The Reserve Bank of India stated that it decided to supersede Reliance's Board owing to defaults in meetings payment obligations to its creditors and serious governance concerns.
Reserve Bank of India informed on Monday that it has superseded the board of Reliance Capital on account of defaults in meeting various payment obligations to its creditors and serious governance concerns. The apex banking regulator's notice added that former Executive Director of the Bank of Maharashtra, Nageswar Rao would be appointed as the administrator of the company.
"In exercise of the powers conferred under Section 45-IE (1) of the Reserve Bank of India Act, 1934, the Reserve Bank has today superseded the Board of Directors of M/s Reliance Capital Ltd (RCL) in view of the defaults by RCL in meeting the various payment obligations to its creditors and serious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," RBI's circular stated.
The apex banker informed it would shortly be resuming the process of resolution of the company under the Insolvency and Bankruptcy (Insolvency and Liquidation Proceedings of Financial Service Providers and Application to Adjudicating Authority) Rule, 2019.
Additionally, the RBI would be applying to the Mumbai bench of the National Company Law Tribunal for appointing the Administrator as the Insolvency Resolution Professional.
In a statement issued on Monday evening, the Anil Ambani-led firm said it welcomed the RBI's move to resolve the company's debt in accordance with the Insolvency and Bankruptcy Code. "The Company looks forward to expeditious resolution of its debt and continuation as a well capitalised going concern through the IBC process, in the overall interests of all its stakeholders, including lenders, customers, employees and shareholders," the company's statement read.
It informed that the company had no outstanding loans from banks and approx 95 per cent of its debt is in the form of debentures.
The company's total indebtedness stood at Rs 21,781.01 crore. The number includes short-term and long-term debt including accused interest up to October 31.
The Anil Ambani-spearheaded company's faced severe hardships following the collapse of the IL&FS in 2018. It failed to pay back debt and collect money from borrowers. It was obligated to sell its stake in Reliance Nippon Life Asset Management in 2019. The Japanese insurer hiked it shareholding in the venture from 42.88 per cent to 75 per cent. This was done via open sale and acquiring the company's stake. The company had set its acquisition price at Rs 230/share.
The lenders of the company faced troubles in selling the company's assets for recovery owing to multiple pending litigations against the company and its promoters, according to a report in the online publication, Business Standard.