Delhi High Court stays RBI order declining to allow Religare Finvest debt restructuring

The Delhi High Court recently stayed a communication issued by the Reserve Bank of India (RBI) declining to allow the restructuring of Religare Finvest Limited (RFL) [Religare Finvest Limited v. Reserve Bank of India]..RBI, in its communication dated February 11, had barred Religare Finvest from recasting its debt on the grounds that lenders had classified the loans as fraud exposure..“…it prima facie appears that the respondent has ignored the vital fact that the erstwhile promoters of REL are no longer in charge of the affairs of either the petitioner company or of REL. In case the impugned order is not stayed, grave and irreparable prejudice will be caused to the petitioner as the banks are likely to take precipitative steps against the petitioner on account of the impugned communication,” the order reads.Justice Rekha Palli noted that if the order is not stayed, grave and irreparable prejudice will be caused to the petitioner as the banks are likely to take precipitative action against them.The Court stayed the February 11 communication till the next date of hearing. Notice was issued to RBI, which is required to file its response by March 28, when the case will be taken up next..RFL is a Non-Banking Financial Company (NBFC) and an arm of Religare Enterprises Limited (REL). The company has been in financial distress since 2018 because of allegations of misappropriations of funds by its former promoters. The company had been barred from taking any business and was put under the Corrective Action Plan (CAP) of the RBI.Appearing for RFL, Senior Advocate Kapil Sibal argued that the RBI’s fresh order is “wholly perverse” since it was based on the premise that there has been no change in the ownership of REL, which is still the promoter shareholder of RFL.Sibal further submitted that the RBI’s presumption overlooked the fact that the erstwhile promoters are no longer in management, and criminal proceedings have been initiated against them at the behest of the petitioner.Along with Sibal, Advocates Pratap Venugopal, Surekha Raman, Amarjit Singh Bedi and Vijay Valsan appeared for Religare Finvest. Despite an advance notice, no one appeared for the RBI in the matter..[Read Order]