RCap resolution: NCLAT seeks Hinduja’s reply on lenders’ plea to forfeit equity

Mumbai: The National Company Law Appellate Tribunal (NCLAT) has issued notice to IndusInd International Holdings Ltd (IIHL) on a plea filed by lenders of insolvent Reliance Capital seeking forfeiture of ₹2,750 crore in equity component in case the Hinduja group company fails to implement the resolution plan.

NCLAT's Delhi bench, led by justices Ashok Bhushan and Arun Baroka, has asked IIHL to file a reply within two weeks. The bench will hear the matter on 30 September.

The lenders are primarily seeking a modification of the NCLT order of 23 July, which allowed IIHL to take over Reliance Capital for ₹9,861 crores. Since then, the lenders have been at odds with the Hinduja Group regarding the implementation of the resolution plan.

In a plea before the NCLAT, the lenders have sought interest payment on the debt component of ₹7,300 crores from August 2023 until the actual date of the payment from IIHL.

Also Read: RCap lenders move NCLAT for forfeiture of funds in escrow account

The counsel for the lenders said that if the applicant fails to implement the resolution plan within the extended period, it will be treated as a default, and the committee of creditors will be entitled to take all requisite steps against the applicant (IIHL). In case of a default, the amount deposited in the escrow account will be returned to the lenders, the counsel added.

“Lenders are not opposing the extension for plan implementation, but the interest should have been granted to us. We have been losing ₹125 crores worth of interest every month,” counsel Pooja Dhar said.

The counsel for IIHL Bhoomika Batra to be added in 7 th para said the monies have been deposited in the escrow account in accordance with the NCLT order. “We are almost in the last leg of implementing the resolution plan,” Batra added.

The resolution plan

Under the approved plan, IIHL was to deposit the initial equity amount of ₹250 crore in a domestic escrow account and ₹2,500 crore in an offshore escrow account of the Committee of Creditors (CoC) by 31 July. 

Subsequently, with the deadline nearing, IIHL last week filed an application before the NCLT, seeking modification of the tribunal’s order. The administrator has opposed granting any relief to IIHL.

NCLT had partly granted IIHL an extension till 10 August for implementation of the resolution plan.

Also Read: Reliance Capital administrator defends use of ’Reliance’ brand amid legal dispute

Experts said the forfeiture of monies was appealed to secure the lenders' interest and protect them from further losses that would accrue due to IIHL’s delay in implementing the NCLT-approved resolution plan.

The petition said a significant amount of public money was involved in this case as a huge amount of debt is owed to pension funds, retail bondholders, insurers, including Life Insurance Corp of India, EPFO and Army welfare fund. 

Earlier, the CoC pleaded in the NCLT that they were deprived of the timely payout of money owed to them by the corporate debtor under the resolution plan. The resolution plan binds IIHL to pay the lenders within a period of 90 days from the date of the order.

“In the event IIHL fails to make the payments within this period and defaults, then it is liable to pay interest to the CoC for the delayed payment and should also be asked to put monies in escrow account which will be forfeited if there are further delays in implementation of the resolution plan”, the petition said.

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