A two-member bench of the National Company Law Appellate Tribunal (NCLAT) on March 3 allowed a petition filed by the lenders of Reliance Capital to hold another round of auction for the sale of the company under the Insolvency and Bankruptcy Code (IBC).
Overturning the National Company Law Tribunal’s (NCLT) February 2 ruling, which declared the extended challenge round proposed by Reliance Capital lenders illegal, the NCLAT today said lenders could go ahead with another round of auctions after two weeks’ time.
The NCLAT ruled that even after completion of the challenge mechanism, the committee of creditors (CoC) retains its jurisdiction to re-negotiate and issue request for resolution proposal (RFRP). The court ruled that the CoC reserved the power to renegotiate the bid amount, or to call for another round of auction in its commercial wisdom.
Earlier this month, the NCLT on February 2 had ruled that the extended challenge mechanism proposed by RCap lenders was not in compliance with IBC regulations. The bench had observed that the challenge process concluded on December 22, 2022 with the declaration of highest NPV of Rs 8640 crore offered by Torrent Investments, one of the suitors in the fray. It declared that the process note for the second challenge mechanism was in violation of Regulation 39(1)(A)of the CIRP regulations, while ruling against the lenders in the matter.
NCLAT’s verdict comes as a relief for lenders who can now go ahead with another round of challenge mechanism for the company to seek higher bids.
In the last round, CNBC-TV18 had reported that Torrent Investments had emerged as the highest bidder with a resolution plan of Rs 8,640 crore. However, post the conclusion of the second round, the other suitor- Hinduja Group via its company Indusind International Holdings Ltd (IIHL) sent lenders a revised bid of close to Rs 9,000 crore in net present value (NPV) terms, prompting the lenders to seek another round of bidding, which was challenged by Torrent in NCLT.
Torrent had moved NCLT opposing revision in bid by Hinduja post e-auction, and also sought stay on extended challenge mechanism proposed by lenders, which the NCLT granted on February 2nd. However, lenders had subsequently moved the NCLAT against the ruling. Lenders had argued that freezing the bid value at December 2022 levels would risk an order for liquidation, as they found the bids sub-optimal.
Reliance Capital is facing claims of Rs 25,334 crore from various creditors under IBC, with about Rs 45 crore of interest mounting each week with the delay in resolution.
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