# In the matter of Reliance Capital Limited IA No.717-MB-C-I-2022 In CP. (IB) No. 1231-MB-C-I-2021

> NCLT judgment dated 2022-10-07. Citation: TCN-2022-NCLT-00822. Axix Bank Limited filed an application under Section 60(5) of the Insolvency and Bankruptcy…

- **Court:** NCLT
- **Order date:** 7 Oct 2022
- **Citation:** TCN-2022-NCLT-00822
- **Category:** IBC
- **Source page:** https://caseease.in/cases/ibc/nclt-division-bench-court-i-chenn/reliance-capital-limited-ia-no717-mb-c-i-2022-in-cp-ib-no-1231-mb-c-i-2021-25962436

## Summary

### Background

Axix Bank Limited filed an application under Section 60(5) of the Insolvency and Bankruptcy Code, 2016, seeking admission of claims as a Financial Creditor of Reliance Capital Limited. The bank sought acceptance of its claim of Rs. 1,45,02,42,799.04 as a Financial Creditor and to be included in the Committee of Creditors during the Corporate Insolvency Resolution Process (CIRP) of Reliance Capital Limited. The application stems from commercial papers issued by Reliance Home Finance Limited (RHFL), for which Reliance Capital Ltd. provided an Obligor Undertaking.

## Facts

In April 2019, Reliance Home Finance Limited (RHFL) proposed issuing commercial papers to raise funds. To protect its interests, Axix Bank Limited obtained a tripartite Obligor Undertaking dated April 10, 2019, executed by Reliance Capital Ltd. (RCL) and RHFL. This undertaking ensured that any dilution of RCL's stake in Reliance Nippon Life Asset Management Limited would be used to pay for the commercial papers. Axix Bank subscribed to commercial papers issued by RHFL with a face value of INR 124 Crore. Letters of Offer were issued on April 15, 2019, and Deal Confirmation was executed on April 16, 2019. The commercial papers were issued on April 16, 2019. RCL diluted its stake in Reliance Nippon, realizing Rs. 5500 Crores, but failed to make payments towards its

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## Issues and analysis

### Issue 1: Whether the 'Obligor Undertaking' provided by Reliance Capital Ltd. constitutes a guarantee under …

**Ratio:** A guarantee requires a contract to perform the promise or discharge the liability of a

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**Reasoning:** The NCLT found that the 'Obligor Undertaking' did not contain an explicit promise by

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**Interpretation:** Section 126 of the Indian Contract Act defines a 'guarantee' as a contract to

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**Application:** In this case, the 'Obligor Undertaking' lacked the essential element of a

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## Parties

- **Judges:** P.N. Des…; Shyam Babu…
- **Appellants:** Axix Bank L…
- **Respondents:** Reliance Capital…; Nageswar…
- **Advocates:** Shyam Babu…; Vikram Na…; +1 more

## Timeline

- **2019-04-10 — Obligor Unde…**: The Applicant, the corporate Debtor and…
- **2019-04-16 — Commercial Papers…**: The Applicant subscribed three commercial Papers issued by RHFL, of (i) INR 39 crores,…

## Legal provisions

- [Insolvency and Bankruptcy Code, 2016, Section 60(5) — Adjudicating Authority for corporate persons](https://caseease.in/legal-provisions/insolvency-and-bankruptcy-code-2016/section-60)

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