Bombay HC rules against SEBI; Green Lights Reliance Commercial Takeover by Authum Investments

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Tanya Gupta

Published on: March 23, 2022 at 17:30 IST

In the Case of Securities and Exchange Board of India Vs. Rajkumar Nagpal & Ors, Bombay High Court’s Division Bench upheld the Single-Judge Order permitting Stakeholder of Reliance Commercial Finance Ltd. (RCFL) to proceed with Voting Process on Debenture Trust Deeds signed by Shareholders in compliance with Reserve Bank of India.

Justices SJ Kathawalla and Milind Jadhav stated,

“We do not see how the Interest of Retail Investors is not protected should Voting be carried out in Terms of the Debenture Trust Deeds. Under this procedure, the Decision-Making Power still vests with each Individual Debenture Holder. Every Debenture Holder will have the Right to Vote and the Faith of the Vote shall be decided by a Majority of 75% after taking into consideration the Votes cast by the Debenture Holders. This mechanism, is in our opinion, Fair, Just, Equitable and in keeping with the Interest of all Stakeholders.” 

This order was stayed till March 28, so that the Securities Exchange Board of India (SEBI) could approach Supreme Court in Appeal.

The conflict in present Case arose out of the Application of two Circulars issued by 2 Lenders, the Reserve Bank of India and the Securities Exchange Board of India.

The Court observed,

“This would lead to an Incongruous Situation wherein even if one Single Investor either Votes against or worse, abstains from Voting, the entire Resolution Plan would Fail. In such situation, it would be the Retail Debenture Holders who would suffer the most. Therefore, according to the Respondents, Securities Exchange Board of India (SEBI), whose role is to Protect the Interest of Small Investors, would in fact be Defeating their Rights by submitting that the Meeting of Debenture Holders should be held as per their Circular.” 

Also Read: Supreme Court: SEBI must disclose probe report before Punitive Action

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