July 12, 2024

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Reliance Home Fin NCD holders move SC

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Reliance Home Finance Ltd’s debenture holders have filed a contempt case against Authum Investment and Infrastructure Ltd, (AIIL) Reliance Home, and IDBI Trusteeship, alleging “wilful disobedience” of the Supreme Court’s 3 March order. Mint has reviewed a copy of the petition.

The SC had authorized AIIL to implement its proposed resolution plan to turn around the company as part of Reliance Home’s corporate insolvency resolution process, in accordance with the Reserve Bank of India’s prudential norms.

The crux of the dispute lies with the disgruntled debenture holders who had sought full redemption of their non-convertible debentures issued by Reliance Home.

In accordance with the resolution plan, approved by Justice B.R. Gavai of the Supreme Court, petitioners with investments of up to 5 lakh, were eligible to receive 100% of the principal investments back.

Reliance Home, however, in complete contravention of the undertaking before the SC, as well as the terms of the resolution plan, repaid only 27% and, in some cases 20%, of the principal amount to the debenture holders, the petition alleged.

Over 103 debenture holders of the firm have filed the contempt petition, represented by Edictum Law & Co.

“Authum and RHFL have suppressed several material facts from the Supreme Court and has misused the indulgence shown by the top court. The apex court has been apprised of the said facts and how contemnors have discriminated with the small bondholders,” said Srijan Sinha, partner, Edictum Law.

According to the plea, the petitioners submitted that the court was not apprised of all the debenture holders, falling under the category of individuals who had invested 5 lakh or less.

The debenture holders also claimed that the top court was not informed that 15 April 2022 was the cut-off date for debenture holders to be eligible for 100% repayment of the principal amounts, according to the company.

The contemnors (Authum) specifically said the category of “individuals and HUFs who had invested up to 5 lakh” were the intended beneficiaries of the resolution plan.

It is based on this undertaking that the SC exercised its extraordinary powers under Article 142 of the Constitution, and approved Reliance Home’s resolution plan.

Authum, in its response said that “as resolution applicant, we have paid the entire resolution amount of 3,351 crores as per the resolution plan and do not possess any authority over the distribution of the amount. The process of approving the distribution of the resolution amount lies solely in the hands of the lenders and advisors”.

While IDBI Trusteeship stated that “Since 2019 we have taken all requisite steps to protect the interest of the debenture holders of RHFL. It is incorrect to state that we have acted in any manner detrimental to the interest of any debenture holder. We reiterate that the present order dated 03.03.2023 passed by the Hon’ble Supreme Court required Authum to make payment to the debenture holders, there is no order or actionable on part of IDBI Trusteeship Services Limited post passing of the said order.”

An email query to Reliance Home Finance did not elicit a response.

“That this act of wilful disobedience, erroneous undertaking and suppression of material facts, only to mislead this Court into invoking its extraordinary powers under Article 142 of the Constitution, amounts to contempt of this Hon’ble Court. Consequently, the Petitioners are constrained to approach this Hon’ble Court by way of the present Contempt Petition.”, the debenture holders said.

During 2017-18 Reliance had issued NCDs worth 6610 crores which were sold to Qualified Institutional Buyers (QIB) or Individuals.

“Authum and other parties acted in concert and suppressed material facts to induce the court to use Article 142 for the benefit of retail debenture holders who were short-changed eventually,” said Lokender Gupta, a corporate law adviser.

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