CoC eyes liquidation as IIHL and Torrent are barred from bidding

New Delhi (Best Hindu News): Lenders to Reliance Capital are facing difficulties in the second round of auction as bidders are said to be not keen on the second round under insolvency resolution. The Supreme Court has listed the matter related to the second auction for hearing in August.

The Supreme Court had on March 20 allowed an appeal by Torrent Investments, the highest bidder with Rs 8,640 crore, against the lenders’ decision to hold another round of auction. The court refused to stay the second round of auction.

It is noteworthy that the insolvency process of RCAP has been going on for more than 450 days, which is much more than the stipulated time limit of 330 days.

Torrent reportedly told lenders recently that it is not ready to participate in the second round of auction. Hinduja Group’s other bidder, International Holdings Ltd, also reportedly informed the lenders that it wanted to withdraw its revised bid of Rs 9,000 crore, which it made after the auction process, and the old one of Rs 8,110 crore in the first round. Offer upheld.

These developments have hampered the plan of the Committee of Creditors (CoC) to conduct a second round of auction with a base price of Rs 9,500 crore to maximize the recovery from the RCAP resolution process.

Besides, a consortium had submitted binding bids to Reliance Capital in November and has now sought refund of its earnest money of Rs 75 crore.

While the CoC may pursue the extended challenge mechanism, the outcome of the auction will be subject to the final decision of the Supreme Court.

In light of this, Reliance Capital is looking at liquidation if the lenders and bidders fail to reach a workable solution to end the impasse. Lenders will get Rs 13,000 crore if they go for liquidation.

Torrent has proposed to conduct a Swiss Challenge auction with its earlier bid limit of Rs 8,640 crore. If agreed to, Torrent will have the first right to match any counter offer from Hinduja Group.

The challenge mechanism may be considered flawed as bidders would be wary of participating in open-ended processes. Since the Supreme Court is examining the interpretation of Regulation 39(1A) for the first time, this judgment will have a far-reaching impact on the future of the IBC (Insolvency and Bankruptcy Code).

The Swiss challenge or closed envelope bidding process may go against the apex court’s direction, which allowed lenders to go ahead with the extended auction.

The controversy over the bid for Reliance Capital began when Hinduja offered to pay Rs 9,000 crore in cash upfront to the lenders, a day after the first round of auction ended on December 21.