SECURITIES AND EXCHANGE BOARD OF INDIA Vs. RAJKUMAR NAGPAL

JUDGEMENT

(1.) Reliance Commercial Finance Limited["RCFL"] issued Non-Convertible Debentures to various persons.["debenture holders"] Vistra ITCL (India) Limited was the Debenture Trustee["Vistra"] under three Debenture Trust Deeds dtd. 3/5/2017, 23/5/2017 and 5/2/2018.["Debenture Trust Deeds" or "Debenture Trust Deed"] RCFL committed its first default under the Debenture Trust Deeds in March 2019.

(2.) On 7/6/2019, RBI issued the Reserve Bank of India (Prudential Framework for the Resolution of Stressed Assets)["RBI Circular"] Directions 2019, with "a view to providing a framework for early recognition, reporting and time bound resolution of stressed assets".[Clause 4, RBI Circular.] The 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["Resolution Plan"] or initiating legal proceedings for recovery or insolvency. If the lenders chose to implement a Resolution Plan, they were required to enter into an intercreditor agreement.["ICA"] Bank of Baroda and other lenders of RCFL entered into an ICA on 6/7/2019, pursuant to the RBI Circular. Bank of Baroda was later appointed as the lead bank under the ICA.

(3.) The RBI Circular applied to banks and specified categories of lenders. Other investors were outside its purview. SEBI issued a circular on 13/10/2020. The subject was the 'Standardisation of procedure to be followed by Debenture Trustee(s) in case of 'default' by issuers of listed debt securities'.["SEBI Circular"] On 11/3/2021, RCFL and Vistra amended the Debenture Trust Deeds by executing a Supplementary Debenture Trust Deed which took note of the SEBI circular. On 15/7/2021, the Resolution Plan submitted by Authum Investment and Infrastructure Limited["Authum"] was approved by RCFL's lenders.