2022 (12) TMI 1377 - HC - SEBI

Procedure to be followed by debenture trustees - Option to dissenting Debenture Holders to accept the terms of the Resolution Plan - approving the Resolution Plan as sought in interim application - Whether the debenture holders and other parties in the present case were required to follow the procedure under the SEBI Circular? - scope of Debenture Trust Deeds - SEBI Circular to have retrospective effect - Interim Application sought for exercise of inherent powers by this Court under Section 151 of the CPC - alternatively, the dissenting Debenture Holders be given a right to stand outside the Resolution Plan and pursue other legal means as available in law - HELD THAT - As considering the law laid down by the Supreme Court in SEBI Vs. Rajkumar Nagpal Ors 2022 (9) TMI 110 - SUPREME COURT which holds that the SEBI Circular dated 13th October, 2020 has retroactive application, it is not open for the Applicant by way of this present Interim Application to contend otherwise. The moulding of relief can only be done by the Supreme Court under Article 142 of the Constitution of India. This Court under Section 151 of the CPC does not have the powers akin to Article 142 of the Constitution of India. Exercise of powers u/s151 of the CPC is limited to only those circumstances where procedural gaps exists and which is not expressly or impliedly provided for in the CPC, so as to ensure substantive justice is not obliterated by hyper technicalities. This Court whilst exercising jurisdiction under Section 151 cannot be do something contrary to what the statute lays down. The SEBI Circular dated 13th October, 2020 has received the force of law by the said judgment and order dated 30th August, 2022 of the Supreme Court which holds the SEBI Circular to have retroactive effect. It is a conceded position that in accordance with SEBI s Circular dated 13th October, 2020, the requisite majority has not been achieved for approval of the Resolution Plan tabled for approval of at the meeting held on 13th May, 2022. As taken note of the manner in which the Supreme Court has moulded the relief in approving the Resolution Plan which was the subject matter of those proceedings. As noted the observations of the Supreme Court which are in Paragraph 88 and 89 wherein notice has been taken regarding the small Retail Debenture Holders whose exposure is not more than Rs.10 lakhs in that case being in a position to recover 100% of their admitted dues under the Resolution Plan. There can be a comparison drawn between that case and the present case, wherein a similar pattern arises if one was to consider the approval of the Resolution Plan. In the present case this would benefit the small Retail Debenture Holders having exposure upto Rs.5 lakhs being in a position to recover 100% of their principal dues. These small Retail Debenture Holders number 19353 out of the total 20861 Debenture Holders. However, the moulding of relief as had been done by Supreme Court in approving the Resolution Plan in the case of RCFL cannot be done by this Court in exercise of its inherent powers under Section 151 of the CPC for approving the Resolution Plan of the Applicant as has been sought for it in the present Interim Application. In view of the above finding it is not necessary to go into the other arguments of SEBI that by the filing of the present Interim Application, the Applicant has overriden the prior orders of this Court.

Summary

Issues Involved:
1. Approval of the Resolution Plan.
2. Applicability of SEBI Circular dated 13th October, 2020.
3. Exercise of inherent jurisdiction under Section 151 of the CPC.
4. Comparison with the Supreme Court's decision on RCFL Resolution Plan.
5. Rights of dissenting Debenture Holders.

Detailed Analysis:

1. Approval of the Resolution Plan:
The Applicant (Defendant No.1) sought approval for the Resolution Plan tabled on 13th May, 2022, with an option for dissenting Debenture Holders to either accept the plan or pursue other legal remedies. The meeting and voting were conducted as per prior court orders, but the results were sealed pending further orders.

2. Applicability of SEBI Circular dated 13th October, 2020:
The SEBI Circular's applicability was a contentious issue. Initially, the Single Judge ruled that the meeting should adhere to the Debenture Trust Deeds, not the SEBI Circular. However, the Supreme Court later held that the SEBI Circular has retroactive application, necessitating ISIN-wise voting. This retroactive application was confirmed in the Supreme Court's order dated 30th August, 2022.

3. Exercise of inherent jurisdiction under Section 151 of the CPC:
The Applicant sought the court's inherent jurisdiction under Section 151 of the CPC to approve the Resolution Plan, citing the Supreme Court's use of Article 142 in a similar RCFL case. However, the court noted that it lacks powers akin to Article 142 and cannot override statutory provisions. The SEBI Circular, having the force of law, must be adhered to, and the requisite majority for approval under the SEBI Circular was not achieved.

4. Comparison with the Supreme Court's decision on RCFL Resolution Plan:
The Applicant drew parallels with the Supreme Court's decision on RCFL, where relief was molded under Article 142 to approve the Resolution Plan despite non-compliance with the SEBI Circular. The court acknowledged similarities but reiterated its inability to exercise such powers under Section 151 of the CPC. The Supreme Court's decision was based on unique circumstances and its constitutional authority, which the High Court does not possess.

5. Rights of dissenting Debenture Holders:
The Supreme Court had provided dissenting Debenture Holders in the RCFL case an option to accept the Resolution Plan or pursue other legal means. The Applicant sought a similar provision. However, the court emphasized that without the requisite majority as per the SEBI Circular, the Resolution Plan could not be approved, and such relief could only be granted by the Supreme Court under Article 142.

Conclusion:
The court concluded that it could not approve the Resolution Plan as sought by the Applicant due to the binding nature of the SEBI Circular and the lack of requisite majority. The inherent jurisdiction under Section 151 of the CPC does not extend to overriding statutory provisions or retroactive application of the SEBI Circular. The Interim Application was disposed of without granting the relief sought, and no costs were ordered.