Even as the Reserve Bank of India has started the insolvency process against , the pending resolution of two of its subsidiaries – Ltd (RHFL) and Reliance Commercial Finance (RCFL) – is set to cast a shadow on the process with the market regulator’s diktat and the insolvency rules working against each other.

Lenders selected the preferred bidder almost six months ago, but the debt resolution for the two subsidiaries is still hanging fire as Securities and Exchange Board of India (Sebi) rules say 100% debenture holders have to approve the resolution plan for a company, contrary to the trust deed signed by investors which expects only 75% to vote.

“It’s a very peculiar situation because both the lending subsidiaries, which owe the majority of the debt to creditors in financial services by the Anil Ambani group, have found a buyer before the NCLT (National Company Law Tribunal) process has started. But it’s stuck due to a regulatory clash. The matter is in court, and we have been waiting for a solution for months now,” said a person closely involved in the resolution of these companies.

In June, Authum Investment & Infrastructure was declared the preferred bidder by lenders to take over RHFL with 91% of the creditors voting in favour. Authum offered ₹1,724 crore in cash and another ₹300 crore through 8% non-convertible debentures payable within a year for the company which owed creditors ₹11,200 crore in a deal brokered by BoB Capital Markets.

However, bond holders who account for 41% of the debt, have not yet voted on the plan. IDBI Trusteeship, the main trustee for bond holders, has so far not conducted a voting as it is awaiting clarity on a Sebi rule, which was amended in September 2020 making 100% of debenture holders’ vote compulsory for a resolution plan.

“The plan has so far been approved by only lenders which have signed the intercreditor agreement. Debenture holders have to still approve it because trustees which are regulated by Sebi are going by its interpretation. Though the trust deed says 75% votes are enough, trustees have not agreed so far,” said a second person.

The situation is more complex in RCFL, which owed creditors more than ₹9,000 crore. In July, Authum again was selected as the preferred bidder to take over the company with a ₹1,240 crore offer, which meant an 86% write-off for the creditors.

On October 28, the Bombay High Court, responding to a plea by lenders, directed Vistra ITCL, the trustee for bond holders in RCFL, to call a meeting of the bond holders within 30 days to vote on the resolution plan, overriding Vistra’s contention of going by Sebi rules. Bond holders own more than 90% of the debt in RCFL. A majority of the bonds are held by banks and financial institutions.

Based on the order, Vistra called a meeting of bond holders on December 8. However, this week Sebi filed a caveat against the order, the hearing for which is next Monday.

“This is turning out to be a tussle between the regulators. The RBI would want lenders to follow the process, while Sebi wants trustees to go by rules laid by it. One of them has to step back to ensure the issue is resolved because resolution will take a back seat,” said a senior official from a debenture trustee.

The RBI move earlier this week to refer Reliance Capital to the NCLT has complicated the situation. Lenders hope that the central bank does not direct a consolidated resolution of all three financial services companies which will mean all the work carried out so far to find a buyer for RCFL and RHFL will be down the drain.

“Either Sebi allows voting to go through or the RBI consolidates all the debt. Otherwise, this stalemate will continue. One can only hope that a solution is found soon because this is an unnecessary delay for a process which is already much delayed,” said the trustee official.