Cinema VinesThe National Company Law Tribunal (NCLT) in Mumbai has formally admitted Reliance Entertainment Studios Private Limited into the corporate insolvency resolution process (CIRP) after a claim of Rs 11.94 crores from Pen India over the release financing of Ajay Devgn’s film Auron Mein Kahan Dum Tha. In an order dated August 19, the bench of judicial member Nilesh Sharma and technical member Sameer Kakar ruled that the Rs 20 crores advanced by Pen India to support the film’s release constitutes financial debt under the Insolvency and Bankruptcy Code (IBC). The tribunal has imposed a Section 14 moratorium and appointed Umesh Balaram Sonkar as the interim resolution professional, but has not yet fixed the final payable amount, leaving the calculation to the resolution professional.
The dispute traces back to a security deposit agreement signed in November 2022, under which Pen India lent Rs 20 crores to Reliance Entertainment Studios with a 21% per annum interest rate, compounded monthly. A subsequent October 2023 agreement saw Friday Filmworks Private Limited, a company partly owned by Reliance, pay Rs 15 crores to Pen India. According to Pen India, the remaining balance of Rs 4.49 crores in principal, plus Rs 7.44 crores in interest, was still due.
Reliance argued that the money was a security deposit, not a loan, and claimed that its liability had been extinguished by a clause that allowed repayment through a third‑party satellite or digital rights provider. The NCLT rejected these defenses, stating that the substance and commercial effect of the transaction mattered more than the terminology used. The tribunal said the arrangement had all the essential attributes of a borrowing, and that the clause about third‑party payment only added an extra mechanism, not a release of primary liability.
The court also noted Reliance’s conduct after the Rs 15 crores payment. In April 2024, the company proposed to clear the remaining debt in two instalments by June 30 and September 30, 2024. It later revised the plan in August 2024 to a three‑instalment schedule, with the final payment due by December 31, 2024. The NCLT observed that Reliance failed to meet the revised payment dates, using the company’s own actions as evidence of its understanding of the agreement.
With the CIRP now underway, the resolution professional will gather all claims and determine the final amount payable to Pen India. The case highlights the growing scrutiny of film‑financing arrangements under the IBC and the importance of clear contractual terms in the entertainment industry.
