NCLT stops Hinduja’s ‘late’ RCap bid from being tabled

The National Company Law Tribunal (NCLT) Tuesday told Reliance Capital’s administrator not to present an offer made by the Hinduja Group past the auction deadline to the committee of the creditors (CoC) for consideration. That restrained the administrator from tabling the Rs 9,400 crore improved offer from the Group before the verified lenders at the CoC meeting on January 3.

Torrent Investments had asked the NCLT division bench to direct the administrator not to consider the Hinduja Group's offer, which was made a day after the auction concluded on December 21, as reported by ET on January 3.

Ravi Kadam, senior counsel for administrator Nageswara Rao Y, argued that the directive from the tribunal restraining him from presenting the revised offer is akin to a stay on the resolution process of the financial services company. The administrator will appeal against the NCLT order before the National Company Law Appellate Tribunal (NCLAT), he said.

The NCLT division bench comprising justice PN Deshmukh and technical member Shyam Babu Gautam has scheduled the next hearing on January 12.

Anil Ambani-founded Capital, which is undergoing insolvency proceedings, received the highest bid of Rs 8,640 crore from Torrent Investments at the auction, while the Hinduja Group submitted an Rs 8,110 crore plan at the auction on December 21. Both offers were on a net present value (NPV) basis, arrived at by discounting future cash flows.

Within 24 hours, Hinduja submitted a revised offer of Rs 9,400 crore on NPV basis, of which Rs 8,750 crore would be an upfront cash payment. Torrent’s Rs 8,640 crore bid includes upfront cash of Rs 3,750 crore.

Kadam told the tribunal that the administrator is duty bound to present both offers and that it would also place any objections raised by Torrent Investments before the CoC. He also said that Torrent's petition was premature and should be dismissed.

Kadam pleaded that at this stage the administrator was verifying whether the plans given by the bidders were compliant but that no decision would be taken on selecting a winner. Kadam said that it was his client’s duty to submit compliant and non-compliant plans to the CoC.

Darius Khambhata, senior counsel for Torrent, argued that its “apprehension is that the administrator will submit this non-compliant plan before the CoC for consideration.”

He informed the tribunal that Torrent had written to the administrator on December 23 seeking confirmation that Hinduja’s revised plan would not be entertained. However, there was no response from the administrator and thus, Torrent decided to seek relief from the tribunal.

“Procedure and rules cannot be abandoned for value maximisation,” Khambhata told the bench. “This can delay the resolution process,” he said in the context of a bidder making an improved offer after the deadline in the name of giving better recovery to lenders.

CoC counsel Prateek Seksaria said it should be made a party to the matter. He argued that the applicant (Torrent) does not have locus standi since its plan hasn’t yet been approved as the winning bid.

The tribunal sought clarification on the request for proposal (RFP) condition which stipulates that no change in plan is permitted after it’s been submitted.

Kadam said that, as per the terms of RFP, the CoC can consider, reject, select, call for new plans, and engage with any bidder for value maximisation.

“If it is not done, your lordship will question us why we failed in doing so (value maximisation),” he said.

To be sure, it’s not clear if the CoC will eventually consider any of the plans because they are 25-40% below the liquidation value pegged at Rs 12,500 crore to Rs 13,000 crore, one lender said. The revised Hinduja offer is at 25% below liquidation value while that of Torrent is 44% below this level.