BackRBI refers Reliance Capital to insolvency tribunal
Reliance Capital is the third financial services company to be sent to the bankruptcy tribunal after the government notified the rules for referring financial services providers on 15 Nov 2019
PremiumMUMBAI : The Reserve Bank of India (RBI) on Thursday referred Reliance Capital Ltd to the Mumbai bench of the National Company Law Tribunal (NCLT) after it superseded its board and seized control on Monday.
“The Reserve Bank has today (2 December) filed an application for initiation of corporate insolvency resolution process (CIRP) against Reliance Capital Ltd..." it said in a statement.
Reliance Capital is the third financial services company to be sent to the bankruptcy tribunal after the government notified the rules for referring financial services providers (FSPs) on 15 November 2019. Unlike insolvency proceedings for companies from other sectors, an FSP creditor or debtor cannot approach the tribunal—the firm has to be referred by a regulator. Earlier cases were those of Dewan Housing Finance Corp Ltd (DHFL) and two Srei group firms.
“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," the regulator said on Thursday.
Mint reported on 30 November that last month, bondholders of Reliance Capital urged RBI to consider referring the company for insolvency resolution, citing challenges faced in the asset monetization process and non-cooperation from the company. Vistra ITCL, the trustee for bondholders, constituting 96% of Reliance Capital’s debt, has put up several company assets, including its insurance ventures, asset reconstruction firm and securities arm on sale.
Vistra, which RBI invited for another meeting on 7 October, reiterated its challenges in running the asset monetization process and highlighted non-cooperation from Reliance Capital. Vistra had hired SBI Capital Markets and JM Financial Ltd to carry out the sale process of Reliance Capital’s assets and investments in various entities. However, the asset monetization process was delayed due to numerous litigations.
Reliance Capital holds majority stakes in two insurance firms, an asset reconstruction company, a brokerage firm, and a minority stake in a commodity exchange. The holding company owes its bondholders ₹16,260 crore, out of the total ₹26,887 crore on a consolidated level as of 31 March.
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