RCap administrator opposes Rs 118 cr payout to Reliance General Insurance officials

“This action of yours in provisioning for the same runs contrary to your representations on the solvency ratio post infusion of the additional funds,” the administrator said. “The provisioning in its financial statements is also in express violation to our various email communications with latest being January 12, 2024, issued by RCL to RGIC, wherein we had requested you to refrain from undertaking certain specified actions, inter alia, the one-time payment proposed to be paid to any employee or key managerial person, without the prior written approval of the Administrator,” it said.

“In any case, we have not granted any approval under section 197 of the Companies Act 2013 for the payment of such remuneration to the key managerial personnel,” the note said.

When contacted, the administrator confirmed his opposition to the payout. “They (RGIC) are yet to reply,” he said.
RGIC Executive Director and Chief Executive Rakesh Jain and the company’s spokesperson did not respond to a request for comment on the issue.

RCap, with the approval of the committee of creditors (CoC) recently made an infusion of Rs 200 crore into the company for strengthening its solvency ratio, as prescribed by the Insurance Regulatory and Development Authority of India (IRDAI). The one-time special payment to the directors was approved by the RGIC board prior to the commencement of Reliance Capital’s insolvency process.

RCap had pledged its entire equity holding in RGIC in favour of IDBI Trusteeship Services against dues guaranteed by the company. The trustee, on November 19, 2019, invoked the pledge and presently holds the shares of RGIC in their custody.

IRDAI said the shares are being held by the trustee in that capacity and have not been transferred. In 2020, the Securities Appellate Tribunal held that the trustee is holding shares as a trustee/ custodian and will not exercise any control over RGIC and cannot exercise any voting rights on shares of RGIC. Accordingly, RGICL continues to be a subsidiary of RCap.

“The Administrator on behalf of the company has filed an application before the National Companies Law Tribunal, Mumbai on April 27, 2022, against the Trustee inter alia seeking direction against the Trustee to return the custody and control of the RGICL shares owned by the company,” RCap said in its Annual Report.

In 2021, the Reserve Bank of India superseded the board of RCap in the wake of defaults by the company in meeting its payment obligations. Rao, former ED of Bank of Maharashtra, was then appointed as the administrator.