India MF exercised the ‘put option’ before the maturity of NCDs.
The fund house wanted to sell 6,369 NCDs for approximately ~331 crore and gave notice to RCap on October 11, 2019, to purchase the NCDs. However, upon RCap’s failure to purchase the NCDs, Nippon
India MF asked IDBI Trusteeship to invoke the pledge.
This led to the Insurance and Regulatory Development Authority of India (Irdai) issuing a letter in December stating that the transfer of shares was in violation of the Insurance Act and was “null and void ab initio”.
Upon receipt of Irdai’s directions, the regulatory body was informed by Nippon India MF that IDBI Trusteeship had taken possession of shares as a statutory duty. And before a suitable buyer is found for the holding in RGICL, the trusteeship would make formal application before Irdai.
Further, both Nippon India MF and IDBI Trusteeship clarified that there was no intention to exercise any control in the insurance company.
On Thursday, SAT said Irdai’s order, which called the transfer of shares as “null and void ab initio”, was incorrect and to that extent the order was being set aside.
Also, the tribunal made it clear that so long as IDBI Trusteeship is holding shares in RGICL in the capacity of a custodian, it will not exercise any control over RGICL or make changes or have a say in the management or decision-making process of the company.