The move by Life Insurance Corporation of India (LIC) to sell secured bonds of Reliance Capital worth Rs 3,400 crore has hit another roadblock. Now, a non-governmental organisation (NGO) is seeking a ban on the bidders who are part of the bankruptcy process.

New Delhi-based NGO — Infrastructure Watchdog — has alleged that the prospective bidders are ‘insiders’ as defined under Sebi rules as they were given access to privileged and confidential business information. This includes Unpublished Price Sensitive Information (UPSI), which is not available in the public domain, the NGO said in a letter sent to LIC and its advisor

The letter was also marked to the Securities and Exchange Board of India (Sebi) officials and the administrator for RCap’s Corporate Insolvency Resolution Process (CIRP).

“As part of the CIRP, the administrator had invited Expression of Interests (EoI) for RCap and its assets from the prospective bidders. Several prospective bidders, who are interested in acquiring RCap, have submitted their EoIs and are conducting due diligence,” the letter said, adding, that these bidders are privy to crucial information.

Additional members of the Committee of Creditors (CoC), constituted by the administrator, also have access to and possess sensitive information. Several CoC members have also submitted their EoIs and are conducting due diligence. Such members are also ‘insiders’ under Sebi’s (Prohibition of Insider Trading) Regulation, 2015, it added.

The NGO also wants LIC and IDBI Capital Markets to ensure that such persons are considered ineligible to participate in the bond sales process. On eligibility, Infrastructure Watchdog asked the sellers to obtain an undertaking from bidders that they neither submitted any nor will participate in RCap’s bankruptcy process and are not members of the CoC.

Earlier on Monday, LIC extended the deadline to submit bids for bond sales by another 11 days to July 22, following a tepid interest from the prospective bidders. LIC has been trying to sell the bonds, now trading at a 70% discount, since July 2021. The insurer had made two attempts earlier but failed as it could not arrive at a price consensus with the prospective buyers.

LIC was expecting to recover at least 30% of the bond amount as it expects several prospective buyers to submit their bids before the expiry of the new deadline.

RCap is currently undergoing insolvency proceedings, with the creditors of the former Anil Ambani group company seeking Rs 23,666 crore in dues. At present, there are only five bidders, including a consortium led by Piramal Enterprises, actively pursuing the process, which is in contrast to the nearly 54 EoIs the firm had received in March.