Reliance Capital Insolvency: Creditors Agree To Reschedule Auction To Jan. 23
Torrent has no vested right to approach the NCLT, auctions should be left to the wisdom of creditors, says Reliance Capital's CoC.
The Committee of Creditors of the Anil Ambani-owned Reliance Capital Ltd. has informed the National Company Law Tribunal that it will reschedule the 'extended auction' to Jan. 23. The auction was originally scheduled for Jan. 19.
The CoC agreed to do this in light of Torrent Investments Ltd.'s pending challenge before the insolvency court. In a reciprocal arrangement, Torrent has agreed not to withdraw the commitment of paying its bid of Rs 8,640 crore as upfront cash.
Earlier this month, Torrent Investment had challenged the CoC's move to conduct a fresh round of auctions for the insolvent company. According to Torrent, the auction process concluded in December, in which its bid of Rs 8,640 crore was declared the highest.
A stay by the NCLT on the CoC considering revised bids is still in effect.
According to Torrent, the proposed auction is not in compliance with the insolvency code, as the law doesn't permit more than one round of auction. Moreover, the plea by the CoC that all the bids are suboptimal is also baseless, as the administrator as well as the CoC have admitted otherwise in their email and minutes respectively, Torrent has argued.
However, the administrator's counsel has countered that and said the conclusion of the auction process does not fetter the right of the CoC to solicit bids, and that it is free to look for bids that maximize the value of the asset.
The law that prevents multiple rounds of auctions is only meant to prevent ‘unsolicited bids’. The revision is not illegal if it’s the CoC that’s coming with it. "There was no arbitrariness in the process," he said.
The challenge, however, is premature, according to Kapil Sibal, representing the CoC. The duty of the NCLT to scrutinise the compliance of a plan can only commence once it’s duly selected and submitted before the tribunal.
In this case, the court has already ventured into the merits of various plans even before it’s placed before the CoC. The resolution applicant, even with the highest bid, has no vested right to challenge the decisions of the CoC, Sibal submitted on Wednesday, questioning the maintainability of Torrent’s challenge.
According to him, the Committee of Creditors is not obligated to approve a resolution plan just because it’s the highest bid. It can use its commercial wisdom to either approve or reject the plan.
The CoC had already informed the bidders that their bids were suboptimal and much below the estimated liquidation value. CoC should be allowed to realise its optimum value, he submitted. The conduct of Torrent itself proves that there is much value yet to be realized, he said.
Torrent went from a bid of Rs 3,650 crore to Rs 8,640 crore in nearly a month. This itself proves that there is value yet to be realized from the company.Kapil Sibal, Counsel, Committee of Creditors
The auction is not concluded as argued by the counsels for Torrent. It can come to an end only when a signed resolution plan is submitted by the bidders. The auction has not come to fruition and is therefore, still in operation, Sibal highlighted.
The NCLT will continue hearing the matter on Thursday.