The Insurance Regulatory and Development Authority of India (Irdai) has cancelled the invocation of pledge and transfer of shares of Reliance General Insurance by the trustee as “null and void”, Reliance Capital (RCap) informed the stock exchanges.
Earlier, on November 19, RCap announced that the company’s shareholding in its wholly owned subsidiary, Reliance General Insurance Company has been transferred to IDBI Trustee Services, upon invocation of pledge by the trustee.
RCap had alleged that the trustee acted on behalf of two parties — Credit Suisse and Nippon MF — claiming against the company under certain guarantees, while another lender filed a suit in the Bombay High Court, claiming that the shareholding in Reliance General of RCap comprises security for all secured lenders of the company.
Irdai has now restored 100 per cent shareholding of Reliance Capital in Reliance General Insurance and has further directed the trustee not to give effect to any encumbrance or transfer or any change in the shareholding of the Reliance General Insurance.
IRDA had also said that its prior approval was not taken for the transfer and that the enforcement of pledge so it was in violation of applicable provisions of law.
“Irdai ruling has protected the interest of all lenders and debenture holders of RCAP. This will now help RCAP to monetise its stake in RGIC and to reduce its debt”, the company said in a release.
Reliance Capital believes that the order by Irdai will protect the interest of all lenders and debenture holders of the company. It will also help the company to monetise its stake in Reliance General Insurance and to reduce its debt.
Reliance Capital said the action taken by Irdai will benefit all lenders of Reliance Capital as sale proceeds of Reliance General Insurance shares will go to all lenders and not just Credit Suisse and Nippon MF.
The sale of shares of Reliance General is expected to fetch Reliance Capital lenders close to Rs 6000 crore and it will reduce the debt of Reliance Capital by almost 40 per cent.
Source: Business Standard