The Reserve Bank of India (RBI) on November 30 said it has appointed an advisory committee to advise the administrator of Reliance Capital. The committee includes Sanjeev Nautiyal, ex-DMD of State Bank of India, Srinivasan Varadarajan, ex-DMD of Axis Bank, and Praveen P Kadle, ex-MD & CEO, Tata Capital Limited.
On November 29, 2021, the RBI superseded the board of directors of Reliance Capital Ltd and appointed Nageswara Rao Y, former executive director of Bank of Maharashtra, as the administrator.
“It may also be mentioned that the Insolvency and Bankruptcy Rules, 2019 provide for the concerned financial sector regulator appointing a Committee of Advisors to advise the Administrator in the operations of the financial service provider during the corporate insolvency resolution process,” the RBI said.
The RBI superseded the board of Reliance Capital due to the defaults of the company in meeting various payment obligations and citing governance concerns.
“The Reserve Bank has today superseded the Board of Directors of M/s Reliance Capital Ltd (RCL) in view of the defaults by RCL in meeting the various payment obligations to its creditors and serious governance concerns which the Board has not been able to address effectively,” the RBI said on November 29.
The Reserve Bank will shortly initiate the process of resolution of the company under the Insolvency and Bankruptcy Rules, 2019.
Also, it will apply to the NCLT, Mumbai for appointing the administrator as the Insolvency Resolution Professional, the central bank added.
The Reliance Capital welcomed the RBI move to resolve debt "in accordance with IBC" and said it will cooperate fully with the RBI-appointed administrator for expeditious resolution of debt.
"The complexity of litigation initiated by unsecured, some secured lenders has effectively stalled resolution of debt over past 2 yrs. The company has no outstanding loans from banks; 95% of debt is in the form of debentures," a company statement said. "Look forward to the resolution of debt, continuation as a well-capitalised going concern via IBC process."
Reliance Capital had defaulted on interest payments on loans worth Rs 624 crore drawn from Housing Development Finance Corporation (HDFC) and Axis Bank, the company informed stock exchanges on November 27, 2020. The company has defaulted on Rs 4.77 crore to HDFC and Rs 0.71 crore to Axis Bank in terms of the interest payment as on October 31.
Reliance Capital borrowed term loans from HDFC for a period of six months to seven years at 10.6 percent-13 percent and from Axis Bank at 3-7 years for 8.25 percent.
In the stock exchange clarification, the company said it was unable to proceed with asset monetisation due to the prohibition on the company to dispose of any assets following court orders. Hence, the delay in debt servicing, it said.
Later in April 2021, the company said it failed to make the interest payment for non-convertible debentures (NCDs) due on April 22. Earlier, the company had said it was in the process of meeting its obligations by way of time-bound monetisation of its assets in cognisance with debenture trustee (Vistra) and debenture holders.
"The committee of debenture holders has sought expression of interest (EoI) for submission of asset monetisation plans for certain subsidiaries/investments of the company," it said last year. The invitation for this EoI was issued on October 31, 2020.
Although the company received multiple EoIs, the sale process initiated by the lenders was delayed due to various litigations across courts. The Board of Reliance Capital Ltd includes Anil Ambani, Rahul Sarin, Chhaya Virani, Thomas Mathew, AN Sethuraman, and Dhananjay Tiwari, according to the company website.