PremiumThe National Company Law Tribunal (NCLT) on Monday denied interim relief to Torrent Investments, seeking a stay on the voting process for the second round of auctions by the lenders of debt-laden Reliance Capital (RCap)
The National Company Law Tribunal (NCLT) on Monday denied interim relief to Torrent Investments, seeking a stay on the voting process for the second round of auctions by the lenders of debt-laden Reliance Capital (RCap).
On Friday, the committee of creditors of RCap floated a proposal to hold a second round of auctions over two days, that will conclude on Tuesday. RCap has a debt of over ₹20,000 crore.
Torrent is a key bidder for RCap’s assets under the insolvency resolution process, and offered to pay ₹8,640 crore upfront to the lenders in the first round of auctions.
The tribunal said no urgent hearing was required for Torrent’s application and posted the matter for 12 January.
While the proposal to conduct a second auction required 51% voting by the creditors, it crossed 75% mark in favour of the proposal. Life Insurance Corp. of India and Employees’ Provident Fund Organisation, the two largest lenders, which have 35% voting rights, voted in favour of the second challenge mechanism.
The NCLT bench led by Justices Shyam Babu Gautam and Pradeep Narhari Deshmukh said: “The complied plan should be put before committee of creditors. Everybody has to act in accordance with the law." Vikram Nankani, the counsel for Torrent Investments, informed the bench that the previous order of the NCLT on a stay on the Hinduja’s bid has been an overreach. “We have argued that under the rules, there cannot be more than one challenge mechanism because then it is an endless exercise."
On 3 January, the NCLT had asked the lenders not to accept the bid offered by the Hindujas till the next date of hearing, thereby granting interim relief to Torrent Investments in RCap’s resolution process.
Torrent had moved an interlocutory application seeking a stay on the revised bid of ₹9,000 crore by the Hindujas.
On 21 December, Torrent submitted a bid worth ₹8,640 crore higher than the ₹8,110 crore offered by a Hinduja Group entity IndusInd International Holding.
“From an Insolvency and Bankruptcy Code standpoint, Torrent’s argument is fair in principle," said Nirav Shah, partner, DSK Legal. “IBC has specific timelines and the entire purpose is defeated if the timelines are not adhered to. When the resolution professional put up the timelines for inviting resolution plans, Hindujas did not submit a plan and the CoC voted in favour of Torrent’s resolution plan."
“Torrent’s point is limited in that once CoC approved a resolution plan, no third party can be permitted to give a fresh resolution plan. If Hinduja’s plan is considered by CoC (even if it’s a better plan), it would create prejudice against Torrent. Just like Hinduja, it is likely that other bidders may also submit competing bids and call upon CoC and NCLT. At this rate, there will never be a finality and this saga can continue for a long time and this can erode the value of the assets of the corporate debtor," Shah said.
However, Harish Salve, representing the Hindujas, said: “All allegations have been made against my client (Hinduja), but we have not been made a party to the case. We want to be heard."
The bench said it cannot pass an order unless it has all the documents on record and posted the matter for 12 January.