Mumbai: Reliance Capital’s administrator has said that the Hinduja Group-owned IndusInd International Holdings Ltd’s bid to unilaterally seek extension of the deadline to implement its resolution plan for the bankrupt company creates ‘reasonable apprehension’ about its willingness to honour the resolution plan.
In a submission before the Mumbai bench of the National Company Law Tribunal (NCLT) on Monday, administrator Nageswara Rao Y. said that any such extension without the consent of the lenders is impermissible. “IIHL cannot be permitted to seek unconditional extension as the same would be tantamount to rewriting the plan,” the administrator said in his submission, a copy of which Mint has reviewed.
The administrator’s submissions came in response to IIHL’s application seeking a 90-day extension for implementing the approved resolution plan to take over Reliance Capital (RCap). The NCLT in February approved IIHL’s ₹9,861-crore resolution plan which was mandated to be implemented by 27 May.
Emails sent to the administrator remained unanswered.
The proposal includes ₹7,300 crore in the form of borrowing from lenders, ₹2,500 crore via equity infusion by IndusInd International from outside India, and another equity infusion of ₹250 crore by Cyqure India (a Hinduja Group associate).
The administrator also charged that “IIHL has not shown its bonafides in seeking extension of time by paying interest or by depositing the amount of equity contribution of ₹2,750 crore in an escrow account.”
Earlier, IIHL in its meeting with the monitoring committee of the lenders had sought an extension till 30 June. However, in its application before the NCLT, it sought an extension of 90 days, much beyond 30 June. Interestingly, in its oral arguments, IIHL sought an extension till 31 July 2024.
“This demonstrates utter lack of clarity and creates reasonable apprehension about IIHL’s readiness and willingness to abide with the resolution plan,” the administrator contended.
It was also submitted before the bench that the grounds made by IIHL for seeking an extension were “misleading”. For seeking an extension, IIHL claimed that there were certain government approvals which are pending and which are required for implementation of the resolution plan, the administrator said. These include IIHL’s application for RBI approval to raise ₹8,000 crore by pledging 100% shares of Reliance Capital.
Way Forward
Furthermore, India’s foreign direct investment policy states that overseas investment in a Core Investment Company (CIC)—in this case RCap—would require prior government approval, the administrator stated.
IIHL, however, believed the automatic route would apply, and no prior government approval would be required, until they were informed by the RBI on 29 April that prior approval would be required. “IIHL proceeded assuming it had a correct understanding of the law,” the administrator said in its submissions.
IIHL subsequently decided to file an application for government approval just 13 days ahead of the 27 May deadline to implement the resolution plan.
“Though the resolution plan allows IIHL some flexibility to implement the resolution plan through its wholly-owned subsidiary–IIHL BFSI (India) Ltd. and Aasia Enterprises LLP or such other entity as may be decided by IIHL with the approval of the CoC, it cannot be taken to mean that IIHL can keep changing the structure, keep adding on requirements one after the other endlessly, and ignore all timelines under the resolution plan,” the administrator said.