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IDBI Trusteeship Services filed the application under the Companies Act, since this doesn’t require it to first seek the Reserve Bank of India’s permission, a requirement to move under the Insolvency and Bankruptcy Code against a financial services company. Taking the IBC route through the RBI would be time-consuming and it “is not actively under consideration for now”, a person in the know said.
IDBI Trusteeship wants the tribunal to seize the assets of Reliance Home Finance and Reliance Capital to recover the dues. ET has seen a copy of the application, filed on Thursday.
The application also requested the NCLT that the company not be allowed to sign any debt resolution plan with other lenders or other resolutions that may go against the interests of the investors in its non-convertible debentures.
In response to ET’s questions, Reliance Capital said it had been legally advised that the application was “entirely misconceived and in violation of the provisions of the Debenture Trust Deeds” and would be challenged by the company and Reliance Home Finance “on those among other grounds”. The company shall take all appropriate steps in the matter to protect the interests of its lenders and other stakeholders, it said in a statement, which was also sent to stock exchanges.
IDBI Trusteeship’s complaint comes ahead of a January 14 meeting with bondholders called by the company, which though doesn’t have the approval of IDBI Trusteeship.
On November 19, IDBI Trusteeship managing director Swapan Kumar Bagchi had recalled the entire loan amount on the immediate maturity date of January 3, after the company was downgraded to ‘D’, or the default category, by rating firms.
In a note to the bondholders, IDBI Trusteeship said following the default on payment of interest and redemptions of principal, it filed two petitions against the mortgage lender before the Mumbai bench of the NCLT, for recovery of Rs 2,850 crore and Rs 476 crore in principal, plus interest.
The bondholders had subscribed to the non-convertible debentures between November 2016 and January 2017 in various trenches. As much as 85% of these debentures are said to be secured by the issuer’s assets, according to a person in the know.
On January 3, Anil Ambani-promoted Reliance Capital informed the stock exchanges that as directed by the lead bank to an inter-creditor agreement that was being worked on, the amounts due and payable by Reliance Home Finance in respect of unsecured NCDs were delayed.
After the company defaulted on bond repayments, ET reported on Monday that the bondholders were considering legal action that might include seeking recovery proceedings through the NCLT.
Nippon India Mutual Fund, SBI Mutual Fund, Indian Iron and Steel PF, an arm of sovereign backed SAIL, Oriental Bank of Commerce, Emami group entity Frank Ross, the National Bank for Agriculture and Rural Development, and Maharashtra government-owned SICOM were among those that had invested in these bonds that were once rated AA+ — just a notch lower than the highest grade.
The bondholders are also seeking the NCLT’s intervention to retrain the company from making any further payments or disbursements to any secured or unsecured creditors including any third parties before clearing their dues.
Nitesh Jain of Shardul Amarchand Mangaldas filed the application on behalf of IDBI Trusteeship.
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4 Comments on this Story
Gopal Iyer56 days ago
May be authorities can consider Mukesh Ambani to take over ailing and sick Anil Ambani companies where public monies are invoved.At least current interest and repayment obligations are taken care of instead of long drawn IBC/NCLT route
Tutu372 days ago
Nonsense ! How and why this new thug company of crooked Anil Ambani got approval to go ahead to raise money . Those bas***ds should first be nabbed and put behind bar alongwith AA. It is ultimately public money.
Bipin Kochar372 days ago
Welcome step. This will ensure speedy recovery of dues