Ongoing litigation against RCap could delay the debt resolution process

Ongoing litigation against Reliance Capital Ltd (RCL) may delay the ongoing debt resolution process initiated by the lenders.

The process of resolving the corporate insolvency of RCL under IBC commenced on 6th December 2021 following an application filed by the Reserve Bank of India before NCLT, Mumbai. The RBI has appointed Y Nageswara Rao, as a director of the company. Following this, Credit Suisse filed its claim with the RCL administrator under the CIRP process for an amount of approximately ₹1,074 crore.

The administrator rejected a majority of Credit Suisse’s claim amounting to approx. ₹660 crore and recognized a claim of only ₹414 crore on the grounds that said claim of ₹660 crore does not constitute a financial liability of RCL.

Subsequently, Credit Suisse challenged the administrator’s decision by filing a claim with NCLT, Mumbai.

Separately, Vistra ITCL India Limited, in its capacity as trustee of the NCD Debentures issued by Reliance Capital Limited, filed a commercial claim in the Bombay High Court in May 2020. Vistra challenged the validity and reliance of the pledge of the shares of Reliance General Insurance Company Limited created in favor of IDBI Trusteeship Services Limited on behalf of Credit Suisse and others.

“Given that Credit Suisse’s claim is secured by a pledge of the shares of RGICL, which is RCL’s most valuable asset, it appears that RCL’s entire resolution process could be tainted by the past litigation and regarding the Credit Suisse claim and subsequent pledge of Reliance General Insurance Company Limited (RGICL) shares, an industry source said.

Vistra also filed an interlocutory motion in the trade lawsuit seeking interim relief pending final settlement of the lawsuit. This case is still pending in the Bombay High Court.

Published on

June 28, 2022

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