The lenders of Reliance Capital are holding a meeting on Tuesday to decide on when to hold the second round of auction for the bankrupt company amid the ongoing case in the Supreme court challenging the process, people with knowledge of the matter told CNBC-TV18.

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“We will discuss how to proceed with the process with the case going on in Supreme Court, and decide when to hold the second round of auction since the court has not prevented us from doing so,” said a lender to the company. This person added that a date for the second round may be decided in the meeting, and lenders will likely proceed with the auction, pending final orders from the Supreme Court.

The lenders are likely to set the base bid at Rs 9,500 crore on a Net Present Value (NPV) basis as previously decided, with a minimum cash component of Rs 8,000 crore. The bid amount will go up by Rs 500 crore in the subsequent round, and by Rs 250 crore in the rounds after that, as per the terms that will likely be set.

The Committee of Creditors (CoC) will be meeting for the first time since Supreme Court started hearing Torrent Investments’ plea, challenging the second round of auction for the company, and setting aside its highest bid in the first round.

Torrent Investments had emerged as the highest bidder with a resolution plan of Rs 8,640 crore. However, post the conclusion of the second round, the other suitor- Hinduja Group via its company IndusInd International Holdings Ltd (IIHL) sent lenders a revised bid of close to Rs 9,000 crore in net present value (NPV) terms, prompting the lenders to seek another round of bidding, which was challenged by Torrent in NCLT.

Torrent had moved NCLT opposing revision in bid by Hinduja post the e-auction, and also sought stay on extended challenge mechanism proposed by lenders, which the NCLT granted on February 2.

However, lenders had subsequently moved the NCLAT against the ruling. Lenders had argued that freezing the bid value at December 2022 levels would risk an order for liquidation, as they found the bids sub-optimal. NCLAT had ruled in favour of lenders on March 2, and permitted the CoC to continue with the challenge mechanism and invite bids after two weeks.

Thereafter, Torrent moved the Supreme Court in the matter on March 13, but was refused any interim relief by means of a stay on the second round of bidding on Monday. The court has allowed the lenders and Administrator of the company to file their reply within six weeks’ time, and will next hear the case only after that.

In this scenario, the final orders which could impact the resolution process will not be clear until much later. This would impact significant uncertainty to the process, and it remains unclear how the resolution applications will react to another round, said a lender to the company.

The CoC will likely invite all four resolution applicants to participate from the last round- including Torrent Investments, a consortium of Piramal-Cosmea Financial Holdings, American financial services major Oaktree Capital Management, and Hinduja Group’s IIHL.

Reliance Capital is facing claims of Rs 25,334 crore from various creditors under IBC, and its lawyers had previously argued that about Rs 45 crore of interest was mounting each week with the delay in resolution.

First Published:Mar 21, 2023 12:27 PM IST