Exclusive| Reliance Capital to challenge NCLT order in Supreme Court, say sources

Reliance Capital

Debt-ridden Reliance Capital (RCap) is planning to challenge the verdict of National Company Law Tribunal (NCLT) that ruled Torrent Investment as the highest bidder for the firm in the Supreme Court, people aware of the matter told Moneycontrol requesting anonymity.

On February 2, NCLT quashed the appeal by the committee of creditors (CoC) to hold another auction, terming it against the Insolvency and Bankruptcy Code (IBC) regulations. The committee of creditors (CoC) is expected to meet on Saturday and decide on the next steps, according to one of the persons quoted above. At this stage, no decision has been taken by COC, the person said. The NCLT order is likely to be uploaded tonight.

“Torrent Investments had a bid of Rs 8640 crores, whereas Hinduja Group’s bid was Rs 400 crores more at Rs 9000 crore. We would go with Hinduja,” said one of the persons quoted above.

Plan for second auction

The lenders in the case were planning another auction of Reliance Capital in order to maximise the value of the assets.

After the first auction, Torrent Investments was the highest bidder in the with a bid of Rs 8,640 crore for Reliance Capital.

Regarding this, the CoC was planning for a second auction after it received an offer from Hinduja group of Rs 9,000 crore, higher than that of Torrent Investments.

On January 25, lenders of RCap moved the National Company Law Appellate Tribunal (NCLAT) to challenge the bankruptcy court order for maintaining the status quo on the company's insolvency proceedings.

The lenders have argued that the interim stay ordered by NCLT is not permitted under law.

Earlier to that, NCLT directed the lenders of Anil Ambani-promoted Reliance Capital to maintain the status quo and asked all applicants to submit written notes.

The tribunal postponed the second auction for RCap, which was scheduled for January 19, to January 23 as the NCLT Mumbai bench could not complete the hearing of arguments of all applicants.

How did Reliance Capital face insolvency?

Reliance Capital is the third major non-banking financial company (NBFC) facing bankruptcy proceedings, along with Srei Group and Dewan Housing Finance Corp Ltd (DHFL). The company plunged into a crisis following huge debts and liquidity crises. In March 2019, its financial auditor, PricewaterhouseCoopers (PwC) resigned, and Care Ratings downgraded Reliance Capital’s mounting debt to default status.

In December 2021, Reliance Capital, in a regulatory filing, said that the NCLT had admitted the case of the company for the corporate insolvency resolution procedure (CIRP) under IBC.

In November 2021, the Reserve Bank of India (RBI) referred Reliance Capital for bankruptcy resolution process after it defaulted on bonds worth Rs 24,000 crore.

Nageswara Rao Y, former executive director of the Bank of Maharashtra, was appointed the administrator for the process.

Who were the bidders in the race?

In February 2022, 55 companies submitted their expression of interest (EOS) for the sale of Reliance Capital, and 14 submitted non-binding bids by August end. By December 2022, only four investors - Hinduja, Torrent, Cosmea-Piramal consortium, and Oaktree Capital, submitted the final bids.

But since the submitted bids were below the liquidation value, the CoC held an e-auction where bidders were asked to revise their bid prices.
Reliance Capital’s insolvency process now majorly involves two parties, Hindujas and Torrent Group, and is in the final stages.