government approval, Joshi argued that the delay was solely the responsibility of the Hindujas, noting that they had a year from June 2023 to secure the necessary clearances. He highlighted that the Hindujas had initially claimed that legal advice suggested DIPP approval was unnecessary, a stance they later reversed.

Joshi further criticized the Hindujas for seeking modifications to the resolution plan, stating that these changes were not justified and accusing them of engaging in "gimmicks." He pointed out that Sebi approvals were granted based on a specific corporate structure, which the Hindujas later attempted to alter, causing further complications.

In May, as IIHL neared the implementation of the NCLT-approved resolution plan, it sought permission to pledge 100% of Reliance Capital's shares, owned by Anil Ambani, to raise funds. IIHL proposed raising ₹3,500 crore through secured non-convertible debentures (NCDs), with Reliance Capital seeking an additional ₹4,500 crore from eligible investors. The entire ₹8,000 crore was to be raised by pledging Reliance Capital's shares, a proposal still awaiting approval from the RBI.

In April, the Hinduja Group submitted another request to the RBI, seeking approval for a change in its corporate structure. This proposal also remains pending. The group has since provided clarifications to the Irdai regarding the structural changes.

The NCLT concluded by urging both parties to collaborate and resolve outstanding issues. The tribunal scheduled the next hearing for 28 August.

Last July, IIHL, the promoter of IndusInd Bank, had placed a bid of ₹9,861 crore to acquire Reliance Capital, which was subsequently approved by the administrator. The bid also received overwhelming support from creditors, with a 99% majority voting in favour.

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In November 2021, the Reserve Bank of India had superseded the board of Reliance Capital in view of payment defaults and serious governance issues.

Reliance Capital had a secured debt of ₹16,000 crore, with admitted claims at over ₹23,666 crore.