Reliance Capital IBC case: NCLT's final orders to arrive in the week of January 30

He added that Reg 39 1A was introduced with the objective of curbing menace of unsolicited bids and it does not prohibit the right of the CoC to solicit bids.

Kapil Sibal, appearing for RCap Committee of Creditors, had said the role of resolution profession is to ensure plans submitted are compliant and if they meet the criteria, the plans are submitted to CoC.

“There is plan before the NCLT; there is no basis of the application filed by Torrent CoC has asked for an extended challenge mechanism; whether it is extended or not will be decided by the CoC,” he said.

The lenders committee argued that there is no legal mechanism under which the application has been filed by Torrent. Resolution Applicant has no vested right to have his plan considered, that is the CoC’s decision, Sibal told the tribunal.

He added that the signed resolution plans have not come to the CoC yet and that Torrent’s application is premature and should be dismissed at this stage. Torrent is arguing that their NPV remained the same when they tweaked the bid to offer Rs 8640 crore as upfront cash; it is for CoC to decide if NPV is changed, not Torrent, he said during the hearing.

Bidders have significantly revised their bids in under a month’s time and their conduct itself demonstrates that much greater value is yet to be discovered, Kapil said and suggested that the NCLT should not intervene in any process in which public interest is impacted when it is clear that greater value is yet to be discovered.

Both Torrent and Hinduja have recorded statements that they will not withdraw from the process and maintain the bid amount.

These developments come after the Torrent Group on Tuesday said that the challenge mechanism in the Reliance Capital Insolvency and Bankruptcy Code (IBC) case has been torn up by the Committee of Creditors (CoC) and that there is no guarantee that the second auction will be the last and the process won’t go on forever.

Mukul Rohatgi appearing for Torrent, pointed out in a hearing at the National Company Law Tribunal (NCLT) that the January 19 deadline when the lender’s committee wants to start a fresh challenge process is nearing and that the latter wants to bypass the tribunal’s January 3 interim order and start auctions afresh.

The development comes after Torrent last week submitted to the National Company Law Tribunal (NCLT) that it should pass an order to keep the extended mechanism in abeyance and stop the second round of auction.

During Tuesday’s hearing, Torrent told the tribunal in round 3 of the first auction, Hinduja submitted its bid of Rs 8,110 crore, below the threshold of Rs 8,550 crore, while Torrent’s bid in this round stood at Rs 8,550 crore. As per rules, Hinduja did not meet the cut-off as of round 3 of the first auction, whereas Torrent went to round 4 and improved the bid to Rs 8640 crore, Rohatgi told the NCLT.

Torrent Group claims that when Hinduja realised it was ousted, it illegally changed its bid to Rs 8,950 crore from Rs 8,110 crore earlier, which is in violation of the terms. It cited Regulation 39 (1A) (a), which prescribes that RPs (resolution professionals) can only allow one modification to a resolution plan provided RFPR provided for such a modification or via challenge mechanism.

“The Committee of Creditors (CoC) falsely claimed that our bid had some deficiency, and so to avoid any discrepancy, we offered the entire amount of Rs 8,640 crore as upfront cash… Our submission is that there cannot be endless wisdom of CoC. It is limited to one thing under Reg 39 1Aa, which allows only one change,” the company argued.

Torrent added that Reliance Capital Administrator’s stand for conducting a second auction with a base bid set at Rs 9,500 crore, below the liquidation value of Rs 12,000-13,000 crore.

Rohatgi argued that there is now a law which says bids lesser than liquidation value are ineligible and added that it is clear that the Administrator and CoC were bending backwards to give a chance to another party after the process is over. He reiterated that NCLT’s January 3 interim order was clear that no new bids would be considered, which the CoC wants to bypass.

Darius Khambata, also representing Torrent, said that CoC minutes show that the challenge mechanism was concluded and conducted fairly and transparently, with Torrent as the highest bidder, and Regulation 39 1Aa binds all parties; thus, a second auction is against the law.

“How can CoC say Torrent bid was sub-optimal when it was above the threshold they themselves set,” he said.

“There are no precedents since Reg 39 1Aa was introduced that allow for another auction round after the conclusion of the first…There is no question that the Administrator himself appears very clear in minutes of CoC meetings that Hinduja’s revision is illegal,” he said during the hearing.

Torrent claimed that CoC was attempting to conduct a fresh process and not a continuation of the challenge mechanism and that CoC and Admin describing the second auction as a continued challenge mechanism process is a falsehood.