The committee of creditors (CoC) of Reliance Capital (Rcap), which met on Friday, was unable to decide on the format of the proposed ‘challenge mechanism’ and decided to take the call later. While the lenders want the mechanism to be added in the bidding process, a consensus was yet to be arrived on the process, sources close the development said.
The advisors to the bankruptcy process had suggested multiple options under the challenge mechanism, including the ‘Swiss Challenge Process’ where the highest bidder would be declared as an anchor bidder and will have the right of first refusal (RoFR). Other options included negotiations with CoC by bidders, electronic auction to declare the highest bidder or combination of these. This would mean that the bidders would have to submit the resolution plans without “enough” information on the proposed process.
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“The bidders are in complete darkness on how this process will work,” a source close to the development said, adding this might result in bids being placed at much lower valuations.
The CoC also wants the bidders to provide a written consent stating they will participate in the challenge mechanism, even if it is implemented at a later stage.
The bidders had earlier raised concerns over introduction of the ‘challenge mechanism’, which gave power to lenders to challenge any resolution plan as and when they want. Further, this was added later as there was no mention of this clause in the request for resolution plan (RFRP) and the CoC had not clearly spelled out the contours of the clause.
According to certain bidders, the clause is also being added at a time when the former Anil Ambani group firm’s insolvency process was inching towards a closure, with the deadline to complete it ending on January 31.