In a development which can be seen as a setback for the Hinduja Group, the National Company Law Tribunal on Thursday directed IndusInd International Holdings (IIHL), a Hinduja Group entity, to deposit Rs 2,750 crore in a special escrow account within 48 hours as part of Reliance Capital’s resolution plan.

The NCLT Mumbai bench passed the order while hearing a petition filed by the Hindujas seeking modification of the tribunal’s July 23 order and an extension to complete the obligations for implementing the resolution plan.

As is known, IIHL was the highest bidder for RCap, with an offer of Rs 9,561 crore. On July 23, the NCLT had directed IIHL to pay Rs 2,750 crore of the offer by July 31. However, IIHL did not pay the lenders on the ground that lenders should first meet some pre-conditions relating to the escrow account.

For instance, IIHL had maintained that what is being referred to as escrow account, is actually not such an account. It’s an account which has been opened by the committee of creditors. IIHL had maintained that by its very basic definition, an escrow account is an account where funds are held in trust whilst two or more parties complete a transaction. This means a trusted third party will secure the funds in a trust account. According to it, in this case, the so called escrow account opened by CoC is nothing but a unilaterally owned bank account which cannot be called an escrow account as it does not satisfy any of the conditions required for opening such an account which is a bilateral/joint effort.

However, on Thursday, the NCLT bench, comprising Justice Virendrasingh G Bisht and Justice Prabhat Kumar, clarified that the interest on the money in the escrow account will belong to the CoC.

IIHL has also been asked to disclose the term sheet for Rs 7,300 crore fundraising through debt to the monitoring committee.

While partly allowing an appeal by IIHL, the NCLT directed it to implement the resolution plan by August 10 and to deposit Rs 2,500 crore in the offshore escrow account of Vistra – controlled and operated by CoC — with Yes Bank in the Gift City and Rs 250 crore in the Vistra’s Yes Bank escrow account in Mumbai.

Hindujas’ counsel Abhishek Manu Singhvi urged that if the NCLT does not consider the modification of its order, the administrator, the CoC and IIHL will face inexplicable challenges in implementing the resolution plan for Reliance Capital.

Singhvi submitted a compliance affidavit stating that it has deposited the entire equity component of Rs 2,750 crore. However, this amount has been deposited in accounts of Ashok Hinduja, Harsha Hinduja, and Shom Hinduja.

The administrator argued that IIHL was seeking minor changes to the order and trying to shift the responsibility for implementing the plan onto them, which is not in accordance with the resolution plan.

In an order on May 26, the tribunal had approved IIHL’s application for an extension of the May 27 deadline for paying Rs 8,000 crore to acquire Reliance Capital.

The Group had cited pending regulatory approvals and compliance requirements as reasons for the extension. On June 29, 2023, the lenders to the bankrupt Reliance Capital accepted the revised Rs 9,661-crore bid put forth by IIHL.

IIHL made the highest cash offer of Rs 9,661-crore in the auctions and secured as much as 99% of the lender’s votes.

The bid also included the Rs 500-crore cash balance with Reliance Capital going to the lenders, taking the overall recovery to Rs 10,200 crore or about 65% as against Rs 16,000 crore principal secured debt Reliance Capital owed to lenders.

Meanwhile, a lawsuit challenging the second e-auction filed by Torrent Group is pending before the Supreme Court and needs to be concluded.