The National Companies Act Appeals Court (NCLAT) recently ruled in favor of Reliance Capital's lenders and allowed another round of auctions for the financial services company.
The lenders had approached NCLAT against an earlier order by the National Company Law Tribunal (NCLT) restricting the Committee of Creditors (
The initial bidding process ended on 21 December 2022 and Torrent Investments was found to be the highest bidder with Rs 8640 crore.
Soon after that, the Hinduja Group
In his written submission to NCLAT, one of the CoC Vistra ITCL members said: "NCLT has usurped the jurisdiction of the CoC by arguing that the CoC has to vote on the Rs 8,640 crore plan of Torrent and the Rs 8,110 crore plan of IIHL and that the CoC has no jurisdiction to negotiate even over the numbers."
He further argued that NCLT has not even looked into these plans and there is no Rs 8110 crore plan from IIHL and NCLT has substituted its opinion for CoC which is not allowed under the Insolvency and Bankruptcy Code (IBC). ).
The appellant claimed that Torrent Investments, within 24 days, increased the offer values โโfrom Rs 1,100 crore upfront to Rs 3,750 crore in advance and then within 2 weeks more than Rs 3,750 crore in advance to Rs 8,640 crore of rupees in advance, and the same thing happened with the IIHL.
Appellant held that the CoC therefore clearly feels that there is more value to be discovered and judicial intervention cannot prevent it at this stage.
In the next bidding round, the minimum/reserve price will be Rs 8000 crore in advance cash, then the first round will be Rs 9500 crore and then it will be Rs 10 000 crore and Rs 250 crore after every round, you know.
But the moot point is that if Torrent Investments goes to the Supreme Court against the NCLAT order, then there will be a legal delay in the resolution process and why would bidders participate if the matter must be resolved by the higher court.
By the way, maximizing value for stakeholders is the foundation on which the IBC rests firmly.
There are several successful examples of COC's business savvy and ability to renegotiate to get a better deal for a corporate debtor's stakeholders.
For example, in the case of DHFL, which had a debt of Rs 88 billion, the first offer made by the Piramals to acquire it was Rs 15 billion.
But after negotiations/review/new plans, the revised offer increased by Rs 22,250 crore to Rs 37,250 crore.
With regard to SREI debt resolution (Rs 32,791 crore), the initial offer for the company was Rs 3,402 crore and National Asset Reconstruction Company Ltd (NARCL), while the value of the resolution plan after the negotiation/review/consideration of new plans was increased by Rs 11,465 crore to Rs 14,867 crore.
The same goes for a couple of other corporate debt resolution plans:
Essar Power, ArcelorMittal's initial resolution plan value was Rs 32 billion and has been revised upwards by Rs 10 billion to Rs 42 billion.
Bhushan Power and Steel: debt of Rs 48,719 crore; the first round value was said to be Rs 15,000 crore and JSW Steels revised it to around Rs 24,500 crore;
Binani Cement - debt Rs 7,500 crore; the initial settlement plan value was Rs 6,932 crore and later rose to Rs 7,950 crore for Ultratech Cement;
Bhushan Steel: debt of Rs 59,207 crore; value of resolution plan after negotiation/review/new plans Rs 35,200 crore plus 12 plus shareholding;
Videocon: Debt of Rs 64,938 crore; first round value over Rs 2,962 crore per
Interestingly, in the case of Reliance Capital with a debt of around Rs 25,500 crore, the value of the resolution plan after the first round was around Rs 2,591 crore. The settlement value went up to Rs 9,000 crore which was done by IIHL of Hinduja group.
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