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SAT allows lenders to sell Reliance General Insurance

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MUMBAI: In a victory for Reliance Home Finance’s lenders Nippon India Mutual Fund and Credit Suisse, the Securities Appellate Tribunal (SAT) has upheld their right to sell shares of Reliance General Insurance following invocation of a pledge. The Insurance Regulatory and Development Authority (Irdai) had earlier declared the pledge enforcement as invalid since the regulator’s nod was not sought and the transfer violated foreign investment norms

The tribunal, however, said after identifying a buyer for Reliance General Insurance, the proposed owner will have to be certified fit and proper by Irdai, which will carry out a due diligence and ascertain the prospective buyer’s financial soundness.

Nippon India MF and Credit Suisse are likely to invite bids for Reliance General Insurance, whose shares are held by IDBI Trusteeship. Current foreign direct investment norms prohibit non-residents from owning more than 49% in an insurer.

Nippon India and Credit Suisse argued before SAT that they enforced the pledge in accordance with the share pledge agreement to safeguard their interest and not to take control of the company. Nippon India also submitted that, in any case, it cannot control or manage any other business apart from mutual fund according to Sebi norms.

Nippon India was represented by counsel Pradeep Sancheti and Sumit Agrawal of RegStreet Law Advisors, while Credit Suisse was represented by counsel Janak Dwarkadas and law firm Juris Corp.

The case dates back to March 2018, when Reliance Home Finance issued bonds worth Rs 400 crore and Rs 1,200 crore to Nippon India and Credit Suisse respectively. After Reliance Home Finance defaulted on its debt obligations, the two invoked the pledge (of Reliance General shares) made by Reliance Home Finance’s promoter, Reliance Capital.

In November, the Delhi high court had prevented Reliance Capital from selling any of its assets. Another debenture trustee Vistra ITCL sought to intervene in SAT, claiming it held a prior charge on Reliance General shares. It was, however, told to approach an appropriate forum for its case.