'More value to be discovered, NCLT has usurped the jurisdiction of the CoC', RCap to NCLAT

The lenders of Reliance Capital have submitted before the National Company Law Appellate Tribunal (NCLAT) that the Committee of Creditors (CoC) of the corporate debtor Reliance Capital Ltd. is being prevented to discover the best price in the CIRP and NCLT has acted in excess of its jurisdiction at a stage where even signed plans were not placed before the CoC for consideration.

Earlier this month, NCLAT had issued notices to Torrent Investments and other respondents on a petition filed by the lender of Reliance Capital seeking a second round of financial bids for the debt-ridden firm, currently going through insolvency resolution process. Vistra ITCL (India) Ltd, one of the members of the CoC of Reliance Capital, has moved NCLAT against an NCLT order.

In its written submission before NCLAT, Vistra ITCL said: "NCLT has usurped the jurisdiction of the CoC by holding that the CoC has to vote on the Rs 8,640 crore plan of Torrent and Rs 8,110 crore plan of IIHL and that CoC has no jurisdiction to negotiate even on the figures."

It further argued that NCLT has not even looked at these plans and there is no Rs 8,110 crore plan of IIHL and NCLT has substituted its opinion for that of CoC, which is not permissible under the IBC.

The appellant submitted that Torrent Investments has, within a span of 24 days, increased the values of the bid from Rs 1,100 crore upfront to Rs 3,750 crore upfront and then further within 2 weeks from Rs 3,750 crore upfront to Rs 8,640 crore upfront, and the same was the case with IIHL.

The appellant contended that CoC therefore clearly feels that there is more value to be discovered and the same cannot be interdicted by judicial intervention at this stage.

It has been contended before the NCLAT that as a result of the NCLT order, the CoC of the corporate debtor Reliance Capital Ltd. is prevented from carrying out the extended round of challenge mechanism to discover the best price in the CIRP of the corporate debtor.

"The Adjudicating Authority (NCLT) has assumed jurisdiction which it did not have. The jurisdiction of the NCLT arises only at the stage when resolution plans are placed before the NCLT for approval u/s 31 of the IBC. In the present case, draft unsigned plans were still being evaluated by the Administrator and CoC, and even the stage for approval by the CoC, much less the NCLT, had not come. Hence the application moved by Torrent was premature and the NCLT had no jurisdiction to entertain it," it added.

The appellant has argued that maximization of the value of the assets of the corporate debtor is one of the most vital objects of the IBC and strict adherence to this goal safeguards and advances the interests of all stakeholders.

The Mumbai bench of National Company Law Tribunal (NCLT), on February 2, had ruled against holding a fresh round of auction for the takeover of Anil Ambani-promoted Reliance Capital (RCap) and said the challenge mechanism for financial bids has already concluded.

The tribunal upheld the plea by Torrent Investments challenging the bankers' decision to go for the second round of auctions in pursuit of higher value for the bankrupt company. It allowed Torrent Investments application and declared that the challenge mechanism for financial bids stood concluded on December 21, 2022, with the bid of the applicant at Rs 8,640 crore being the highest.

In the last round of the challenge mechanism, Torrent Investment was the highest bidder, offering Rs 8,640 crore. Reliance Capital has a consolidated debt of about Rs 40,000 crore.