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The National Company Law Appellate Tribunal (NCLAT) on Thursday set aside the February 2 order of the Mumbai bench of the NCLT, thus allowing the CoC (committee of creditors) of Reliance Capital to hold the second challenge mechanism.
The NCLAT allowed the CoC to hold a revised challenge mechanism after two weeks, and to take “any steps for further negotiations with the Resolution Applicants”.
A two-member bench held that the CoC “is fully empowered” to further negotiate with one or more resolution applicants, even after completion of challenge mechanism on December 21.
It added that the decision of the CoC taken on January 6 to undertake an extended challenge mechanism “is not violative of Regulation 39 (A)”, as per the final order accessed by businessline.
Regulation 39 (A) pertained to the fact that to ensure resolution timelines are met, a CoC can either opt for one revision in the RFRP or choose a challenge mechanism for value maximisation under the resolution process.
“We, thus conclude that even after completion of the Challenge Mechanism, the CoC retains its jurisdiction to negotiate with one or other Resolution Applicants, or to annul the Resolution Process and embark on to re-issue RFRP,” the NCLAT order said.
The order came against pleas filed by Vistra ITCL (India)--debenture trustee acting on behalf of 90 per cent of the lenders--and IndusInd International Holdings against Torrent Investments Private Limited.
Torrent Investments had taken the CoC to the NCLT after it emerged as the highest bidder under the Challenge Mechanism with a NPV (net present value) bid of ₹8,640 crore but the CoC decided to go ahead with a second auction citing the bids received as sub-optimal and unsatisfactory. Torrent had also challenged the revised bid submitted by the other bidder--Hinduja Group--after the completion of the challenge mechanism.
The NCLT, had on February 2, had agreed with Torrent Investment saying that the challenge mechanism has been concluded, a second auction would violate the CIRP, and that the CoC cannot devise an illegal method to renegotiate terms with the bidders,
Torrent Investments is likely to challenge NCLAT’s Thursday decision in the Supreme Court, as per industry sources.
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