SC agrees to hear Torrent’s plea against NCLAT verdict favouring RCap lenders

SC agrees to hear Torrent’s plea against NCLAT verdict favouring RCap lenders

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The Supreme Court has agreed to hear Torrent’s argument against the National Company Law Appeal Tribunal (NCLAT) order allowing a second round of auctions for Reliance Capital’s creditors’ committee (COC) for the sale of assets of the company on March 20.

Last week, NCLAT allowed lenders of trust capital hold an expanded challenge mechanism or a second round of auction for the sale of the debt-ridden financial services company.

The Torrent Group moved to the Supreme Court, seeking a stay of NCLAT’s decision. He claimed “irreversible damage” if the second round of auctions is allowed for Reliance Capital, which is in insolvency proceedings.

Second round of auction for RCap

The objective of the second round auction was to obtain the maximum value from the sale of assets.

According to the rules of the extended challenge mechanism, the minimum threshold or the initial value of the offer has been set at $9,500 crore, with the subsequent round increasing to $10,000 crores and for $250 crores in any round that follows.

This compares the minimum threshold value of $6,500 crores in the first round which concluded on December 21.

The expanded challenge mechanism will also have a minimum advance cash payment threshold of $8,000 crores for bidders, according to a ITP report.

The COC hopes to make an increase in $10,000 crores from the extended challenge mechanism.

In the first round of the challenge mechanism, Torrent turned out to be the highest bidder with an offer of $8,640 crore, while Hinduja Group firm IndusInd International Holdings Ltd (IIHL) was the second highest with $Offer of Rs 8,110 crore.

The first round of the auction became legally entangled after the IIHL made a cash bid of $Rs 9,000 crore to the lenders after the completion of the auction process.

Torrent challenged the IIHL’s bid in the NCLT, although the company itself reviewed its own bid for $Rs 8,640 crore by offering the full amount in cash upfront instead of $Rs 3,750 crore offered in the auction.

NCLT ruled in Torrent’s favor and suspended the second round of auction, but RCap’s lenders challenged NCLT’s decision in the court of appeal, which ruled in their favor and allowed them to proceed with the second round of auction.

Corporate insolvency was commenced against Reliance Capital in November 2021 to recover nearly $Rs 40,000 crore of unpaid loans.

With agency inputs

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