Reliance Capital’s (Rcap) second round of auction continues to remain on hold as the lenders on January 25 chose to withdraw the appeal from National Company Law Appellate Tribunal (NCLAT) challenging the order of National Company Law Tribunal (NCLT) postponing the company’s insolvency proceedings.
The appellate tribunal observed that it would not be appropriate for it to comment on the case on merits, as NCLT is yet to pronounce the order.
What was argued?
Appearing for the lenders, Senior Advocate Kapil Sibal argued that they were losing money every week as the company’s auction is yet to be finalised. He stated that a huge public interest is involved as the lenders include entities such as Life Insurance Corporation (LIC) and Employees Provident Fund Organisation (EPFO), thus urging the NCLAT to vacate the status quo order. Sibal further said that a private company cannot get an order from the NCLT barring the lenders from discovering higher value for the company.
Gopal Jain, Senior Advocate, appearing for the administrator of Reliance Capital, argued that the proceedings were an attempt by Torrent to dictate the terms of the game.
Appearing for Torrent, Darius Khambatta, Senior Advocate, argued that the lenders were changing tracks frequently. He submitted that while they agreed not to hold the second auction till January 23, they subsequently refused to extend it till the judgment is pronounced in the case.
The NCLAT, on hearing the arguments observed that it would not be appropriate for them to comment on the merits of the case, since the NCLT has already reserved the case for orders. Sibal at this point sought the court’s permission to withdraw the case as the cause of action will stand nullified if it is postponed any further. The tribunal accordingly permitted the case to be withdrawn.
Torrent Investments, a participant in the auction for RCap, had filed a plea seeking the tribunal to quash the lenders' plans to hold a fresh auction for the takeover of the Anil Ambani-promoted company. Torrent Investments was the highest bidder offering Rs 8,640 crore. It is the contention of the lenders that the bids received in the first round of auction were sub-optimal and they wish to explore options to maximise the value.
On January 23, the NCLT directed the lenders of Rcap to maintain the status quo on the second round of auction. The tribunal had also indicated that it would pass orders in the case in the week commencing January 30.
Lenders of the company had moved the NCLAT on January 25 to challenge the bankruptcy court order for maintaining the status quo. They had sought an early hearing, and the NCLAT agreed to hear the case in the afternoon of January 25.
The NCLT had earlier postponed the second auction for Reliance Capital, which was scheduled for January 19, to January 23, as it could not complete the hearing of arguments of all applicants.
The NCLT Mumbai bench, led by Justice Shyam Babu Gautam and Justice Pradeep Narhari Deshmukh, has been hearing the applicants on a day-to-day basis since January 9, when Torrent Investments approached the tribunal seeking to halt the Committee of Creditors's move for a second round of auction or 'Challenge Mechanism'. NCLT’s judgment in the case is expected in the week commencing January 30.
