The Delhi High Court has stayed the operation of the Reserve Bank of India (RBI) communication against execution of ₹4,000-crore debt recast of Religare Finvest Ltd (RFL), which is the troubled NBFC arm and a wholly-owned subsidiary of Religare Enterprises Ltd ( REL). 

The RBI had on February 11 said in a communication that the restructuring of RFL cannot be implemented with REL continuing as its promoter since RFL has been declared as “fraud” exposure by lenders. 

Following this communication, RFL had filed a writ petition with Delhi High Court . The Delhi HC has in its order dated February 18 noted that it prima-facie appears that the RBI has ignored the vital fact that the erstwhile promoters of REL are no longer in charge of the affairs of either the petitioner (RFL) or of REL. 

“In case the impugned order is not stayed, grave and irreparable prejudice will be caused to the petitioner as the banks are likely to take precipitative steps against the petitioner on account of the impugned communication. It is, accordingly, directed that till the next date, the operation of the impugned communication dated February 11, 2022 will remain stayed “, the Delhi High Court order said.

REL, which is a listed entity, on Sunday conveyed to the bourses the court stay order of the RBI letter.

REL had also earlier contested the lenders decision to categorise its loans to RFL as “fraud” exposure, arguing that the NBFC was a victim of fraud perpetuated by its former management.

It maybe recalled that RFL is barred from undertaking fresh business as it has been under a corrective action plan of the RBI since January 2018. RFL had hit a rough patch four years ago and faced financial distress due to alleged misappropriation of funds by erstwhile promoters Shivinder Singh and his brother Malvinder Singh. 

Already several investigative agencies of the government are looking into the alleged misappropriation of funds to the tune of ₹ 4,000 crore by erstwhile promoters. 

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