NCLT To Intervene In Escrow Impasse Between IndusInd International And Reliance Capital

NCLT To Intervene In Escrow Impasse Between IndusInd International And Reliance Capital

Strap – It concerns the unwinding mechanism during litigation

IndusInd International Holdings Ltd (IIHL) has filed an interlocutory application with the Mumbai bench of the National Company Law Tribunal (NCLT). It sought help on the impasse over escrow agreements between the Anil Ambani-promoted Reliance Capital creditors and the IIHL lenders.

The deadlock has hindered the final Rs.4,300-crore funding required to complete the acquisition, as both entities disagree on the ‘unwinding’ mechanism in case of litigation during the escrow period.

IIHL was to pay Rs.9,861 crore to complete the transaction, comprising Rs.2,750 crore in equity and Rs.7,300 crore in debt. It deposited Rs.5,750 crore (58.31 percent of the total payout, including the equity portion, and Rs.3,000 crore in debt).

However, the funds, backed by Reliance Capital's insurance subsidiaries required the Committee of Creditor’s (CoC) approval and a resolution framework. It approved a ‘Fund Flow Note’ with 89.07 percent voting in favor, but the impasse over escrow blocked the transaction's completion.

As part of the process, IIHL had to submit documents to the administrator and the CoC. By 31 January 2025, it submitted the documents, except two key escrow agreements - the intermediate escrow agreement and the global escrow agreement.

In its application, IIHL said, “The reason why the two escrow agreements could not be submitted is because of a deadlock between the present creditors, that is CoC and the lenders of IIHL (funding Rs.4,300 crores) on one point-unwinding.”

The second tranche of Rs4,300 crore is backed by Reliance Capital's insurance subsidiaries and raised from lenders including 360 One, Barclays and Bank of America.

The ‘Fund Flow Note’ lenders of IIHL must transfer the amount to the intermediate escrow account. However, the lenders were concerned that if a legal dispute arose while the money was in escrow (before the transfer of the shares), they would not get the amount back.

Explaining the scenario, IIHL stated, "Because of no resolution, the parties are stuck and seeking guidance from the NCLT.”

Meanwhile, the resolution plan submitted by IIHL was approved by the tribunal in February 2024, but the company sought extensions to complete the transactions.