No Deviation From Procedures In Adopting 'Challenge Mechanism', Reliance Capital Tells NCLAT

Vistra ITCL (India) Ltd, one of the lenders of Reliance Capital, told NCLAT that the efforts were towards maximisation of assets and it is for the lenders to decide the value.

Lenders of Reliance Capital have told to the National Company Law Appellate Tribunal (NCLAT) that there was no deviation from procedures in the 'challenge mechanism' adopted by them for the resolution of the Reliance Capital case, reported news agency PTI. The report said that one of the lenders of Reliance Capital, Vistra ITCL (India) Ltd, told the appellate tribunal that the efforts were towards maximisation of assets and it is for the lenders to decide the value. 

Senior advocate Kapil Sibal, representing Vistra ITCL, said in his submission that the adjudicating authority (NCLT) cannot restrain the Committee of Creditors (CoC) from exercising their commercial wisdom. He said the NCLT can not decide the value.

Supporting the lenders, Hinduja group firm Indusind International Holdings Ltd (IIHL) has also approached the NCLAT. IIHL said that it sees no bar in multiple rounds of 'challenge mechanism', to discover the highest value.

The Adjudicating Authority (NCLT) has committed a grave "jurisdictional error" in entertaining an application that seeks to interdict an ongoing Resolution Process carried out by CoC at the behest of a resolution applicant, IIHL said.  

"The Adjudicating Authority (NCLT) has sought to effectively step in the shoes of CoC and take over the decision-making process and interfere with the exercise of commercial wisdom of CoC …The Impugned Order halts the CoC's decision to continue with the Challenge Mechanism with a threshold value of Rs 9,500 crore," it said.

On February 2, the Mumbai bench of NCLT ruled against holding a fresh round of auctions for the takeover of Reliance Capital. The beach had said the challenge mechanism for financial bids has already concluded.

The NCLT had approved Torrent Investments' request and stated that as of December 21, 2022, the challenge mechanism for financial bids was complete, with the applicant's bid of Rs 8,640 crore being the highest.

On January 9, Torrent Investments submitted a plea asking the tribunal to halt the lenders' proposal to conduct a new auction for the acquisition of RCap.

Torrent Investment won the last round of the "challenge mechanism" with the highest bid of Rs 8,640 crore. Reliance Capital has a consolidated debt of about Rs 40,000 crore.