Reliance Capital Insolvency: Torrent Investment Seeks To Halt Second Round Of Auction
Extended auction is meant for value maximisation as previous bids were sub-optimal, says Reliance Capital's CoC.
The committee of creditors' decision to conduct a second round of auction for Reliance Capital Ltd. is a "brazen attempt" to make an earlier court order infructuous, Torrent Investments Pvt. argued on Thursday.
The Ahmedabad-based Torrent Group emerged as the highest bidder with a Rs 8,640-crore offer for the Anil Ambani-owned Reliance Capital.
On Jan. 3, the National Company Law Tribunal had granted an interim relief to Torrent.
It had directed the NBFC's administrator from placing the alleged non-compliant plan of the Hinduja Group before the CoC. The Hinduja Group reportedly revised its bid from Rs 8,110 crore to Rs 9,000 crore after the auction had concluded.
According to Torrent, revision of a resolution plan post the conclusion of the bidding process is against the very essence of the challenge mechanism adopted by the administrator.
Unable to consider the revised bid proposed by Hinduja, the committee of creditors unanimously decided on Tuesday to extend the first round of auctions to accept fresh bids from eligible bidders.
The minimum threshold is set at Rs 9,500 crore for this round, Rs 500 crore more than than the last round.
Law Doesn't Permit Fresh Round Of Auction, Says Torrent
Counsels representing the Torrent Group argued that the CoC has essentially decided to conduct a second round of auction against an extension of the first round as portrayed by it.
The administrator has already called for the conclusion of the challenge mechanism in December. There cannot be a second round of auctions after the administrator has concluded the bidding process as the law doesn't permit one, Mukul Rohatgi, the counsel for Torrent Group, said.
A fresh round of auctions will seriously affect the conclusion of insolvency resolution, which is a time-bound process, Rohatgi said.
Darius Khambata, who also represented Torrent, pointed out the illegality in the second round of auctions as proposed by the CoC.
Khambata argued that the administrator was "junking a mechanism it has already set and is trying to start a new mechanism" by allowing a fresh round.
This Is For Value Maximisation, Says CoC
According to the CoC's counsel Kapil Sibal, this is not a second round of auction as alleged by Torrent, but is merely an extension of the first round.
Existing bidders, including Torrent, are free to submit their revised bids with the CoC. This has been done as the previous bids were sub-optimal and were below the threshold price set by the creditors' committee, Sibal contended.
"This is for value maximisation. No resolution applicant, not even the highest bidder, can oppose the move because the challenge mechanism confers no rights on any bidder participating in the process."
The applicant assumes he is compliant and wants us to consider his bid, which he believes to be the highest. It's unbelievable how such submissions can be made even before the CoC has considered everything.Kapil Sibal, Counsel, Committee of Creditors
Sibal said that the committee of creditors has already informed Torrent about how it is non-compliant and fails to meet the threshold set for the third round of auctions on Jan. 4, after which it has submitted fresh bids for the process.
Torrent has not informed this fact to the tribunal, he said. "They are trying to obtain an ex-parte order from the court after hiding relevant facts to the case."
Representing the Hinduja Group, Abhishek Singhvi also stood by the decision of creditors' committee to extend the auction process.
The court cannot be called on to decide on several clauses of the challenge mechanism at such a short notice, Singhvi argued.
He said the premise put forward by Torrent that the bidding process was concluded in December is "fallacious".
"Sibal's client has flexibility to negotiate or renegotiate with its bidders to ensure value maximisation. None of the bidders, including us, have any vested rights in the bidding process as held in the Arcelor Mittal case," Singhvi said.
The court has directed the CoC to file its reply and has ordered for the continued operation of its interim relief until the next hearing on Jan. 16.