Debt-laden Reliance Capital’s (RCap) lenders have moved the National Company Law Appellate Tribunal (NCLAT) against the bankruptcy court’s order disallowing a second e-auction, stating that the present proposals will lead to an upfront loss of ₹5,010 crore. The appellate tribunal is slated to start hearing the matter next week.
According to the committee of creditors (CoC), RCap’s admitted debt is more than ₹25,000 crore, including public money, and the objective of the insolvency process was to pursue “value maximisation”. The resolution plans submitted before the date of the challenge mechanism were “sub-optimal” and “not satisfactory” and an extended challenge mechanism was inevitable, sources close to the development said.
The CoC was “disappointed time and again with the offers from the bidders”, they said, citing reasons for moving the appellate tribunal.
They also alleged that the entire corporate insolvency resolution process has come to a standstill as the plans were not presented to the CoC and the second mechanism was kept in abeyance. The petition has also stated that there were a number of inaccuracies in the February 2 order of the National Company Law Tribunal (NCLT).
In the e-auction conducted under the challenge mechanism, Torrent had presented a resolution plan with an NPV of ₹8,640 crore, while that by Hinduja Group was at ₹8,110 crore.
The NCLT’s Mumbai bench on Thursday declared the proposed second e-auction as a violation of bankruptcy rules. It had also termed Torrent the highest bidder under the first challenge mechanism, and directed the administrator to take the process to its “logical conclusion”.
The lenders to the former Anil Ambani group company had earlier planned to hold the second challenge mechanism (e-auction) targeting proceeds of more than ₹10,000 crore from the insolvency process. Earlier, the counsel for the administrator had informed NCLT that when the bankruptcy process of the former Anil Ambani group firm started two bidders had quoted at about ₹4,000 crore.
This, over a period, had risen to about ₹8,000 crore, and they believe that there is a further scope for improvement. This was the reason for the proposed second challenge mechanism, the counsel had informed NCLT.
In 2018, in a landmark decision approving UltraTech Cement’s revised ₹7,900 crore bid to acquire debt-laden Binani Cement, NCLAT had ruled that the purpose of the bankruptcy process was to extract the maximum value from auctions of stressed assets. The dispute stemmed after Binani Cement’s CoC decided to consider an improved bid from UltraTech after Rajputana Properties’ (owned by Dalmia Bharat) ₹6,930-crore bid was declared the highest.