Anil Ambani firm Reliance Big to face insolvency proceedings
Reliance Big Pvt Ltd, an Anil Ambani group company, will face corporate insolvency resolution process (CIRP) after NCLT admitted the insolvency plea against the company moved by financial creditor Axis Trustee Services Limited. This move comes as the Financial Creditor seeks to address an unresolved financial debt totalling Rs 425 crore.
Axis Trustee Services had subscribed to Reliance Big’s 5,750 debentures, each valued at Rs. 10 lakhs, in a single private placement. Reliance Big, in compliance with the terms outlined in various Transaction Documents dating back to December 13, 2017, was obligated to uphold a security cover. In the unfortunate event of this security cover diminishing, Reliance Big was contractually bound to replenish it by providing additional security.
However, trouble started brewing in February 2019 when the security cover experienced a significant dip, triggering a “Mandatory Prepayment Event” as stipulated in Clause 9 of the Debenture Trust Deed from December 13, 2017. To rectify the situation, a “Mandatory Prepayment Notice” dated February 7, 2017 was promptly issued by the Financial Creditor. This notice urged Reliance Big to rectify the shortfall by depositing the outstanding amounts into a designated account.
The corporate debtor acknowledged their financial defaults on multiple occasions, and also took responsibility for its liabilities.
A commitment to reducing the outstanding amount by at least Rs. 200 crore was stipulated, with a deadline set for June 30th, 2019. Subsequent correspondence in July 2019 reiterated the Corporate Debtor’s commitment to repaying the specified amount upon the disposal of their stake in Code Masters.
However, Reliance Big failed to honour their financial obligations. A series of notices ensued, with a particularly significant “Notice for Invocation of Corporate Guarantee” dated July 27, 2020 being directed not only to the Corporate Debtor but also to the Corporate Guarantor. These notices were a final call for the payment of the total outstanding amount. Yet, in a twist, both the Corporate Debtor and the Corporate Guarantors disregarded the notifications, failing to meet their commitments.
As a consequence of these mounting defaults, the Financial Creditor found itself with no recourse but to file an application to instigate the Corporate Insolvency Resolution Process.
NCLT has appointed Rohit Mehra as the Interim Resolution Professional in the case.
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