Nippon India Mutual Fund has dragged the Insurance Regulatory and Development Authority of India (IRDAI) to the Securities Appellate Tribunal (SAT) challenging the insurance watchdog’s order that stated that the pledging of shares of Reliance General Insurance with the fund house was in violation of the law.
While the fund house has said that the pledge was created to safeguard the interests of its investors and unit holders without an intent of owning the shares of the insurance company, it has asked the tribunal to quash the order passed by IRDAI in December
It has further asked the tribunal to direct IRDAI to give it an opportunity of personal hearing as it feels that the ex-parte order is in violation of the principles of natural justice. The tribunal will hear the matter on February 11.
The matter dates back to March 2018, when Reliance Home Finance issued non-convertible debentures to raise about ₹400 crore. Nippon India MF was one of the subscribers.
The company, however, defaulted on its payment obligations, and Reliance Capital, the promoter of Reliance Home Finance, restructured the terms by providing additional collateral by pledging its 100% shareholding in Reliance General Insurance Company.
The company, however, again defaulted on its payment obligations and Nippon India MF invoked the pledge. IDBI Trusteeship, which was acting as the debenture trustee, took possession of the shares of Reliance General Insurance from the depository account of Reliance Capital.
Later, IRDAI declared this pledge ‘null and void ab initio’, which the fund house has challenged in the SAT.
“It is submitted that these orders, passed without any application of mind, ex-parte without hearing the appellants, and in such a hurried manner will have serious and market-wide ramifications affecting millions of small-scale retail investors,” stated the petition.
On January 4, The Hindu had reported that the spat between Nippon India MF and IRDAI is expected to be headed to SAT.