Debt investors of Reliance Home Finance (RHFL), a unit of Reliance Capital, are planning legal action that may include a request for initiating recovery proceedings in the National Company Law Tribunal against the stressed financier, which defaulted on bond repayments due earlier this month.
Multiple industry sources aware of the developments told ET that IDBI Trusteeship, which is representing the interests of RHFL’s non-convertible debenture (NCD) holders, has appointed Shardul Amarchand Mangaldas as the legal adviser for the affected investors, numbering about 20,000.
“The legal firm has conducted a conference call with investors and has already prepared an application draft on behalf of the investors,” one of the participating investors told ET.
Investors are weighing the option of filing the case in either the National Company Law Tribunal (NCLT) or Debt Recovery Tribunal (DRT) to recover their money. IDBI Trusteeship has already reached out to the company’s lenders for approval, said another person who invested in RHFL bonds.
“The NCLT application is likely, but through the Companies Act, as there are certain instances of irregularities,” said an investor.
A forensic report has also allegedly pointed to some deviations. ET could not independently verify contents of the forensic report.
IDBI Trusteeship did not immediately comment.
A Reliance Capital spokesperson said that RHFL has sufficient assets to honour repayment claims from its bond buyers.
“Reliance Home Finance has good quality retail assets and close to Rs 500 crore, (with) which it wants to pay retail investors, but is unable to proceed with such payments owing to the complete restraint placed by the banks, led by the lead lender, on making any preferential payments.”
The company also said that it is working on a resolution plan it wants to share with bondholders.
“On the issue of trustees calling for full loan repayment, we have already called for a debenture holders’ meeting and will be sharing the resolution plan as one of the agenda items,” the spokesperson said in response to a query from ET.
RHFL had raised Rs 3,500 crore via public issuance of NCDs from about 20,000 investors.
If IDBI Trusteeship decides to file a case using the Insolvency and Bankruptcy Code (IBC), it may have to approach the Reserve Bank of India (RBI). The central bank recently referred Dewan Housing FinanceNSE 4.97 % (DHFL) to the dedicated insolvency courts in the first such case involving financial companies.
“The IBC route is not actively under consideration for now,” said a person involved in the matter.
The government has empowered RBI to refer to any financial services company for insolvency proceedings.
“The new amendment related to financial services companies (Sec 227 of IBC) is applicable only when the administrator (RBI ) refers any such company to NCLT,” said Anil Goel, founder of AAA Insolvency. “If a trustee wants to take a company to NCLT acting on behalf of investors, it has to first approach the RBI.”
IDBI Trusteeship Services is yet to receive any confirmation from RHFL pertaining to principal and interest due on January 3, it said in a note to investors.
On November 19, Swapan Kumar Bagchi, MD & CEO of IDBI Trusteeship Services, wrote to RHFL’s chief investment officer, recalling the entire loan amount on the immediate maturity date of January 3 after the company was downgraded to ‘D’, or default.
“In case you fail to make the payments…, the trustee shall be constrained to take such steps as may be advised for enforcing the securities and realising the dues at your own risk,” the letter said.
Nippon India Mutual Fund, SBI Mutual Fund, Indian Iron and Steel PF, an arm of sovereign backed SAIL, Oriental Bank of Commerce, Emami group entity Frank Ross, the National Bank for Agriculture and Rural Development (NABARD), and Maharashtra government-owned SICOM were among those that invested in these bonds that were once rated AA+ – just a notch lower than the highest grade.
Source: Economic Times