Another round of bidding for the insolvent company Reliance Capital has been approved by the National Company Law Appellate Tribunal (NCLAT). The judgement will make it easier for the Indian lenders to negotiate better terms with the two bidders, the Hinduja Group and the Torrent Group of Ahmedabad.
As its offer of Rs. 8,640 crore emerged as the highest bid for the company, Torrent petitioned the court to halt the second round of bidding. As the auction ended, the Hindujas made a bid worth Rs 9,000 crore.
The Committee of Creditors of Reliance Capital Ltd. is being prevented from determining the best price in the Corporate Insolvency Resolution Process (CIRP), according to the NCLAT submission made by Reliance Capital’s lenders, and the National Company Law Tribunal (NCLT) has overstepped its authority when even signed plans weren’t presented to the CoC for consideration.
“NCLT has usurped the authority of the CoC by declaring that the CoC has to vote on the Rs 8,640 crore plan of Torrent and the Rs 8,110 crore plan of IIHL (Hindujas) and that the CoC has no jurisdiction to negotiate even on the figures,” Vistra ITCL claimed in its written filing to NCLAT.
It further claimed that NCLT had not even looked at these plans, that there was no IIHL plan for Rs 8,110 billion, and that NCLT had replaced CoC’s opinion with its own, which was against the Insolvency and Bankruptcy Code (IBC).
In the event that the expanded challenge process is rejected and the assets of Reliance Capital are sold to Torrent for the value determined under the first challenge method, the banks would lose Rs 5,000 crore in upfront funds.
Torrent is a private company, according to the lenders’ written filing with the NCLAT, whereas Reliance Capital has acknowledged claims totaling more than Rs 25,000 crores, the majority of which is public money.
The lenders further stated that a continuous reliance on the extended challenge procedure would harm them irreparably. Almost 275 crores of rupees have already been lost in interest over the last six weeks, and another 45 crores are lost each week as a result.
While the first challenge mechanism’s results were insufficient and unsatisfactory, COC has unanimously voted in favour of an extended challenge mechanism in the exercise of its commercial wisdom, which is one of the key principles of IBC outlined by the Supreme Court.
The COC was prevented from finding a higher value by the prolonged challenge mechanism, which also placed the resolution process on hold.
The lenders had contended that, in accordance with the auction’s conditions, the COC is free to pick any approach to discussions, one of which can include a challenge mechanism, and that there is no limit to the number of challenge mechanisms that may be used. The power of the lenders to hold numerous challenge processes is properly supported by the auction regulations, it had stated.
Lenders claimed that Torrent utilized the NCLT’s ex-parte order from January 3 to draught its own resolution plan. The advance payment was changed on January 6 by the corporation from Rs 3,750 crores to Rs 8,640 crores, while purposefully leaving the COC out of the NCLT.
With an upfront payment of Rs 8640 crore, Torrent’s amended resolution plan from January 6 was a “topple bid,” created to outperform Hindujas in a scoring matrix.
In November 2021, Reliance Capital was referred for debt resolution under the Insolvency and Bankruptcy Code.