Hinduja Group moves NCLAT in support of 2nd round of auction in Reliance Capital CIRP
Hinduja group’s IIHL has filed an appeal with the NCLAT supporting the second round of auction for Reliance Capital. Hinduja Group along with Torrent Investment are the front runner for acquiring Reliance Capital, as the lenders of the corporate debtor are contesting an NCLT order that constrained them from conducting another round of e-auction.
In its latest appeal, the Hinduja group has contended that the Adjudicating Authority has committed a grave jurisdictional error in entertaining an application which seeks to interdict an ongoing Resolution Process being carried out by COC at the behest of a Resolution Applicant (Torrent Investment) which is seeking to grab a company by causing a loss of several hundred crores to the financial creditors.
It says that the NCLT has erred in restraining the Committee of Creditors in exercising the commercial wisdom and to achieve the objects of maximization of asset-value.
IIHL says in its latest plea with the NCLAT that it sees no bar in multiple rounds of challenge mechanism to discover the highest value.
The NCLT order halts the CoC’s decision to continue with the Challenge Mechanism with threshold value of Rs. 9,500 crores.
The Hinduja Group further says that the Adjudicating Authority has glossed over the fact that Torrent is not a successful resolution applicant as the evaluation is at an intermediate stage where the Committee of Creditors is undertaking a price discovery exercise for maximisation of asset value.
“The Adjudicating Authority failed to envisage that Torrent as one of prospective resolution applicants is merely a participant in the insolvency resolution process and Torrent would not have any locus to stall the resolution process,” contends Hinduja group in its plea.
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.
Hinduja Group says in its plea that the Adjudicating Authority has given undue weightage to the NPV submission of Torrent and has failed to consider that the NPV factor is the outcome of payment proposition in the respective resolution plans.
“The Adjudicating Authority has disregarded the fact that NPV carried only 30% of the weightage as per the evaluation matrix, and that the other criteria prescribed by the COC have to be looked into while considering the aspect of value maximisation and viability/feasibility of plans,” it says.
NCLAT will hear Hinduja’s plea on 10 February 2023.
Also see: NCLT orders against second round of auction in Reliance Capital CIRP
