The Reserve Bank of India on Thursday filed an application to initiate insolvency proceedings against Reliance Capital in the Mumbai court of the National Company Law Tribunal.
The RBI replaced the board of directors of Reliance Capital Ltd (RCL), promoted by Anil Ambani’s Reliance group, on Monday due to breaches of payment obligations.
The RBI said the board was replaced “due to RCL’s failure to meet various payment obligations to its creditors and serious governance issues that the board was unable to address. respond effectively “.
He also appointed Nageswar Rao Y (former executive director, Bank of Maharashtra) as administrator of the NBFC.
This is the third major NBFC against which the central bank has recently initiated bankruptcy proceedings under the Insolvency and Bankruptcy Code.
The RBI has initiated similar proceedings against Srei Group NBFCs and Dewan Housing Finance Corporation (DHFL). While the proceedings against DHFL are closed, Srei’s issue is still pending.
“… the Reserve Bank replaced today (Monday) the board of directors of M / s Reliance Capital Ltd (RCL) due to RCL’s failure to meet various payment obligations to its creditors and serious governance issues that the board has not been able to deal with effectively, âthe central bank said.
He further stated that the Reserve Bank would shortly begin the process of resolving the company under the insolvency and bankruptcy rules (insolvency and liquidation proceedings of financial service providers and request to the awarding authority), 2019.
âReserve Bank will also ask the Mumbai NCLT to appoint the administrator as an insolvency resolution professional,â he said.
In September, Reliance Capital at its annual general meeting (AGM) informed shareholders that the company’s consolidated debt was Rs 40,000 crore.
The company reported a consolidated loss of Rs 1,156 crore for the second quarter of this fiscal year against Rs 6,001 crore in income. In 2020-21, the company recorded a loss of Rs 9,287 crore on total income of Rs 19,308 crore.
Reliance Capital, in its statement, said that the “complexity of litigation” initiated by some secured and unsecured lenders, resulting in more than 10 cases pending in various forums – including the Supreme Court, the Mumbai High Court, the Delhi High Court and DRT – has effectively blocked the company’s debt settlement, despite its best efforts over the past two years.
âThe company has a profitable and valuable operating business, with its 100% stake in RGIC and 51% in RNLIC (a joint venture with Nippon Life Co. of Japan), which accounts for the majority of the company’s value. being a core Investment Company (CIC), in addition to other financial investments, “he said.
Reliance Capital further said it had “no outstanding loans from banks” and that about 95% of its debt was in the form of bonds.
The company looks forward to prompt debt resolution and the continuation of a well-capitalized business through the IBC process, in the general interest of all of its stakeholders, including lenders, customers, employees and shareholders, he added.