Reliance Capital lenders stare at Rs 5,000 cr loss due to stay on auction
The lenders of Reliance Capital have upped the ante against Torrent Investments, which has been thwarting the attempts of the former to force another round of auctions. The lenders have made a submission in the National Company Law Appellate Tribunal (NCLAT) saying that the NCLT stay on another round of auction could result in a loss of Rs 5,000 crore to the banks.
The lenders have argued in their submission that claims submitted by them – Rs 25,000 crore – are mostly public money. “Rs 13,500 crores of claims belong to LIC, EPFO, Provident & Pension Funds, and Army Group Insurance Fund, and Torrent has sought unjust enrichment at public expense,” says the lenders latest submission.
They have alleged that Torrent Investments, which has emerged as the highest bidder for Reliance Capital in the e-auction conducted on 21 December 2022, is a private entity trying to cause a loss of public money.
The lenders have argued that continued stay on extended challenge mechanism will cause irreparable harm to the lenders. It has already resulted in an interest loss of over Rs 275 crores in the last six weeks, with further loss of Rs 45 crores per week.
“The Committee of Creditors (CoC) in exercise of its commercial wisdom, which is one of the core principles of IBC identified by the Supreme Court, has voted unanimously for an extended challenge mechanism, as the outcome of the first challenge mechanism was suboptimal and unsatisfactory,” argues the lenders adding that the stay on extended challenge mechanism has prevented the CoC from discovering higher value, and has put the resolution process in suspended animation.
The lenders have argued that as per the terms of Request for Resolution Plan (RFRP), the CoC has complete freedom to choose any method or process of negotiations, and one of such method can include a challenge mechanism.
“There is no limitation on the number of methods of challenge mechanisms adopted. The RFRP sufficiently supports the power of the COC to hold multiple challenge mechanisms. Even if there is a successful resolution applicant, the COC is free to negotiate with other applicants, prior to voting,” say the lenders.
The lenders of Reliance Capital have gone on to allege that Torrent Investments misused the ex-parte order of NCLT dated 3 January to rewrite its own resolution plan. On 6 January, the company revised the upfront payment from Rs 3750 crores to Rs 8640 crores, while deliberately not making COC a party in the NCLT.
The revised resolution plan of Torrent dated 6 January, with upfront payment of Rs 8,640 crores, was a toppling bid, designed to score higher than Hinduja Group in an evaluation Matrix scoring, say the lender.
Both Torrent Group and Hinduja had revised their bid price after the first round of e-auction on 21 December 2022.
Torrent group revised its bid and was offering Rs 8,640 crores as upfront cash. Earlier, the company was offering Rs 3,750 crores as upfront cash and balance in deferred payment.
Hinduja group revised its bid price for Reliance Capital to Rs 9,500 crore on 23rd December 2022, two days after the first round of the e-auction. Hindujas had earlier quoted Rs Rs 8,110 crore in the e-auction. As per Hinduja’s revised bid, they agreed to pay Rs 8,800 crore upfront.
Also Read: Hinduja Group moves NCLAT in support of 2nd round of auction in Reliance Capital CIRP
