Suitors have raised concerns over the bidding process, including the introduction of ‘Challenge Mechanism’, as the resolution process of debt-ridden Reliance Capital Ltd (RelCap) enters the final stage.

According to sources, the decision of the Committee of Creditors (CoC) to introduce a new clause ‘Challenge Mechanism’ in the bidding process has upset the bidders. The ‘Challenge Mechanism’ gives lenders the power to oppose any resolution plan as and when they want.

Bidders have raised concerns about the introduction of this new clause at this late stage of the bidding process, sources said, adding there was no mention of this mechanism in the Request for Resolution Plan (RFRP) document.

RelCap had offered two options to all the bidders. Under the first option, companies could bid for Reliance Capital Ltd, including its eight subsidiaries or clusters. The second option gave the company freedom to bid for its subsidiaries, individually or in combination.

RelCap has eight businesses that are on the block. These include general insurance, life insurance, health insurance, securities business and asset reconstruction. According to sources, bidders such as Hinduja, Oaktree, and Torrent, who are bidding for Reliance Capital as a CIC (core investment company), have raised a red flag as to why a new clause is being introduced at this advanced stage of the bidding process.

Moreover, sources said the lenders have not yet defined or detailed the contours of this new clause, creating more confusion among the bidders. On the other hand, the bidders of Reliance General Insurance Company have raised concerns about the shares, sources said, adding the shares are held by IDBI Trusteeship Services (ITSL) and not in possession of lenders.

Earlier this month, theNational Company Law Tribunal (NCLT) for the third time extended the deadline for ResCap's resolution process to January 31. The earlier deadline was November 1, 2022.

Some other bidders feel that the condition of making all-cash bids and then full payment within 90 days is a difficult one and sought a deferred payment structure for the successful bidders under the second option.

Foreign bidders have expressed apprehension regarding the rules governing the capon foreign holding and lock-in period in an Indian insurance entity. As per the government guidelines, foreign players cannot hold more than 74 percent in the Indian insurance venture.

In addition, they have to adhere to a five-year lock-in period for their investment. The RBI on November 29 last year superseded the board ofRelCap in view of payment defaults and serious governance issues. The RBI appointedNageswara Rao Y. as the administrator for the resolution process of the company. Reliance Capital is the third NBFC against which the central bank has initiated bankruptcy proceedings under the IBC code.

At odds

■ Lenders have introduced a criteria called challenge mechanism

■ They can now oppose any bidding plan as and when they want

■ No mention in request for proposal document

■ Besides Reliance General Insurance shares with trustee and not with lenders