Torrent Group Bid Not Compliant, Reliance Capital Lenders Tell NCLT

Lenders to bankrupt Reliance Capital today informed the National Company Law Tribunal that the highest bid made by Ahmedabad based Torrent group to acquire Reliance Capital is non-compliant.

The lenders, who are planning a second round of auction for Reliance Capital on January 19, are seeking a higher valuation for the bankrupt company after Ahmedabad-based Torrent emerged as the highest bidder with an offer of Rs 8,640 crore as upfront cash. Post-auction, the Hindujas later offered Rs 9,000 crore — leading to litigation by Torrent at the NCLT.

Senior advocate Kapil Sibal, appearing for the CoC (committee of creditors), said the challenge mechanism does not confer any rights on any resolution applicant, including the resolution applicant with the highest net present value and the CoC is not obligated to approve the resolution plan, which has the highest net present value (NPV) or scored the highest according to the evaluation matrix.

“Torrent assumes that its plan is compliant, but the CoC has come to the conclusion that it is not compliant. The CoC found a discrepancy in Torrent plan and the administrator wrote to Torrent on January 4 saying the NPV of the financial proposal as submitted by Torrent in their draft resolution proposal does not match with the highest bid amount submitted by them in the challenge mechanism,” Sibal said.

“That’s why the CoC found that Torrent does not even meet the threshold of the third round of the first auction. Therefore, it is non-compliant even in the third round, it could not have participated in the fourth round. When the administrator wrote to Torrent, it submitted a fresh bid on January 6 and changed its entire bid. This is shocking that Torrent did not disclose these facts to the NCLT,” Sibal said.

Sibal said the Hinduja group was offering Rs 1,000 crore more than Torrent and hence the lenders, including the Life Insurance Corporation and the Employee Provident Fund Office (EPFO), will be denied the higher amount — if the company is offered to the highest bidder of the first round.

Arguing on behalf of Torrent — the highest bidder in the first round — Daries Khambata said the administrator on the instructions of the CoC had already announced in writing on December 21 that the challenge mechanism (auction) had concluded and its bid was the highest in the challenge mechanism. Torrent also argued that the second round of auction was illegal and not permitted under the regulations and the CoC and the administrator needed to put to vote all compliant resolution plans based on the first round. To this, the CoC disagreed and requested time to file a reply in the matter and argue its case in detail at the next hearing.

The NCLT recorded the CoC and the administrator’s submission that the second round of challenge mechanism will not be conducted prior to the next date of hearing at NCLT. The NCLT also directed that its interim order, which does not permit the administrator to place Hinduja’s non-compliant plan before the CoC, will remain in force.

Reliance was sent for debt resolution by the Reserve Bank of India (RBI) under the Insolvency & Bankruptcy Code, 2016, after the company defaulted on its loans worth Rs 24,000 crore.

The NCLT asked lenders to Reliance Capital (RCap) not to take any decision on the second round of auction till its order is pronounced next week.

The lenders, who are planning a second round of auction for Reliance Capital on January 19, are seeking a higher valuation for the bankrupt company after Torrent emerged as the highest bidder with an offer of Rs 8,640 crore as upfront cash. Post-auction, the Hindujas offered Rs 9,000 crore — leading to litigation by Torrent at the NCLT.