NCLAT allows lenders to invite fresh bids for RCap

Mumbai: The National Company Law Appellate Tribunal (NCLAT) on Thursday allowed Reliance Capital (RCap) lenders to seek fresh bids for the Anil Ambani Group company under bankruptcy proceedings.
Lenders had gone in for appeal after the National Company Law Tribunal (NCLT) ruled that Torrent Investment’s Rs 8,640-crore bid was the highest. Lenders wanted to have a fresh round as the Hindujas put in a belated bid of nearly Rs 9,000 crore.
In its order, the appellate tribunal said that the modification or improvement in the resolution plan cannot be confined only to plan value.“We are of the considered opinion that regulation 39(1A) does not prohibit CoC (committee of creditors) from negotiating with or asking resolution applicants to further increase the plan value,” the order said.
The NCLT in its order had said that after the challenge mechanism (a process where all bidders are given an opportunity to outdo the highest bidder), no negotiations can be undertaken by the CoC. The tribunal also said that in the minutes of the CoC meeting, it was noticed that bid of IndusInd International Holdings (IIHL, or Hinduja’s) was not in accordance with the bid offered in the challenge mechanism.
“The decision of the CoC to go for extended challenge mechanism cannot be said to be based on the bid of IIHL and further the view of the adjudicating authority that second challenge mechanism runs fouls to regulation 39(1A) also cannot be sustained,” the order said.
The appellate authority did not agree with the earlier order that there is no power with the CoC to enter into negotiations with the resolution applicant after the challenge mechanism and the exercise of the commercial wisdom is circumscribed by the framework for value maximisation under the insolvency code.