Industry

After Nippon moves SAT, IRDAI softens tone on Reliance insurance

In a reversal of its stand in the ongoing matter related to the pledging of shares of Reliance General Insurance Company by Reliance Capital, the Insurance Regulatory and Development Authority of India (IRDAI) has asked IDBI Trusteeship Services to comply with the relevant insurance regulations if there is any change in ownership of the shares of the general insurance company.

This assumes significance as the insurance regulator had earlier directed the trustee firm to transfer the shares back to Reliance Capital after declaring the pledge ‘null and void ab initio’, a decision that was challenged by Nippon India Mutual Fund at the Securities Appellate Tribunal (SAT).

“It is hereby advised that as and when any transfer of the said shares is contemplated, it should be ensured that the provisions of Section 6A4(b) of the Insurance Act, 1938, read with Regulation 3 of IRDAI (Transfer of Equity Shares of Insurance Companies) Regulations 2015 are complied with,” stated a letter by the IRDAI to IDBI Trusteeship Services.

These regulations require the entities to inform whether they are acquiring shares for themselves or some other entity and whether the holding would breach certain threshold limits as set by the insurance laws.

IDBI Trusteeship is holding the pledged shares of the insurance company after its promoter entity Reliance Capital defaulted on bond payment obligations — its subsidiary Reliance Home Finance issued non-convertible debentures to raise about ₹400 crore — and brought in shares of its insurance entity as additional collateral while restructuring the payment terms.

Interestingly, the development comes even as the matter has already landed at the Securities Appellate Tribunal where Nippon India MF asked the tribunal to quash the order passed by the insurance regulator in December.

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.

Nippon India MF was one of subscribers of the ₹400 crore worth of non-convertible debentures issued by Reliance Home Finance.

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Printable version | Aug 10, 2020 4:07:36 AM | https://www.thehindu.com/business/Industry/after-nippon-moves-sat-irdai-softens-tone-on-reliance-insurance/article30765507.ece

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