High Court stays BoB, PNB move to classify RCFL, RHFL as fraud accounts

The Delhi High Court has stayed the Bank of Baroda and Punjab National Bank’s move to classify Reliance Commercial Finance Ltd (RCFL), and Reliance Home Finance Ltd (RHFL) as 'fraud' accounts.
 

In separate communications to the stock exchanges on Monday, Reliance Home Finance and Reliance Commercial Finance Ltd said they had challenged Bank of Baroda's action of classifying them as fraud accounts. The Delhi High Court on August 14 stayed the bank's move to place both accounts in the ‘fraud’ category till the next hearing.
 

The Delhi High Court in a separate petition also directed Punjab National Bank to maintain the status quo in relation to classifying RCFL's account as a fraud. A similar announcement was made by another RCL group firm, Reliance Home Finance Ltd, saying that the Delhi HC has directed both banks not to classify the accounts as fraud.
 

Earlier on August 5, Reliance Home Finance said it has net cash of more than Rs 800 crore in the form of investment in liquid mutual funds. However, the delay in debt servicing is due to prohibition on the company to dispose off, alienate, encumber either directly or indirectly, or otherwise part with the possession of any assets, pursuant to order dated November 20, 2019 passed by the Delhi High Court.
 

Further, Reliance Home Finance said its lenders have entered into an inter-creditor agreement for arriving at the debt resolution plan in accordance with the circular dated June 7, 2019 issued by the Reserve Bank of India on resolution of stressed assets. This has resulted in delay in debt servicing by the company, it said.
 

In another communication on August 12, Reliance Capital lashed out against Care Ratings saying that it had in a completely biased, unwarranted and unjustified rating action on September 20, 2019, downgraded the company’s entire outstanding debt to default category  even though there were no overdues on principal or interest payment to any lender.
 

‘’As communicated on October 11, 2019, that this rating downgrade has initiated acceleration, of various facilities and consequential demands for immediate payment of amounts that were otherwise due and payable in a phased manner over the next 8 years till March 2028, as per the original terms of debt. It is expected that the debt servicing of the company in relation to the accelerated amounts and otherwise will be delayed,” Reliance Capital said.
 

Further, RCL said it is prohibited from disposing of its assets according to an earlier Delhi High Court order. Besides, the company is also prohibited from transferring, alienating, encumbering or otherwise parting with the possession of assets owned by the company pursuant to the proceedings initiated by Vistra ITCL (India) Limited, the debts recovery tribunal vide its order dated December 3, 2019. "In view of the above, the company is unable to proceed with its asset monetization resulting in non payment of its debt servicing of the interest obligations due on August 12, 2020 with respect to the non-convertible debentures,” it said.