The Mumbai bench of National Company Law Tribunal (NLCT) admitted the petition moved by the Reserve Bank of India (RBI) to initiate insolvency proceedings against Reliance Capital under Section 227 of the Insolvency and Bankruptcy Code (IBC).
The bankruptcy tribunal has also confirmed the appointment of Y Nageswar Rao as the administrator of the company. Earlier in the day, the bench presided over by Pradeep Narhari Deshmukh and Kapal Kumar Vohra had reserved their order in the matter after hearing the case.
The RBI had moved the Mumbai bench of NCLT last week to initiate insolvency proceedings against Reliance Capital, after it superseded the company’s board last month, citing defaults and governance issues.
Senior counsel Ravi Kadam, appearing on behalf of RBI, said only the regulator has the power to initiate insolvency proceedings against a financial services provider under Section 227 of IBC. Darius Jehangir Kakalia, appearing for Reliance Capital, informed the bench that they support the petition filed by the banking regulator. In a statement, the company said, Reliance Capital supports RBI application of referring RCap to NCLT under Section 227, for the fast-track resolution.
This is the third time in recent years that the central bank has superseded boards and initiated insolvency proceedings of what once were considered systemically important NBFCs. The central bank superseded the board of DHFL in November 2019, and then two NBFCs of SREI Group in October this year.