Torrent Group wrote to the Reliance Capital Admin and Committee of Creditors on Wednesday asking them to immediately withdraw the second round of auction under the extended mechanism failing which they will be compelled to take legal action.
The Torrent Group on Thursday submitted to the National Company Law Tribunal (NCLT) that it pass an order to keep the extended mechanism in abeyance and stop the second round of auction.
At the NCLT hearing on the Reliance Capital insolvency case, Mukul Rohatgi representing Torrent noted that Torrent was declared the highest bidder after the December 21 auction with an Rs 8640 crore offer and the process of value maximisation ended with the auction.
Therefore, the law does not permit holding of a second round of auction after the challenger mechanism concludes, he pointed out. He argued that the Reliance Capital Admin and CoC were disguising the second auction as an “extended challenge” as there is no provision for another challenge. The challenger mechanism does not provide for any modification in plan once auction is concluded, Torrent’s lawyer said before the tribunal.
The Torrent group argued that the thresholds specified in the challenger mechanism were for value maximisation, which has already been concluded. “As of today, 400 days have gone by since commencement of CIRP (Corporate Insolvency Resolution Process), much in excess of 270 days prescribed. There should be sanctity in deadlines or auctions will become endless,” Rohatgi said.
He claimed that the Admin’s stand to conduct a second auction is that bids are below liquidation value of Rs 12-13,000 crore. However, despite liquidation value being at Rs 12-13,000 crore, the Admin has set base bid for round two at Rs 9,500 crore, he said.
Torrent brought to the tribunal’s notice that Regulation 39 (1A)(a) prescribes that a resolution professional can only allow one modification to a resolution plan provided RFPR provided for such a modification and the process of value maximisation has already concluded with the challenge mechanism held in December in the case under review.
Kapil Sibal, appearing for RCap Committee of Creditors, meanwhile sought time to file a reply in the matter. He alleged that Torrent's claim that its bid was compliant and has to be considered is factually incorrect as it was below the threshold. RCap Admin wrote to Torrent on January 4 saying there was a difference in financial proposal and bid, he said, adding that the bid was non-compliant in the third round of bidding of the Challenge Mechanism. CoC had a meeting and found bids submitted are “sub-optimal,” he argued.
IIHL has now made a bid of Rs 9000 crore and Torrent wants RCap to consider a lower offer, the lawyer claimed. He noted that the original Request for Resolution Plan (RFRP) note says Admin with prior approval of CoC reserves the right to change modalities of challenge mechanism or revise the challenge mechanism.
Instead of starting the process afresh, RCap is continuing the challenge mechanism for getting the appropriate value and CoC is not obligated to approve the plan with the highest NPV, he argued.
The NCLT will next hear the RCap case on January 16 and it has asked the respondents (CoC, Administrator) to file their reply by Monday. Interim orders shall remain in force until then, it said.
The arguments come a day after Torrent wrote to the RCap Administrator and Committee of Creditors (CoC) that it was evident that the latter were conscious that regulations do not permit a second round of challenge mechanism. “Concluding Torrent’s highest NPV offer as “sub-optimal” and proposing a second round of auction breach of NCLT’s interim order, Regulation 39 1A,” it said in the letter.
It pointed out that the Administrator's email dated Dec 21, 2022 stated the Challenge Mechanism stood concluded on Dec 21, 2022, so there’s no scope of extending it.
Therefore, the CoC approving the extended mechanism “reeks of collusion,” the company wrote. It added that this action flouts the interim NCLT order that sought to preserve the challenge mechanism.
(Edited by : C H Unnikrishnan)
First Published: Jan 12, 2023 1:55 PM IST
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