Khushi Doshi
Published on: April 11, 2022 at 18:15 IST
The Supreme Court issued Notice on Appeal filed by the Securities and Exchange Board of India against a Bombay High Court decision that allowed Reliance Commercial Finance Ltd shareholders to vote using Debenture Trust Deeds signed by the shareholders in accordance with a Reserve Bank of India circular.
A Bench led by Justice DY Chandrachud, also Ordered that the voting results be delivered to the Supreme Court in a sealed envelope and Scheduled the Case for further hearing on May 4, 2022.
It had, however, stayed its Judgement until March 28, 2022, to allow Securities and Exchange Board of India to file an Appeal with the Supreme Court.
The point of contention in this Case arose from the applicability of two circulars issued by the two lenders, the Reserve Bank of India and the Securities and Exchange Board of India.
According to the Reserve Bank of India circular, Voting by Lenders must be 75 percent in value and 60 percent of the total number of Lenders.
Meanwhile, according to the Securities and Exchange Board of India circular, all Debenture Holders are required to participate.
The Reliance Commercial Finance Ltd Stakeholders approved Authum’s resolution plan in July 2021. Reliance Commercial Finance Ltd owed its Creditors over 9,000 crores. Accepting Authum’s resolution plan, which offered 1,240 crores, resulted in an 86 percent write-off for the Creditors.
Following the approval of the Resolution Plan, Securities and Exchange Board of India sought a High Court order prohibiting Reliance Commercial Finance Ltd and the consortium of creditors’ lead bank from acting on or creating third party rights in respect of the security under the Debenture Trust Deeds.
One of the arguments made in support of the application of the Securities and Exchange Board of India circular was that a single investor not voting could result in the failure of the resolution plan.
A single judge of the High Court ruled that voting could take place in accordance with the Debenture Trust Deeds. Securities and Exchange Board of India then filed an Appeal with the Division Bench, which upheld the Single-Judge decision, resulting in the current Appeal before the Supreme Court.
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