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Serious differences have emerged between the Reliance Capital Administrator and its Committee of Creditors (COC), and their respective advisors, over the resolution process of company's different subsidiaries/ clusters which are on the block.

Over 50 bidders have submitted expression of interest (EOI) for RCAP and its multiple subsidiaries, out of which around 22 EOIs are for RCAP as a company, while the rest EOIs are for individual or combination of its eight subsidiaries.

Notably, RCAP had offered two options to all the bidders. Under option- 1, companies could bid for Reliance Capital, including its eight subsidiaries or clusters. Option - 2 gave the companies freedom to bid for its subsidiaries, individually or in a combination.

Key clusters of RCAP are Reliance General Insurance, Reliance Health Insurance, Reliance Nippon Life Insurance, Reliance Asset Reconstruction, and Reliance Securities.

According to sources, the bone of contention between the Administrator, COC and their respective legal advisors are the RCAP subsidiaries' resolution process. Notably, all the subsidiaries of RCAP are profit making entities and are well capitalised. Management teams for each of these businessese is also intact. Therefore, as per the IBC, no compliant plan can be submitted for these subsidiaries as there is no requirement of turnaround because none of these entities are facing any stress and are well run businesses.

The difference of opinion between Administrator and COC on the methodology to be adopted for the sale of these subsidiaries is leading to an inordinate delay in the finalisation of Request for Resolution Plan (RFRP) document.

As per the original timeline, RFRP was to be issued to all those companies who had submitted EOIs by April 5, but according to sources, the COC and Administrator are yet to finalise the terms of RFRP document.

RFRP document sets the guidelines for submission and evaluation of Resolution Plan for Corporate Debtor (which is RCAP). RFRP has to be agreed upon between Administrator and COC before it is published to all Prospective Resolution Applicants.

Key differences between Administrator and COC on the RFRP document are: whether or not to invite price bids for individual clusters under option 2 and how will cluster level bidders under option 2 submit an IBC compliant plan?

Sources disclosed that COC is intending to force consortium formation on cluster level bidders to submit a company level resolution plan, but the Administrator is not in favour of this. The key concerns of administrator over this approach are: what will be the mechanism for formation of consortium of cluster level bidders, and who will responsible for non-performance of those plans? Will it joint liability of all consortium partners who are forced by COC into a consortium?

Many of the RFRP suggestions by CoC are not IBC compliant and hence leading to friction with Administrator.
Experts are of the opinion that value maximisation can happen only if cash bids are invited for a diverse asset like Reliance Capital.

Deloitte is the Process Advisor for RCAP Administrator, while AZB and Partners is the legal advisor. In addition, there is a 3-member advisory committee comprising of Ex-State Bank of India DMD, Shri Sanjeev Nautiyal, Ex-Axis Bank DMD, Shri Srinivasan Varadarajan and Ex-MD and CEO of Tata Capital, Shri Praveen P Kadle.

On the other hand COC's advisors are KPMG and Luthra and Luthra.