`This action of yours in provisioning for the KMPs runs contrary to your representation on the solvency ratio post infusion of the additional funds, Also, we, have not granted any approval under section 197 of the Companies Act 013 for the payment of such remuneration to KMP,’’ said the administrator’s letter to Reliance General Insurance
Mumbai:
The administrator of insolvent Reliance Capital Ltd(RCap) Nageswara Rao Y has objected to the act of one of its subsidiary Reliance General Insurance (RGI) making a provision of Rs 118.41 crore as one-time special payment proposed to be paid out to the company’s key management team(KMP).
The administrator apparently has no issue with the amount but the way RGI has taken such a decision and has asked the insurer to follow due procejures for making such provision.
The administrator has asked Reliance General’s MD and CEO Rakesh Jain and other directors to promptly reverse this provision as it is in breach of the provision that requires the insurer to seek RCap and the CoC (committee of creditor)’s approvals for making any such payments.
Financial statement of RGIC for the quarter ended Dec 31 state a provision has been made for an estimated Rs 118.41 crore for RGIC to meet its obligation in relation to one-time special payment proposed to be paid out to the management team of RGIC, said the administrator’s recent letter to RGIC.
“This action of yours in provisioning for the KMPs runs contrary to your representation on the solvency ratio post infusion of the additional funds, Also, we, have not granted any approval under section 197 of the Companies Act 013 for the payment of such remuneration to KMP,’’ added the administrator’s letter.
The administrator had earlier asked RGIC not to allow one-time payment proposed to be paid to any employee or KMPs without prior written approval of the administrator.
The administrator further sought an unconditional undertaking from Reliance General’s board that no further steps would be taken in respect of one time payment and status quo will be maintained, and also the insurer to furnish a certificate of compliance in-line with IRDAI’s corporate governance guidelines.
Asia Insurance Post has not been able to get any comments from RGIC about the RCL’s stand on special pay to its KMP.
RCap, with the approval of CoC, had recently made an infusion of ₹200 crore in Reliance General after the insurer repeatedly sought funds from the parent to bolster its solvency and maintain operational efficiency.
The letter also highlighted that the decision for this one-time special payment was approved by Reliance General before the initiation of RCap’s insolvency process, and questioned the rationale and methodology for computing this payment.
Earlier, Hinduja Group firm IndusInd International Holdings Ltd (IIHL) had emerged as the highest bidder for RCL in an insolvency proceeding to recover unpaid loans. IIHL had made an offer of ₹9,650 crore to take over RCL in the second round of auction concluded in April.
The Reserve Bank of India (RBI) has already approved the appointment of five Hinduja Group representatives as directors on the board of the RCL. While granting the approval on the Rs 10,000 crore resolution plan and appointment of the directors, the RBI has also directed that a copy of the National Company Law Tribunal (NCLT) order approving the IIHL’s resolution plan will have to be submitted to the bank.
The NCLT approval on IIHL’s resolution plan is still pending.
The Supreme Court’s decision on the Torrent Investment’s plea against the second round of auction held by the lenders of RCL is also pending.