RCap resolution: NCLAT allows lenders’ plea to bid afresh

NEW DELHI: The National Company Law Appellate Tribunal (NCLAT) on Thursday allowed lenders of Reliance Capital to hold an extended challenge mechanism or second round of auction for the sale of the debt-ridden financial services company.

A two-member bench of NCLAT also said lenders of Anil Ambani-promoted Reliance Capital had the power to negotiate and call for a higher bid. It overturned an order of the Mumbai bench of National Company Law Tribunal (NCLT) which had declared the extended challenge round illegal.

NCLAT ruled that the Committee of Creditors (CoC) can renegotiate the bid amount or call for another round of auction in its “commercial wisdom”. On February 2, NCLT said the challenge mechanism for financial bids stood concluded as on December 21, 2022, with the bid of Torrent Investments at Rs 8,640 crore being the highest. However, the lenders which had decided to go for an extended challenge mechanism, petitioned against the order before NCLAT.

NCLT in its order had said after concluding the challenge mechanism, no negotiation or value maximisation exercise can be individually undertaken by the CoC. Rejecting it, NCLAT said it has “committed an error” and is contrary to the CIRP regulations.

It said even if Torrent Investments’ bid consequent to challenge mechanism, which was held on December 21, 2022 was with the highest net present value (NPV), “it has no right to insist that the plan should be put to vote by CoC, without taking any further steps by CoC.”