NCLAT stays insolvency proceedings against Reliance Infrastructure

In a major relief for Reliance Infrastructure, the National Company Law Appellate Tribunal (NCLAT) on Wednesday stayed insolvency proceedings initiated against the company.

In a regulatory filing, Reliance Infrastructure said that the appellate tribunal has stayed the order passed by the Mumbai bench of the National Company Law Tribunal (NCLT), which had admitted an insolvency petition filed by IDBI Trusteeship Services Ltd.

“In the appeal filed, the NCLAT today suspended the order dated May 30, 2025, passed by the NCLT Mumbai in case no. C.P. (IB)/624(MB)2022, admitting the company into Corporate Insolvency Resolution Process,” the filing stated.

The insolvency petition was filed by IDBI Trusteeship in April 2022 on behalf of Dhursar Solar Power Pvt Ltd (DSPPL), claiming a default of ₹88.68 crore as of August 28, 2018, along with interest. The alleged default pertained to 10 invoices raised between 2017 and 2018 for the supply of solar power to Reliance Infrastructure.

However, Reliance Infrastructure had contested the insolvency proceedings, asserting that it had already cleared the dues. In a stock exchange filing on June 2, the company said it had paid ₹92.68 crore in full to Dhursar Solar Power Pvt Ltd towards tariff claims under the Energy Purchase Agreement.

With the dues settled, Reliance Infrastructure argued that the basis for initiating insolvency had become infructuous.

Key Details of NCLT order:

1. Petition Filed By: IDBI Trusteeship Services Ltd. (Operational Creditor), acting as security trustee for Dhursar Solar Power Pvt. Ltd. (DSPPL).
2. Default Amount: Principal debt of ₹88.68 crore + monthly interest of 1.25% on delayed payments (interest claimed: ₹81.97 crore).
3. Moratorium: Immediate ban on lawsuits, asset transfers, or recovery actions against R-Infra under Section 14 of the IBC.
4. Management Control: Shifts to IRP; R-Infra’s directors must cooperate fully.

Background of the Dispute:

• Origin: A 2012 Energy Purchase Agreement (EPA) required R-Infra to buy solar power from DSPPL at ₹17.91/unit. DSPPL issued 10 invoices (2017–2018) totaling ₹88.68 crore, which R-Infra failed to pay.
• Assignment of Debt: IDBI Trusteeship took over DSPPL’s claims via a 2012 Direct Agreement, making it the operational creditor.
• R-Infra’s Defenses:
  • Limitation: Argued invoices were time-barred. NCLT rejected this, citing COVID-era limitation extensions and R-Infra’s 2019 acknowledgment of debt.
  • Pre-existing Disputes: Cited tariff disputes with electricity regulators (MERC/APTEL) and arbitration. Tribunal found no link to the unpaid invoices.
  • Locus of IDBI: Challenged IDBI’s right as creditor. NCLT upheld IDBI’s status as assignee of debt.
  • Payment of Principal: R-Infra paid ₹88.68 crore during proceedings (Oct 2024). Tribunal ruled interest dues (₹81.97 crore) still qualify as “operational debt” under IBC.

Tribunal’s Critical Observations:

• Interest Valid as Debt: Contractual clauses (EPA & Indemnity Agreement) obligated R-Infra to pay interest. Non-payment justifies insolvency.
• No Pre-Existing Dispute: R-Infra’s 2019 letter admitted liability, negating claims of prior disagreements.
• Legal Formalities: Absence of a financial certificate under IBC Section 9(3)(c) was “not fatal” due to other evidence.

Implications for R-Infra:

• Operations to be managed by IRP; board superseded.
• Moratorium halts all pending/planned lawsuits, including recovery efforts.
• IDBI Trusteeship directed to deposit ₹5 lakh for initial CIRP costs.

Broader Context:

This is the latest financial setback for the debt-laden Reliance Group. Earlier, Reliance Communications and Reliance Capital faced similar insolvency proceedings. The order underscores tribunals’ strict interpretation of “operational debt,” even where principal amounts are settled after litigation begins.

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