NCLT halts fresh auction at RCap

The National Company Law Tribunal (NCLT) on Thursday barred lenders of bankrupt Reliance Capital (RCap) from conducting a second auction of its assets, terming it an "illegal mechanism" to circumvent rules of India's bankruptcy code.

- Priyanka Gawande

The tribunal further directed the RCap administrator to conclude the resolution process.

Torrent Investments emerged as the top bidder in the RCap bankruptcy auction with an offer of ₹8,640 crore. However, Hinduja Group firm IndusInd International Holdings Ltd (IIHL) offered to pay ₹9,000 crore after the auction ended; when lenders decided to conduct a second auction to determine the winner-called extended challenge mechanism Torrent moved NCLT.

"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," a bench of justices Shyam Babu Gautam and Pradeep Narhari Deshmukh said.

"We are, thus, of the view that the committee of creditors cannot devise an illegal mechanism to circumvent the scheme of code to indirectly be able to negotiate further with the resolution applicants post conclusion of the statutory scheme of challenge process under Regulation 39(1A)," the bench said.