The bone of contention in the present case arose out of the applicability of the two circulars issued by the two lenders, RBI and the Securities Exchange Board of India (SEBI).
The circular by RBI provides that voting by the lenders has to be 75% in value and 60% of the total number of lenders.
Meanwhile, the circular by SEBI stipulated that all the debenture holders are required to participate.
The stakeholders to RCFL approved the resolution plan of Authum in July 2021.
RCFL owed more than ₹9,000 crores to its creditors. Accepting the resolution plan of Authum, which offered ₹1,240 crores, meant an 86% write off for the creditors.
Following approval of the Resolution Plan, SEBI sought an order from the High Court to restrain RCFL and the lead bank amongst the consortium of creditors from acting upon or creating third party rights in respect of the security under the DTDs.
The contentions raised pointing out the consequences on application of the SEBI circular was that a single investor not voting could result in failure of the resolution plan.
“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, 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,” the Court observed.
A single-judge of the High Court had ruled that the voting could take place as per the DTDs executed. SEBI then appealed to the division bench which upheld the single-judge decision, leading to the present appeal before the top court.
Source: Barandbench
