Content Provider | Supreme Court of India |
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e-ISSN | 30484839 |
Language | English |
Access Restriction | NDLI |
Subject Keyword | SEBI (Debenture Trustees) Regulations 1993 |
Content Type | Text |
Resource Type | Law Judgement |
Jurisdiction | India |
Case(s) Referred | Referred Case 0 Referred Case 1 Referred Case 2 |
Case Type | Appeal |
Court | Supreme Court of India |
Disposal Nature | Appeal Allowed |
Headnote | SEBI (Debenture Trustees) Regulations 1993 – Companies Act 1956 – S. 391 (s. 230 Analogous provision, Present law) – Company Act 2013 – SS. 1(4), 430 – Recovery of Debts – Resolution Plan – Debenture Holders – Debenture Trust Deeds – Reliance Commercial Finance Limited (RCFL) issued Non-Convertible Debentures to various persons – Vistra ITCL was the Debenture Trustee – RCFL committed default under the Debenture Trust Deed on March 4, 2019 – On June 07, 2019, a RBI circular provided that certain lenders may opt for a resolution strategy available to them under the existing legal framework, including entering into a resolution plan or initiating legal proceedings for recovery or insolvency – Thereafter, SEBI issued a circular dated 13 October 2020 providing ‘Standardisation of procedure to be followed by Debenture Trustee(s) in case of default by issuers of listed debt securities’ – Debenture Holders instituted a suit before the High Court, for the protection of their interests with respect to amount due to them by RCFL – Single Judge of the High Court suggested that all the concerned parties to enter into a negotiated settlement – Pursuant to that, the terms of repayments under Resolution Plan was formulated under the inter-creditor agreement (ICA) and approved by the company’s lenders – Single Judge also held that SEBI Circular dated 13 October 2020 could not be permitted to operate retrospectively and didn’t govern the Debenture Trust Deed – It directed debenture trustee to conduct a meeting of all debenture holders in terms of Debenture Trust Deed and SEBI Circular would not override the express terms of any of the Debenture Trust Deed – SEBI challenged the Single Judge’s order dated 28 October 2021 and 15 November 2021 before the Division Bench – Division Bench of the High Court held that SEBI circular would not apply retrospectively to defaults committed prior to 13 October 2020 – Aggrieved by this decision SEBI moved to the Supreme Court – (i) Whether the Debenture Holders and other parties were required to follow the Procedure under the SEBI Circular – (ii) Whether the civil Court had the jurisdiction to entertain the lis in this case – On appeal, held : SEBI Circular does not stipulate that the signing of an ICA is the only route to entering into a compromise with the issuer company – Besides the absence of a clause mandating an ICA pursuant to an event of default, clause 6.5.3 of the SEBI Circular recognizes that the debenture holders (through the Debenture Trustees) may undertake actions besides those contemplated in the SEBI Circular – However, if the Debenture Holder’s choose to implement a Resolution Plan to which the lenders are party, they must do so in compliance with the conditions laid down in the SEBI Circular – SEBI circular was issued with reference to the RBI circular – Both the RBI Circular and the SEBI Circular refer to one and the same ICA and Resolution Plan – This is evident from Clause 4 of the SEBI Circular – When the SEBI circular came into force, it specified the conditions under which the debenture holders (through the Debenture Trustees) could access this Resolution Plan and participate in its formulation via the ICA – The ICA and the Resolution Plan are inextricably intertwined and the latter has its genesis in the former, and flows from it – Any reference to an ICA in the SEBI Circular is also necessarily a reference to the Resolution Plan and vice versa – The SEBI Circular does not mandate the execution of an ICA as the only route to entering a compromise with the issuer company, it lays down a procedure in the event that debenture holders choose the route of implementing a Resolution Plan with the lenders – This procedure cannot be circumvented – As far as civil court’s jurisdiction is concerned, bar in section 15Y would not operate as against the suit in the present case – Similarly, nothing in the Companies Act 2013 or any other law for the time being in force vests either the National Company Law Tribunal or the National Company Law Appellate Tribunal with the jurisdiction to adjudicate upon a challenge to the RBI Circular – Hence, the bar in Section 430 of the Companies Act, 2013 is not attracted. SEBI (Debenture Trustees) Regulations 1993 – Companies Act 1956 – S. 391 (s. 230 Analogous provision, Present law) – Company Act 2013 – SS. 1(4), 430 –Retroactive application of SEBI Circular 13 October 2020 – Held: In the instant case, RCFL issued the debentures and defaulted on the payments to the debenture holders prior to the issuance of the SEBI Circular – However, as of 13 October 2020 (the date on which the SEBI Circular came into force), a compromise or agreement on the restructuring of the debt owed by RCFL did not exist – The debenture holders were not vested with any rights with respect to the resolution of RCFL‘s debt – The existence of the debt and the subsequent default by RCFL was the status of events, which existed prior to 13 October 2020 – Once it came into force, the SEBI Circular applied to the manner of resolution of debt, as specified therein. Words/Phrases – Retrospective and retroactive – Discussed. |
Judge | Hon'ble Dr. Justice D.Y. Chandrachud |
Neutral Citation | 2022 INSC 885 |
Petitioner | Securities And Exchange Board Of India |
Respondent | Rajkumar Nagpal & Ors |
SCR | [2022] 15 S.C.R. 1 |
Judgement Date | 2022-08-30 |
Case Number | 5247 |
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