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‘Resolution delay due to complex litigation’

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MUMBAI: The Reserve Bank of India on Monday superseded the board of directors of Reliance Capital and announced plans for insolvency proceedings citing payment defaults and serious governance concerns which the board has not been able to address. The RBI also appointed Nageswar Rao Y, former executive director of Bank of Maharashtra as the administrator.
“RBI will also apply to the National Company Law Tribunal for appointing the administrator as the insolvency resolution professional,” the regulator said in a statement.
Reliance Capital said in a statement, “The company will cooperate fully with the administrator appointed by the RBI for the expeditious resolution of its debt in the best interests of all stakeholders.”
Anil Ambani’s telecom firms are under insolvency proceedings and he had earlier told a London court that he did not have any notable assets to repay Chinese banks.
The Anil Ambani-owned RCL is the third financial services firm to face insolvency proceedings after the law was amended to include NBFCs.
DHFL—the first to be admitted—was resolved this year, resulting in its sale to the Piramal Group. Earlier this month, RBI initiated insolvency proceedings against the Kolkata-based SREI group. However, RCL resolution would be different as most of the value lies in its investment in operating group companies including financial services and insurance. Ambani had told shareholders in the company’s annual general meeting in September that the consolidated debt was Rs 40,000 crore.
The RBI action comes more than two years after Reliance Capital was declared a defaulter by Care Ratings for failing to meet its payment obligations. The default resulted in the Vistra ITCL—the debenture trustee—inviting bids for Reliance Capital’s investments in several of its holding companies.
RCL in its statement attributed the delay in resolution to the complexity of litigation initiated by secured and unsecured lenders, resulting in the pendency of over 10 cases in various courts.
The immediate impact of the insolvency proceedings would be revisiting the entire asset sale process. It is also likely to scuttle an impending sale of Reliance Commercial Finance and Reliance Home Finance by the creditors to Authum Investment and Infrastructure, which was announced by Ambani in the September AGM. RCL’s group companies, which included Reliance General Insurance, Reliance Nippon Life Insurance, Reliance Securities, Reliance Asset Reconstruction Company and Reliance Health Insurance, received over 60 bids in all. However, the resolution process did not progress over concerns of litigation and claims from other creditors who said they have a security interest in some companies.

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