Reliance Capital lenders accuse IIHL of non-compliance, company denies claims

Reliance Capital lenders have accused Hinduja Group’s IndusInd International Holdings Ltd (IIHL) of failing to meet a 31 July deadline to deposit ₹2,500 crore in an escrow account, as mandated by the National Company Law Tribunal (NCLT). IIHL has strongly refuted the allegations.

Mint has seen a copy of the letter.

In a July 23 order, the NCLT granted an extension for the implementation of IIHL’s resolution plan, setting 31 July as the deadline to deposit the equity component of ₹2,500 crore into a designated escrow account of the Committee of Creditors (CoC).

The letter addressed to Moses Newling Harding John, director, IIHL, said: “CoC, however, notes that IIHL has not complied with the NCLT directions...the monies have not been deposited in the designated escrow accounts as on 31 July”.

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IIHL had sought an extension from the NCLT for implementing its resolution plan for turning around Reliance Capital. The NCLT had allowed IIHL time till 10 August to implement its resolution plan for Reliance Capital, but imposed conditions, including depositing ₹250 crore in a domestic escrow account and ₹2,500 crore in an offshore escrow account of the CoC by 31 July.

IIHL was also required to submit binding executed term sheets for a loan amount of ₹7,300 crore, which was to be disbursed to the designated account before the extended date, contingent on the foreign equity component being in place.

According to the lenders, the details of the CoC accounts and fund flow were communicated to IIHL by the administrator on 26 and 27 July 2024. However, the CoC claims IIHL did not provide the details of the designated accounts or the term sheet details as required.

“No delay, indulgence, act or inaction on part of the CoC shall be construed as a waiver of the rights and remedies, unless expressly communicated by the CoC,”, the letter emphasized.

On 31 July, IIHL submitted to the NCLT that it had deposited the ₹2,750 crore amount in a Mauritius bank account. The matter is still pending before the tribunal.

In an official statement on Friday, IIHL said, “We strongly and vehemently deny all the false allegations and baseless rumours. There is no default by IIHL under the Resolution plan at all. IIHL is in compliance with its obligations under the plan approved by the NCLT.” 

Mint has seen a copy of the statement.

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IIHL added that it had deposited the full equity component of ₹2,750 crore, pending the hearing of the filed application and subject to the modification of the order.

On 30 July, a day before the deadline to deposit the funds in CoC-designated accounts, IIHL filed an interlocutory application seeking modification of the NCLT’s order for implementing the resolution plan. IIHL argued that without this modification, the Administrator, the CoC, and IIHL would face ‘hardship’ and ‘unexplainable challenges’ in executing the Resolution Plan for Reliance Capital.

Previously, the NCLT had given IIHL 90 days to implement the resolution plan by May this year. However, implementation has been delayed due to various regulatory approvals the company is yet to receive. In February, the NCLT allowed the Hinduja Group entity to take over the bankrupt Reliance Capital.

Last July, IIHL, the promoter of IndusInd Bank, had placed a bid of ₹9,861 crore to acquire Reliance Capital, which was subsequently approved by the administrator. The bid also received overwhelming support from creditors, with a 99% majority voting in favour.

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In November 2021, the Reserve Bank of India had superseded the board of Reliance Capital in view of payment defaults and serious governance issues.

Reliance Capital had a secured debt of ₹16,000 crore, with admitted claims at over ₹23,666 crore.