The National Company Law Tribunal (NCLT) Mumbai is set to hear on Thursday a crucial petition of the Gujarat-based Torrent Group, which has approached the tribunal challenging the Committee of Creditors’ (CoC) move to conduct second round of e-Auction of the Reliance Capital, which is under the Insolvency and Bankruptcy Code (IBC) procedure.
On December 21, Torrent Investments had emerged the highest bidder with its offer of ₹8,640 crore in the challenger round while the Hinduja Group, which owns IndusInd Bank, was the second-highest bidder; but subsequently, the Hinduja Group bettered the offer in a belated bid, which was submitted 24 hours after the bidding time ended.
The Hinduja Group had raised its bid to ₹8,950 crore but the bid was objected to by the Torrent Group on the grounds that the revised bid was submitted after the time had ended and therefore, Torrent contended that it should not have been considered by the CoC of Reliance Capital, a financial services company belonging to the Anil Ambani group.
However, despite the objections raised by Torrent, the CoC on Tuesday voted in favour of conducting the second round of bidding, allowing all four eligible bidders - namely Torrent, Hinduja, Oaktree, and a consortium of Piramal and Cosmea - to participate.
In the first round, only two bidders had submitted bids: Torrent and Hinduja, with the Ahmedabad-based pharmaceutical and energy major Torrent being the highest bidder while Oaktree and the Piramal consortium had opted out.
According to sources who are closely watching the ensuing legal battle in the Reliance Capital case, a second auction for Reliance Capital does not augur well for timely resolution of IBC cases because it will set a bad precedent for future insolvency cases and bidders will continue to submit toppling bids after the auction deadline and litigate in future.
The sources cited the example of the decision of the CoC of the two SREI companies which decided not to accept the revised bid by Varde-Arena which came after the close of the ‘Challenge Mechanism’ auction.
The e-auction for the sale of SREI Infrastructure Finance Limited (SIFL) and SREI Equipment Finance Limited (SEFL) under the Insolvency and Bankruptcy Code (IBC), was conducted last month.
“It is very strange that the CoC of the Reliance Capital is going ahead with the second round of bidding,” a top lawyer, who appears in NCLT cases, told The Hindu. He added that it would be interesting to see what view the tribunal takes on whether to allow the second round. “It will be a precedent-setting order of the court.”
In the case of Reliance Capital, the administrator has admitted claims worth ₹25,334 crore from secured and unsecured financial creditors.
The financial services company houses 20 finance firms ranging from insurance to broking to other financial services.
