The decision by Reliance Capital (R-Cap) lenders to hold a second auction round is facing difficulties as bidders are not said to be interested in another round under the insolvency resolution.
The Supreme Court has cataloged the matter regarding the second auction for hearing in August.
The Supreme Court on March 20 allowed an appeal by Torrent Investments, which was the highest bidder with Rs 8,640 crore against the lenders' decision to hold another round of auction. The Court refused to suspend the second round of the auction.
It should be noted that the R-Cap insolvency process takes more than 450 days, much longer than the 330-day timeframe.
Torrent reportedly recently told lenders that it is not willing to participate in the second round of the auction. The other bidder, International Holdings Ltd (IIHL) of the Hinduja group, has also informed the lenders that it wants to withdraw its revised offer of Rs 9,000 crore, which it had made after the auction process, and retain the previous offer of Rs 8,110 crore. crores in the first round of auction.
These developments have put a hurdle in the creditors committee (CoC) plan to hold a second round of auction with a base price of Rs9,500 crore to maximize the recovery from the R-Cap resolution process.
Furthermore, a consortium of Cosmea Financial and Piramal, which had submitted binding offers for R-Cap in November, requested a refund of its security deposit of Rs 75 crore each.
Although the CoC can apply the expanded challenge mechanism, the result of the auction will be subject to the final decision of the Supreme Court.
In light of this, R-Cap faces liquidation, if the lenders and bidders fail to come up with a viable solution to end the impasse. The lenders will probably get Rs13,000 crore if they are liquidated.
Torrent has proposed to hold an auction of the Swiss Challenge with its previous bid of Rs 8,640 crore as the threshold. If this is agreed, Torrent will have the first right to match any counter offer from Hinduja Group.
The challenge mechanism can be considered flawed, as bidders are reluctant to participate in open processes. As the Supreme Court will examine the interpretation of Regulation 39(1A) for the first time, the decision will have far-reaching implications for the future of the IBC (Insolvency and Bankruptcy Code).
The Swiss Challenge or sealed bid process could go against the direction of the high court which allowed the lenders to proceed with an extended auction.
The dispute in the bid for R-Cap began when Hindujas offered to pay Rs9,000 crore in cash in advance to the lenders, one day after the first round of auction concluded on December 21, 2022.
The lenders decided to hold one more auction round to enhance the recovery of R-Cap's assets. Torrent, who made a bid of Rs 8,640 crore in the first auction, ruled the IIHL's revised post-auction bid of Rs 9,000 crore invalid and challenged Hindujas' revised bid and second auction round also in court. National Company Law. (NCLT).
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