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Paving the way for Reliance General Insurance Company (RGIC) to find a new promoter, the Securities and Appellate Tribunal (SAT) on Thursday set aside an order by insurance regulator IRDA that had held the share pledge by Reliance Capital (RCAP) to Nippon India Mutual Fund (NIMF) and Credit Suisse (CS) as ‘null and void.’
SAT allowed those holding the pledged shares to find new buyers.
Around ₹6,000 crore worth of debt is likely to be recovered by the lenders of Reliance Capital (RCAP), which is almost 40 per cent of the secured debt held by the company.
Pradeep Sancheti, Senior Advocate, with Sumit Agrawal, Mahaveer Rajguru and Akshit Jain from Regstreet Law Advisors represented NIMF
RCAP had pledged its shares but IRDA, in December 2019, held that any transfer of stake more than 5 per cent required the regulator’s permission and disallowed any invocation of pledge and sale of shares. NIMF and Credit Suisse approached SAT and told the tribunal that they were not interested in being promoters of RGIC but were only lending money to the borrower.
SAT held that “The observation (by IRDA) that the transfer/pledge of the shares in question are null and void ab initio is incorrect and to that extent, the order is set aside. We also record that IDBI Trusteeship is holding the pledged shares as a custodian and will make every endaevour to find a suitable buyer. As and when a suitable buyer is found suitable application would be made before IRDAI for appropriate approval to enable the IRDAI to carry out due diligence and to ascertain fulfillment of Fit and Proper criteria, financial soundness, etc.”
SAT said that so long as IDBI Trusteeship is holding pledged shares it will not exercise any control over RGIC or make changes or have a say in the management or decision making process of RGIC or exercise any voting rights in respect of the said RGIC shares.
IRDA had directed IDBI Trusteeship Services not to give effect to any encumbrance or transfer or any change in the shareholding of RGIC. In the view of IRDA its permission or prior approval was not taken for the transfer. The IRDA had added that the unauthorised transfer also violates FDI regulations.
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