NCLT orders against second round of auction in Reliance Capital CIRP
The National Company Law Tribunal (NCLT) has allowed Torrent Investments’ plea challenging lenders’ decision to hold a fresh round of auctions for the takeover of Reliance Capital. In an order that has come as big setback for Reliance Communication lenders, the NCLT has said that the challenge mechanism for financial bids has already concluded.
The tribunal also held that extended challenge mechanism proposed by the Committee of Creditors was not in compliance with IBC regulations.
It is likely that Reliance Capital will move the National Company Law Appellate Tribunal (NCLAT) against the order.
The tribunal of Justice Shyam Babu Gautam and Justice Pradeep Narhari Deshmukh, in its order said the challenge mechanism for financial bids stood concluded as on 21 December 2022, with the bid of the applicant at Rs 8,640 crore being the highest.
Torrent Group had emerged as the highest bidder in the e-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.
The proposal to conduct a second round of auction in the Reliance Capital corporate insolvency resolution process (CIRP) has been approved with an overwhelming 100% vote by the lenders, led by the Life Insurance Corporation (LIC) and EPFO, who have 35% voting rights.
Torrent Investments had filed a plea on January 9, seeking the tribunal to quash the lenders’ plans to hold a fresh auction for the takeover of Reliance Capital. Torrent Investment was the highest bidder offering Rs 8,640 crore in the last round of ‘challenge mechanism’.
The tribunal had concluded the hearing on Torrent Investments’ plea seeking quashing of the lenders’ plan for a new round of ‘challenge mechanism’ on January 23.
Also Read: Reliance Capital CoC votes 100% in favour of second round of auction
