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Film Funding Dispute Lands Reliance Entertainment in Insolvency
21 Aug
Summary
- NCLT admits Reliance Entertainment Studios to insolvency over Rs 11.94 crore debt.
- The debt is linked to financing the release of Ajay Devgn's film 'Auron Mein Kahan Dum Tha'.
- Tribunal rejected Reliance's argument that the advance was a security deposit.
The National Company Law Tribunal (NCLT), Mumbai, has officially admitted Reliance Entertainment Studios Private Limited into the corporate insolvency resolution process (CIRP).
This action follows an alleged default amounting to Rs 11.94 crores concerning the financing for the release of Ajay Devgn's film, 'Auron Mein Kahan Dum Tha'. The NCLT determined that a Rs 20 crores advance from Pen India was a financial debt under the Insolvency and Bankruptcy Code (IBC), imposing a moratorium.
Pen India had advanced Rs 20 crores under a security deposit agreement in November 2022, with a 21% annual interest. Despite a subsequent payment of Rs 15 crores by a Reliance-partly owned entity, Pen India claimed Rs 4.49 crores in principal and Rs 7.44 crores in interest remained outstanding.
Reliance's arguments that the advance was a security deposit and its liability extinguished were rejected by the NCLT. The tribunal emphasized the transaction's commercial reality over its terminology and noted Reliance's acknowledgment of dues and subsequent failure to adhere to proposed payment schedules, which occurred between April 2024 and August 2026.
