The Reserve Bank of India (RBI), which has approved Reliance Capital’s (RCap) insolvency process, has directed the debt-laden firm to maintain an arm’s length from IndusInd Bank, a Hinduja Group company. The regulator also approved the appointment of five Hinduja Group representatives as directors on RCap’s board.
In its no-objection letter dated November 17, RBI had approved the resolution application submitted by the Hinduja Group for the former Anil Ambani group company.
Mauritius-registered IndusInd International Holdings (IIHL), the group company through which the Hinduja Group had placed its bids for RCap, holds a 15% stake in IndusInd Bank.
According to sources close to the development, the no-objection was granted on a condition that RCap maintain a strict arm’s length distance from IndusInd Bank in all transactions.
Under the arm’s length principle, the subsidiaries of a group should function as separate, independent units and not as interconnected parts of a single enterprise.
Further, any change in shareholding of the resolution applicant, after the implementation of the resolution plan, would need RBI’s prior approval.
RBI also approved the appointment of Amar Chintopanth, Shardchandra V Zaregaonkar, Moses Newling Harding John, Bhumika Batra and Arun Tiwari as directors of RCap, they said.
IIHL had proposed to take over RCap through its wholly-owned subsidiary, IIHL BFSI (India). While RBI approval is a prerequisite, the resolution process also needs approval from the Insurance Regulatory and Development Authority of India (IRDAI), the Mumbai bench of the National Company Law Tribunal (NCLT) and the Supreme Court.
A ‘letter of urgency’ petition filed by Torrent Investments, a Torrent Group company on October 3 – which had sought the apex court’s intervention for an “urgent hearing and final disposal of all pending appeals” — is pending before the SC. The firm, a bidder in the first round of auctions, had also challenged the second round of auctions convened for the sale of RCap’s assets.
The apex court is slated to hear Torrent’s plea on Tuesday.
Earlier in June, RCap’s lenders voted in favour of the resolution plan submitted by the Hinduja Group with 99.6% of the total votes. As per the plan, the lenders were to receive 10,000 crore from IndusInd International Holdings (IIHL), the company through which the Hinduja Group placed its bids, which includes 9,661 crore of upfront cash.