The Supreme Court has allowed creditors in the Anil Ambani-promoted Reliance Commercial Finance Ltd (RCFL) to go ahead with the resolution plan for the company, clearing implementation of the recovery plan more than a year after lenders had approved it.
The court was deciding an appeal by the Securities and Exchange Board of India (Sebi) seeking a stay on voting by creditors because it wanted all bondholders to participate in such votes, contrary to the debenture trust deed (DTD) and central bank guidelines that expect only 75% of the bondholders to vote.
A three-judge bench headed by justice DY Chandrachud, while observing that Sebi norms took precedence over central bank guidelines, still gave a go-ahead to the plan citing delays if voting is called afresh.
“The different voting mechanism proposed under the SEBI circular will further delay the resolution process and potentially disrupt the efforts undertaken by the stakeholders, including the retail debenture holders. Such unscrambling of the resolution process will not only prove time-consuming but may also adversely affect the agreed realized gains to the retail debenture holders, who have already consented to the negotiated settlement before the High Court,” the apex court said.
Lenders to RCFL have already approved the resolution plan by Authum Investments & Infrastructure. RCFL owes creditors Rs 9,017 crore and Authum has offered Rs 2,207 crore – a 75% haircut for secured creditors.
Secured creditors led by Bank of Baroda (BoB) control 87% of the debt, most of it in bonds issued by the company. The plan envisages 20% recovery for unsecured creditors many of whom had voted against or dissented against the plan.
The apex court acknowledged that dissenting debenture holders will have to settle for a lesser amount if they do not agree to the plan. Hence it has allowed these bondholders to stay out of the plan if they do not approve it.
“The dissenting debenture holders have a right to stand outside the proposed resolution plan framed under the lender‘s inter creditor agreement (ICA) and pursue other legal means to recover their entitled dues,” the judgement said.
Lenders said that though the apex court has left the door open for dissenting creditors, its assent to the resolution means that banks can now work on formalities and move to collect the money.
“The dissenting creditors are less than 5% of the total debt. This order is a big positive because now we can expect to complete this long pending transaction as early as possible. In fact, it is not unlikely that some dissenting creditors join too and choose to take the money now rather than wait for the future,” said a person familiar with the plan.
The SC order comes even as parent Reliance Capital received 14 resolution plans earlier this week in an NCLT process overseen by RBI. A Piramal Group-led consortium, Oaktree Capital, Torrent Investments, IndusInd International and Cosmea Financial Services are among bidders who have either offered to acquire the entire company or submitted plans for select clusters, ET reported earlier this week.
Lenders are now contemplating the next course of action and are hoping that the resolution process that has gone on for close to three years since it was first initiated in 2019 is not derailed.
