New Delhi, Dec 29 (SocialNews.XYZ) In a boost for the lenders of Reliance Capital, the Insurance Regulatory and Development Authority (IRDA) has cancelled the pledge enforcement of Reliance General Insurance shares by Credit Suisse and Nippon India Mutual Fund.
According to a statement by Reliance Capital, IRDA has in a direction dated December 27, 2019 has held that the pledge/transfer of shares of Reliance General Insurance Company Ltd (RGICL), a 100 per cent subsidiary of Reliance Capital (RCAP), was in violation of the applicable provisions of law
Pursuant to the regulator IRDAI's direction, the 100 per cent shareholding of RGICL stands restored to RCAP. IRDAI directed trustee not to give effect to any encumbrance / transfer or any change in the Shareholding of the RGICL.
In November 2019, the Trustee had transferred RCAP's 100 per cent shareholding in RGIC by the invoking pledge, which was being contested by the company, the statement said.
"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 will continue its efforts to monetize its shareholding in RGICL as part of its overall plans for debt reduction", Reliance Capital said.
IRDA said in the direction that the enforcement of pledge is null and void and not in accordance with law. The insurance regulator said its prior approval was not taken for the transfer.
In addition, IRDA said the unauthorised transfer also violates FDI regulations. IRDA has directed Reliance General to not give any effect to unauthorised transfer or pledges.
The IRDA action will benefit all lenders of Reliance Capital as the sale proceeds of RGIC shares will go to all lenders and not just Credit Suisse and Nippon MF.
The sale of RGIC shares is expected to fetch Rs 6,000 crore for the RCAP lenders, which is almost 40 per cent of the RCAP total secured debt. It may be noted that 100 per cent shareholding of Reliance General is held by Reliance Capital.
Source: IANS
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