NCLT favours Torrent, rules against second auction for Reliance Capital

The bankruptcy court on Thursday ordered in favour of Torrent Investments in its plea challenging lenders’ decision to hold a second auction for the sale of Reliance Capital and a late improved offer from the Hinduja Group after the auction for the bankrupt company concluded on December 21.

The committee of creditors (CoC) cannot devise an “illegal mechanism” to circumvent the regulations and to indirectly be able to negotiate further with the resolution applicants after the conclusion of the statutory scheme of challenge process under Regulation 39(1A), said a division bench of Justice PN Deshmukh and technical member Shyam Babu Gautam.

As per Regulation 39(1A) of the Insolvency and Bankruptcy Board of India, the bidder has to prepare a resolution plan in accordance with the bankruptcy code and has to submit it to the resolution professional (RP) within the time given in the invitation made by the RP. The CoC is expected to challenge this order at the National Company Law Appellate Tribunal (NCLAT).


Torrent was the top bidder in the earlier round of the auction that concluded on December 21, offering an upfront payment of Rs 8,640 crore for Reliance Capital. However, 24 hours after the auction deadline, the Hinduja Group made another offer, promising to pay Rs 8,950 crore, including Rs 8,110 crore upfront. Both offers were below the liquidation value.

After this, the lenders proposed to hold an extended auction with a threshold of Rs 9,500 crore, which included Rs 8,000 crore as upfront cash payment.

The Mumbai bench of the National Company Law Tribunal (NCLT), in its 71-page order, observed: “The proposed second round of the challenge mechanism is nothing but an act to indirectly achieve what could not have been achieved by adhering to the challenge mechanism in terms of the challenge process note.”

The NCLT had ordered status quo on the auction process on January 3 and extended the stay on January 23.

Subsequently, the CoC moved the appellate tribunal, seeking to vacate the bankruptcy court order on status quo. However, the committee later decided to withdraw the application.