The National Company Law Tribunal (NCLT), Mumbai, has admitted Reliance Entertainment Studios Private Limited into the corporate insolvency resolution process (CIRP) over an alleged default of Rs 11.94 crores linked to the release of Ajay Devgn’s Auron Mein Kahan Dum Tha. In an order passed on August 19, a bench comprising judicial member Nilesh Sharma and technical member Sameer Kakar held that the Rs 20 crores advanced by Pen India to finance the film’s release qualified as financial debt under the Insolvency and Bankruptcy Code (IBC).
Auron Mein Kahan Dum Tha release funding row: Reliance Entertainment Studios enters insolvency process over Pen India’s Rs 11.94 crores claim
The tribunal has imposed a moratorium under Section 14 of the IBC and appointed Umesh Balaram Sonkar as the interim resolution professional. However, the NCLT clarified that it has not determined the final amount payable to Pen India and has left the process of collating the claim to the resolution professional.
Why did the dispute arise?
Pen India had advanced Rs 20 crores to Reliance Entertainment Studios under a security deposit agreement signed in November 2022. The agreement provided for repayment with interest at 21% per annum, compounded monthly. A subsequent agreement executed in October 2023 saw Friday Filmworks Private Limited, which is partly owned by Reliance, pay Rs 15 crores to Pen India.
According to Pen India, Rs 4.49 crores remained outstanding as principal, along with Rs 7.44 crores in interest.
Reliance Entertainment Studios argued that the amount was expressly described as a security deposit and therefore did not constitute a money-lending arrangement. The company also contended that its liability had been extinguished under a contractual provision that required repayment through a third-party satellite or digital rights provider.
The NCLT rejected these arguments, stating that the actual substance and commercial effect of a transaction matter more than the terminology used by the parties. “The transaction, therefore, possesses all the essential attributes of a borrowing notwithstanding the terminology adopted by the parties,” the tribunal said.
The bench also held that the clause concerning repayment through a third-party rights provider only created an additional mechanism for payment and did not remove Reliance’s primary liability.
Reliance had acknowledged the outstanding amount
The tribunal also took note of Reliance’s subsequent conduct following the Rs 15 crores payment.
In April 2024, the company proposed clearing the remaining amount in two instalments by June 30 and September 30, 2024. It later proposed a revised three-instalment schedule in August 2024, with the final payment due by December 31, 2024. “The subsequent conduct of the parties constitutes the best evidence of how they themselves understood and acted upon the Agreement,” the order said.
The NCLT noted that Reliance failed to make payments according to the revised schedules. It consequently found the company’s later reliance on the contractual clauses inconsistent with its earlier acknowledgements of the outstanding dues.
NCLT rejects money-lending licence argument
Reliance had also argued that Pen India was an unlicensed moneylender under the Maharashtra Money-Lending (Regulation) Act, 2014.
The tribunal rejected the contention, noting that there was no evidence to establish that Pen India was engaged in the business of money lending. Instead, the transaction was connected to a specific commercial arrangement concerning a cinematographic project.
Reliance had further pointed out that National E-Governance Services Limited, an information utility, had recorded the alleged default as “disputed”. The NCLT said this did not prevent Pen India from pursuing a Section 7 application under the IBC. “Unlike proceedings under Section 9, the existence of a dispute is not by itself a ground to reject an Application under Section 7,” the tribunal said.
More Pages: Auron Mein Kahan Dum Tha Box Office Collection , Auron Mein Kahan Dum Tha Movie Review
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