SC gives a go-ahead to second round of auction for Reliance Capital
The Supreme Court of India on Monday gave a major setback to Torrent Investments as it refused to stay NCLAT order on Reliance Capital and allowed the Committee of Creditor (CoC) to go ahead with the extended Challenge Mechanism (second round of auction) to maximise the value.
The CoC met on Monday and decided to hold the second round of auction on 29 March 2023.
Torrent Investments had 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.
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.
Torrent Group had emerged as the highest bidder in the first round of auction on 21 December 2022 with bid price of Rs 8,640 crore. As per its offer, Rs 4,000 crore is to be paid up front and the rest 55% bid price is being offered at zero interest to the lenders of Reliance Capital as deferred payment to be paid in three equal instalments in 3rd, 4th and 5th year.
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.
However, the CoC decided to hold a second round of challenge mechanism as the bids submitted by Torrent and IIHL were far below the liquidation value and fair value fixed by the independent valuers. The Liquidation Value of Reliance Capital is pegged at around Rs 13,000 crores and Fair Value is Rs 17,000 crores.
Also See: Hinduja Group moves NCLAT in support of 2nd round of auction in Reliance Capital CIRP
