Torrent Investments move SC against 2nd round of auctions for Reliance Cap

Torrent Investments has moved Supreme Court against the recent order by National Company law Appellate Tribunal (NCLAT) that allowed creditors of Reliance Capital to go ahead with second round of auctions. The decision by Torrent Investments to move SC may derail the second auctions that were to be held on 20 March 2023.

The creditors have claimed that the delay is the process of concluding the resolution process is costing them Rs 50 crore every month.

Creditors of the Reliance Capital had moved NCLAT after the Mumbai bench of the NCLT had asked them not to go ahead with the second round of the auctions.

However, the NCLAT had reversed the NCLT’s decision in favour of the creditors. In its order, the appellate tribunal had rejected the argument of Torrent Investments (which emerged as the highest bidder after the first round of challenge mechanism) that Section 39 (1A)(b) of the Insolvency and Bankruptcy Code prevents the creditors to go for second round of the auction.

“…even after completion of Challenge Mechanism under Regulation 39(1A)(b), the CoC retain its jurisdiction to negotiate with one or other Resolution Applicants, or to annul the Resolution Process and embark on to re-issue RFRP. Regulation 39(1A) cannot be read as a fetter on the powers of the CoC to discuss and deliberate and take further steps of negotiations with the Resolution Applicants, which resolutions are received after completion of Challenge Mechanism,” the appellate tribunal said in its order.

After the favourable order, the Committee of Creditors (CoC) had fixed 20 March the date for holding the second round of auction for the sale of assets of Reliance Capital.

As per the rules of the second round of auction, the minimum threshold or the bid starting value has been pegged at Rs 9,500 crore, with the subsequent round rising to Rs 10,000 crore and by Rs 250 crore in any round that follows. The minimum threshold value was kept at Rs 6,500 crore in the first round that concluded on December 21.

The CoC is expecting to fetch more than Rs 10,000 crore from the second round of challenge mechanism.

Reliance Capital owes Rs 25,000 crore to its creditors while the liquidation value of the company’s assets has been valued at Rs 13,000 crore. The objective of CoC to hold multiple rounds of auctions is to ensure the realisation is closer to the liquidation value.

Also Read: Reliance Capital lenders stare at Rs 5,000 cr loss due to stay on auction