The Reserve Bank of India (RBI) has allowed asset reconstruction companies (ARCs) to act as resolution applicants under the Insolvency and Bankruptcy Code (IBC). According to the revised guidelines released by RBI, ARCs can operate as resolution applicants, which was not allowed under the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (SARFAESI) Act earlier. However, to become a bidder, the ARCs need to have a minimum net-owned fund of Rs 10 billion and a board-approved policy to take up the role of an applicant.
Earlier, UV Asset Reconstruction Company (UV ARC) had made the winning bid for Aircel and Reliance Communications but the acquisition was stuck in litigation over the transfer of spectrum to the acquirer and the RBI’s earlier ban on the ARCs from investing in bankrupt companies under the IBC. Even with the new guidelines, UV ARC will not be able to qualify for future transactions as it does not have Rs 10 billion of net-owned funds.
According to sources, the lenders will wait for the court’s decisions on both Aircel and Reliance Communications’ accounts and then take a call on their next move. The options include whether to call for fresh bids or send both companies to liquidation. Besides, as per sources, both assets are becoming unattractive for UV ARC as the government has made it clear that the spectrum owned by the bankrupt companies cannot be transferred per the new spectrum rules.
