Reliance Capital Ltd.’s administrator made submissions towards IDBI Trusteeship Companies Ltd. earlier than the insolvency court docket on Monday.
On the heart of the dispute is Reliance Capital’s possession in Reliance Common Insurance coverage Co., which it had pledged with IDBI Trusteeship.
Switch of possession of safety doesn’t quantity to extinguishment of pledge, the administrator’s counsel Ravi Kadam mentioned earlier than the Nationwide Firm Legislation Tribunal.
Kadam was responding to IDBI Trusteeship’s argument that giving up the shares of Reliance Common Insurance coverage would quantity to giving up the only real safety in a secured debt.
Within the final listening to, IDBI Trusteeship had resisted the handover of Reliance Common Insurance coverage’s shares to the administrator to be included within the belongings out there for decision. Federal Financial institution Ltd. had additionally intervened to be heard because the beneficiary of the pledge settlement.
Reliance House Finance Ltd. had issued non-convertible debentures, which it did not redeem. As a part of the restructuring phrases of those NCDs in 2019, RHFL’s promoter—Reliance Capital—had pledged its whole shareholding in Reliance Common Insurance coverage in favour of IDBI Trusteeship —the debenture trustee. When Reliance Capital did not redeem the NCDs, IDBI Trusteeship invoked the pledge.
Arguing for the administrator, Senior Counsel Ravi Kadam opposed the stand of IDBI Trusteeship and Federal Financial institution.
The Insolvency and Chapter Code obligates the administrator to take management and custody of the belongings of the corporate and the shares in dispute are very a lot the property of the corporate, he mentioned.
Second, Kadam mentioned, IDBI Trusteeship isn’t the proprietor of the pledged shares. It merely has the appropriate to possession of shares, and till they’re offered, there isn’t any accrual of vested proper and the possession stays with the pledgor (Reliance Capital), he mentioned.
Third, the argument that the corporate has waived its proper of redemption because it failed to order the appropriate is opposite to the settled regulation, Kadam mentioned. The regulation doesn’t require the pledgor to order the appropriate; due to this fact, there isn’t any query of waiver.
Fourth, Kadam questioned Federal Financial institution’s locus to intervene within the matter as it’s not a beneficiary within the involved pledge settlement. Reliance Interactive Advisors Ltd. is the precise beneficiary whose proper was hypothecated to Credit score Suisse, who in flip had transferred a few of the mortgage curiosity to a number of events, together with Federal Financial institution, Kadam mentioned.
‘If Federal Financial institution is allowed to participate in these proceedings, then each safety curiosity beneficiary must be impleaded, he mentioned.
The appliance needs to be dismissed within the absence of any proper to sue, he mentioned.
Lastly, the non-obstante clause in IBC overrides all different statutes, together with the contract regulation from which the pledgee derives its rights, Kadam mentioned.
The thing of the Code is the preservation of worth of the corporate, he emphasised. “The argument of the trustees that the moratorium doesn’t enable the administrator to take custody of all of the belongings might be rebutted with the express provisions of the Code that enable an administrator/RP/IRP to take custody of the belongings.”
The NCLT has reserved its order.