Mumbai,  The Committee of Creditors (CoC) of Reliance Capital (RCAP) is scheduled to meet on Friday to decide on the newly-introduced clause, Challenge Mechanism, in the final binding process.

Notably, bidders like Piramal, Hinduja, Torrent, Zurich, Oaktree, Advent have raised a red flag on this clause which was not in the original Request for Resolution Plans (RFRP) document issued to the bidders.

These bidders have written to the RBI-appointed administrator expressing their concern on the insertion of Challenge Mechanism clause at this stage of bidding.

Bidders have argued that there was no such clause in the bidding process of DHFL, which was the largest resolution done through NCLT in the financial services sector, for over Rs 95,000 crore worth of debt.

Bidders have said that the winning bidder was evaluated only on one simple criteria of the Net Present Value (NPV), as per the RFRP of the bid.

Also, in the case of SREI resolution, where binding bids are due by November 15, neither the CoC, nor the RBI administrator has tried to experiment with a Challenge Process/Mechanism.

KPMG, who is the CoC advisor, and Luthra & Luthra, who is legal advisor to the RCAP CoC, have proposed multiple options for the Challenge Mechanism

Option 1 is the Swiss Challenge Process where the highest bidder will be declared as an Anchor Bidder, and will be offered the Right of First Refusal (RoFR) and the other bidders under option 1 for RCap CIC can participate.

Option 2 is a bilateral negotiation by the CoC with each bidder.

Option 3 is an electronic auction for bidders to participate in, and to declare the highest bidder.

Option 4 is a combination of all the above.

The binding bids for RCAP are due on November 28.

Bidders for Reliance General Insurance (RGIC) -- Advent, Zurich and Piramal -- are concerned with not only the above Challenge Process but also of the fact that they have to provide all cash bids, while Torrent, Hinduja and Oaktree for RCap CIC, in line with RFRP, have the option of cash + deferred payment.

As per the bidders for RGIC, this is not a level playing field, and discriminates bidders for RGIC.

It will be interesting to see, how the concerns of various bidders will be addressed by the CoC.