NCLT rejects second auction of Reliance Capital; creditors likely to appeal

CoC may move NCLAT to hold another auction to get higher value

The National Company Law Tribunal (NCLT) on Thursday termed the second auction planned by the committee of creditors (CoC) of Reliance Capital to sell the bankrupt company’s assets a “violation of law”.

The CoC is expected to move the National Company Law Appellate Tribunal (NCLAT) to appeal against the NCLT order. The lenders were planning another auction of Reliance Capital to maximise the value of the assets after the Hinduja group offered Rs 9,000 crore for the company after the first auction was concluded.

Ahmedabad-based Torrent, which had emerged as the highest bidder with an offer of Rs 8,640 crore, had moved the NCLT against the CoC’s move to hold the second auction saying it (holding another auction) would vitiate the entire auction process.

Reliance Capital was sent to NCLT for debt resolution in November 2021 after it defaulted on its debt worth Rs 24,000 crore.

The decision to have an e-auction was taken at the behest of the Life Insurance Corporation and the Employees’ Provident Fund Organisation (EPFO), which control 35 per cent of the voting in the CoC.

Creditors of Reliance Capital had earlier offered two options for the bidding: Under the first option, companies had to bid for Reliance Capital as a whole, including its subsidiaries. The second option entailed bidders separately going for individual businesses of Reliance Capital. Both Hinduja and Torrent made offers for the entire company.

In an earlier round, Reliance Capital had received four binding bids at the company level, with the highest offer coming from a consortium of the Piramal group and Cosmea Financial Holdings. The CoC then decided to hold an auction. Valuation reports by Duff & Phelps and RBSA Advisors had pegged the liquidation value of Reliance Capital at Rs 12,500 crore and Rs 13,200 crore, respectively. The liquidation value of Reliance Capital is far higher than the value of the bids received so far and hence lenders want to hold another auction.

According to Duff and Phelps, the liquidation value of Reliance General Insurance is Rs 7,000 crore and Rs 4,000 crore for Reliance Nippon Life Insurance.