Reliance Capital’s administrator has written to the board of Reliance General Insurance, objecting to provisions made by the insurer over a one-time special payment of ₹118 crore to key officials of the company.
“The provisioning is in express violation to our various email communications, with latest being January 12, 2024, issued by RCL to RGIC, where we had requested you to refrain from undertaking certain specified actions, inter alia, the one-time payment proposed to be paid to any employee or key managerial person, without the prior written approval of the administrator,” said the letter accessed by businessline.
In its financials for the quarter ended December 2023, Reliance General made provisions of ₹118.41 crore for this special one-time payment to the management. Reliance General is a subsidiary of Reliance Capital.
In a strongly worded letter, RCap administrator Nageswara Rao Y asked Reliance General’s MD and CEO Rakesh Jain and other directors to promptly reverse this provision as it is in breach of the provision that requires the insurer to seek RCap and the CoC (committee of creditor)’s approvals for making any such payments.
RCap is currently undergoing insolvency proceedings. While the CoC has approved Hinduja Group’s proposal to acquire the company, the final approval from NCLT is still awaited.
“This action of yours in provisioning for the same runs contrary to your representations on the solvency ratio post infusion of the additional funds,” the letter said.
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RCap, with the approval of CoC, had recently made an infusion of ₹200 crore in Reliance General after the insurer repeatedly sought funds from the parent to bolster its solvency and maintain operational efficiency.
The letter also highlighted that the decision for this one-time special payment was approved by Reliance General before the initiation of RCap’s insolvency process, and questioned the rationale and methodology for computing this payment.
The administrator further sought an unconditional undertaking from Reliance General’s board that no further steps would be taken in respect of one time payment and status quo will be maintained, and also the insurer to furnish a certificate of compliance in-line with IRDAI’s corporate governance guidelines.