A bench led by Justice DY Chandrachud also ordered that the voting results be presented to the Supreme Court in a sealed envelope, and the case was adjourned until May 4, 2022.
The Supreme Court issued notice in an appeal filed by the Securities and Exchange Board of India (SEBI) against a Bombay High Court decision allowing Reliance Commercial Finance Ltd (RCFL) shareholders to vote using Debenture Trust Deeds signed by the shareholders in accordance with a Reserve Bank of India (RBI) circular.
A bench led by Justice DY Chandrachud also ordered that the voting results be presented to the Supreme Court in a sealed envelope, and the case was adjourned until May 4, 2022.
In a March 21 verdict, a division bench of the Bombay High Court preserved the interests of retail debenture holders voting for the takeover of RCFL by /Authum Investments & Infrastructure.
"We don't see how the interests of regular investors aren't protected if voting is done in accordance with the DTDs." The decision-making power remains with each individual debenture holder under this approach. Every holder of a debenture will have the ability to vote, and the faith of the vote will be decided by a majority of 75 percent of the votes cast by the debenture holders. The High Court had ruled that "this method is fair, just, equitable, and consistent with the interests of all stakeholders."
It has, however, granted a stay of execution until March 28, 2022, to allow SEBI to file an appeal with the Supreme Court.
The point of disagreement in this case was the applicability of two circulars issued by the two lenders, the Reserve Bank of India and the Securities and Exchange Board of India (SEBI).
According to the RBI circular, lenders must vote with a combined value of 75 percent and a total number of lenders of 60 percent.
Meanwhile, SEBI's circular stated that all holders of debentures are required to participate.
In July 2021, the RCFL stakeholders adopted Authum's resolution proposal.
The RCFL owed its creditors around 9,000 crores. Accepting Authum's resolution proposal, which offered 1,240 crores, resulted in a creditor write-off of 86 percent.
Following the acceptance of the Resolution Plan, SEBI petitioned the High Court for an injunction prohibiting RCFL and the consortium of creditors' lead bank from acting on or creating third party rights in respect of the security under the DTDs.
One of the arguments made in support of the SEBI circular was that the failure of the resolution plan could be caused by a single investor not voting.
"This would result in an absurd situation in which the entire resolution plan would fail even if one single investor votes against or, worse, abstains from voting." The retail debenture holders would be the ones who would suffer the most in such a situation. As a result, according to the Respondents, SEBI, whose purpose is to defend small investors' interests, would be infringing on their rights by recommending that the debenture holders' meeting be held in accordance with their circular," the Court noted.
The voting might take place as per the DTDs, according to a solitary judge of the High Court. SEBI subsequently took its case to the division bench, which confirmed the single-judge ruling, prompting the current appeal to the Supreme Court.
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