NCLT allows administrator of Reliance Capital to take control of 25 crore shares of Reliance General Insurance

In a major relief to the lenders of Reliance Capital, the Mumbai bench of the NCLT has directed Credit Suisse to hand over the entire 25.15 crore shares of Reliance General Insurance Company Limited to the Administrator. Reliance Capital, which holds 99.9% in Reliance General Insurance, had pledged its entire holding in favour of Credit Suisse for the benefit of certain secured lenders.

The decision by the NCLT will give impetus to the resolution process of Reliance Capital.

The NCLT was hearing a petition moved by administrator Nageswara Rao. Pronouncing its order in favour of the administrator, the tribunal said that under Section 18(1)(f)(ii) and 25 of the Code, the administrator is duty bound to take control of the assets of the corporate debtor even if they are not in the Corporate Debtor’s possession.

It further said that the reasons for incorporation of these provisions by the Legislature is revival of the corporate debtor and value maximization of the assets of the Corporate.

“These objectives of the code, can be achieved when the Administrator who is in charge of the corporate debtor amidst the CIRP process, is given a control of all the assets of the corporate debtor so that a correct and fair financial position of the corporate debtor is carved out. This exercise of collation of the assets of the corporate debtor, will in turn enable the successful resolution applicants, to place competitive bids for acquisition of the corporate debtor and fetch a viable resolution plan in the interest of all stakeholders,” reads the NCLT order.

The tribunal, however, reiterated that the security interest of the Credit Suisse on the said shares by virtue of pledge created will remain unaltered.

It is to be noted that Credit Suisse had recently asked the Administrator in the Reliance Capital corporate insolvency resolution process (CIRP) to not proceed with any discussion on resolution plan and approval of the same pending legal challenges in the Mumbai bench of the NCLT.  

Credit Suisse had written a letter the Administrator – Nageswara Rao — that its debt of Rs 660 crore (by virtue of the pledge created by Reliance Capital), which had been claimed by it as a financial creditor, was rejected by the Administrator. This has been challenged by it in the NCLT Mumbai and the matter is still pending.

Also Read: Credit Suisse asks CoC not to approve Reliance Capital resolution plan