CoC clears plan to distribute funds equally to Reliance Capital lenders

Dissenting lenders to get same amount from Hinduja offer

Reliance Capital

In a letter to the committee of creditors (CoC) communicating its decision to not bid in the second auction

Dev Chatterjee Mumbai

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The lenders of Reliance Capital (RCap) on Monday approved a plan to distribute the funds to be received from the Hinduja resolution plan, which would be based on their admitted claims and irrespective of their stand while voting on the plan next month.

The fund distribution for RCap will be different from earlier practices as the new plan gives equal treatment to all lenders and avoids litigation, informed a banking source. In earlier resolution plans for a bankrupt company, the dissenting lenders were paid based on liquidation value, which often led to litigation.

The company, earlier owned by Anil Ambani, was sent for debt resolution in November 2021 after it defaulted on loans worth Rs 24,000 crore. Several companies had evinced interest in the expression of interest stage, but a majority stayed away from making binding offers.

The vote on the single resolution plan submitted by IndusInd International Holdings (IIHL), a Hinduja Group company, will be held in June.

The IIHL resolution plan offered approximately Rs 9,650 crore to lenders in the second round of auction held last month. The Hinduja offer is still way below the liquidation value of Rs 13,000 crore.

The fate of the Hinduja offer, however, will be decided by the Supreme Court in August, which is hearing a petition by Torrent Group (Torrent), which has objected to the second auction to be conducted by banks.

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Torrent was the highest bidder for RCap, with an offer of Rs 8,640 crore in the first auction held in December last year. This decision is expected to mitigate intercreditor disputes among lenders, thus ensuring a smoother resolution process. 

A banker said they expect to complete the entire process by submitting the resolution plan to the National Company Law Tribunal by mid-July. A source at Torrent said it steered clear of the second auction because there was no clarity on the process and its concerns were not addressed either.

In a letter to the committee of creditors (CoC) communicating its decision to not bid in the second auction, Torrent reiterated its stand on the “illegality” of a second auction, saying it was in gross violation of the current bankruptcy laws.

Torrent had said the auction process continues to be arbitrary and vague as the CoC decided not to freeze the resolution plans (except the financial proposal) before the extended challenge mechanism.

First Published: May 29 2023 | 8:15 PM IST

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