Lenders to Reliance Capital accuse IIHL of using delaying tactics, company denies allegations

Lenders to debt-ridden Reliance Capital Ltd (RCAP) have alleged that IIHL is indulging in delaying tactics resulting in slowdown in the implementation of the resolution plan, but the Hinduja Group firm has refuted the allegations, saying it was following due process.

Mauritius-based IndusInd International Holdings Ltd (IIHL) emerged as a successful bidder for acquisition of Reliance Capital.

"All allegations are completely false, baseless and are an attempt to malign and obstruct the resolution process," IIHL sources said.

"All allegations are incorrect and untrue. There is absolutely no reason for IIHL to delay the implementation of the plan, more so, when IIHL has already deposited Rs 2,750 crore with the CoC," the company sources said.

Contrary to allegations, it is in IIHL's interest to close the implementation at the earliest and take possession of the company so that the depletion of value that is happening on a daily basis can be immediately stopped and IIHL can focus on growth, they said.

The NCLT Mumbai on February 27, 2024, approved IIHL's Rs 9,861-crore resolution plan for the debt-ridden financial firm.

According to sources, lenders claimed that IIHL's move to seek approval from the Department of Industrial Policy and Promotion (DIPP) is an afterthought.

It was not even a part of conditions set out by the NCLT while approving the resolution plan on February 27, 2024.

According to sources, 90 days have passed since IIHL submitted the application with DIPP, but the approval is still pending.

As regards DIPP approval, IIHL sources said it was part of the same resolution plan which was put to vote and approved by 99.96 per cent of the Committee of Creditors (CoC).

DIPP approval is required as some of the shareholders of IIHL are residents of Hong Kong, a special administrative region controlled by China.

According to Press Note 3, if an entity from a nation sharing a land border with India (namely China, Bangladesh, Pakistan, Bhutan, Nepal, Myanmar, and Afghanistan), or if a citizen or permanent resident of any such country, is the beneficial owner of an investment in India, they are required to pursue investment through the government approval route.

As per the Insolvency and Bankruptcy Code (IBC), all approvals under any law for the time being in force, within such period as may be prescribed.

The plan further provides for a period of one year for obtaining approvals (except for CCI) and therefore, there is no question of condition precedent or subsequent, sources said.

Earlier on August 12, the National Company Law Tribunal (NCLT) directed the Reserve Bank of India (RBI) and DIPP to expedite the approval process to implement RCAP's resolution plan by Hinduja Group-promoted IIHL.

Meanwhile, IIHL has committed for payment of entire consideration of Rs 9,861 crore, subject to receipt of regulatory approvals and resolution of outstanding GST component.

The next hearing by NCLT on the RCAP's resolution plan is scheduled on September 19, 2024.

IIHL sources further said CoC never in all the correspondence or meetings ever drew attention or made a statement of application to DIPP, whereas all other applications to the RBI, CCI, Sebi and other regulators were constantly monitored. They could have very well brought it up since they are equally a part of the approval process of the plan all throughout.

In November 2021, the RBI superseded the board of Reliance Capital on governance issues and payment defaults by the Anil Dhirubhai Ambani Group company.

The central bank had appointed Nageswara Rao Y as the administrator, who invited bids in February 2022 to take over the company.

Reliance Capital had a debt of over Rs 40,000 crore, and four applicants had initially bid with resolution plans. However, the committee of creditors rejected all four plans for lower bid values and a challenge mechanism was initiated in which IIHL and Torrent Investments participated.