Suitors have raised concerns over the bidding process, including the introduction of 'challenge mechanism', as the resolution process of debt-ridden Reliance Capital Ltd (RCL) enters the final stage.

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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.

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

RCL has eight businesses that are on the block. These include general insurance, life insurance, health insurance, securities business and asset reconstruction, among others.

According to sources, bidders like Hinduja, Oaktree, and Torrent, who are bidding for Reliance Capital as a CIC, 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 amongst the bidders.

On the other hand, the bidders of Reliance General Insurance Company (RGIC) have raised concern about the shares, sources said, adding shares are currently held by IDBI Trusteeship Services (ITSL) and not in possession of lenders.

Earlier this month, the National Company Law Tribunal (NCLT) for the third time extended the deadline for RCL'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 short and sought deferred payment structure for the successful bidders under the second option.

Foreign bidders have expressed apprehension regarding the rules governing the cap on foreign holding and lock in period in an Indian Insurance entity.

As per the government guidelines, foreign players cannot hold more than 74 per cent in the Indian insurance venture. In addition, they have to adhere to a five-year lock-in period for their investment.

The Reserve Bank of India (RBI) on November 29 last year superseded the board of RCL in view of payment defaults and serious governance issues.

The RBI appointed Nageswara Rao Y as the administrator in relation to the Corporate Insolvency Resolution Process (CIRP) of the firm. Reliance Capital is the third large non-banking financial company (NBFC) against which the central bank has initiated bankruptcy proceedings under the IBC.

The other two were Srei Group NBFC and Dewan Housing Finance Corporation (DHFL). The RBI subsequently filed an application for initiation of CIRP against the company at the Mumbai bench of the NCLT.

In February this year, the RBI-appointed administrator invited expressions of interest for the sale of Reliance Capital.