SC declines interim stay on Reliance Capital's second auction

The Supreme Court on March 20 refused a stay on National Company Law Appellate Tribunal (NCLAT) order, allowing the lenders of Anil Ambani-promoted Reliance Capital (RCap) to conduct another round of auction.

The court issued notice in the plea and permitted both the parties to partake in the second round of auction. The court also made it clear that the outcome of the auction will be subject to what is decided in the case. The case will be heard in August 2023.

The court on March 13 had agreed to hear Torrent’s plea after NCLAT on March 2 allowed a petition by lenders of Reliance Capital for another round of auction for the debt-ridden firm undergoing the insolvency process.

A two-member bench set aside an order passed by National Company Law Tribunal and said the Committee of Creditors (CoC) had the power to negotiate and call for a higher bid.

The appellate tribunal permitted the CoC to continue with the challenge mechanism and invite bids after two weeks.

The move was challenged by Torrent Investments before the Mumbai bench of NCLT (National Company Law Tribunal).

On February 2, NCLT said the challenge mechanism for financial bids stood concluded as on December 21, 2022, with Torrent Investments being the highest bidder at Rs 8,640.

Torrent Investments had filed a plea on January 9, requesting the tribunal to quash the lenders' plan to hold a fresh auction for takeover of RCap. Later, IIHL also filed a petition challenging the NCLT order.

Torrent Investments was the highest bidder offering Rs 8,640 crore in the last round of the '' challenge mechanism''.

On December 21, 2022, challenge mechanism process was conducted in which only two bidders - Torrent and IIHL participated.

IIHL participated until the third round of the challenge mechanism with a final NPV of Rs 8,110 crore and Torrent submitted a bid till fourth round with a final NPV of Rs 8,640 crore.

However, on December 23, 2022, a CoC meeting was conducted on the submission of the revised draft resolution plan as per the challenge mechanism with an email of IIHL which included additional payments totalling Rs 9,000 crore.

This was objected by Torrent and it moved NCLT, which had directed Reliance Capital's administrator not to submit any non-compliant plan to CoC.

On January 3, 2023, a CoC meeting was held and the process advisor informed the lenders that the NPV calculated on the basis of the financial proposal of Torrent and IIHL was different from the NPV submitted by the Resolution Applicants in the challenge mechanism. It sought clarification from IIHL and Torrent, including on draft resolution plan.

Torrent gave a draft resolution plan with revised offer offering the entire amount of Rs 8,640 crore upfront, while IIHL gave its revised draft resolution plan including some additional payment.

After that in its next meeting on January 6, 2023, CoC opined that outcome of the challenge mechanism undertaken was sub optimal and not satisfactory and proposed that an extended round of challenge mechanism with the existing bidders be conducted.

A resolution was passed by CoC in the next meeting with 98 per cent votes in favour of the extended challenge mechanism.

Following this, Torrent moved NCLT.

Reliance Capital has a consolidated debt of about Rs 40,000 crore.