The Reserve Bank of India on Monday superseded the board of directors of Reliance Capital, stating that the Anil Ambani-owned non-banking finance company had been unable to meet various payment obligations to its creditors.
“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of the powers conferred under Section 45-IE (1) of the Reserve Bank of India Act, 1934, the Reserve Bank has today superseded the Board of Directors of M/s Reliance Capital Ltd (RCL) in view of the defaults by RCL in meeting the various payment obligations to its creditors and serious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 said in a statement.
Nageswar Rao Y., former executive director of Bank of Maharashtra, has been appointed as the administrator of the company.
Reliance Capital said it will co-operate fully with the Administrator appointed by the RBI for the expeditious resolution of its debt in the best interests of all stakeholders.
RBI will shortly initiate the process of resolution of the company under the Insolvency and Bankruptcy Rules. It will also apply to the Mumbai bench of the National Company Law Tribunal for appointing the administrator as the insolvency resolution professional, it added.
Reliance Capital said it looks forward to expeditious resolution of its debt and continuation as a well capitalised going concern through the IBC process,
"The complexity of litigation initiated by certain secured and unsecured lenders, resulting in the pendency of over 10 cases in various fora, including the Supreme Court, Mumbai High Court, Delhi High Court and DRT (Debt Recovery Tribunal), has effectively stalled the resolution of the company’s debt, despite its best efforts for the past over 2 years," it said.
It added that it has no outstanding loans from banks and about 95 per cent of its debt is in the form of debentures.
Reliance Capital will be the third NBFC, after Dewan Housing Finance (DHFL) and two Srei Group firms, against which insolvency proceedings were initiated.
On Monday, Reliance Capital shares declined 5 per cent to hit the lower circuit limit of Rs 19.05. Reliance Power shares were also down 5 per cent to Rs 12.93 and Reliance Infrastructure too fell 5 per cent to Rs 87.85.