Bombay High Court Refuses to Stay RCFL Bondholders’ Vote on Bidder

Key Takeaways:

1. The Bombay High Court refused to stay a voting planned for the bondholders of Reliance Commercial Finance (RCFL) to vet lenders’ selection of a preferred bidder for the Reliance Capital subsidiary.

2. The Securities and Exchange Board of India had sought the stay after a single-judge bench of the high court ruled that the voting can be held based on the trust deed signed by the bondholders.

3. Vistra ITCL, the trustee for the bondholders, is now expected to go ahead with the vote on Wednesday.

4. The division bench order clears the decks for a vote on the resolution plan, increasing the chances of a resolution soon, which is good news for all creditors of the company.

Synopsis:

HC Refuses to Stay RCFL Bondholders’ Vote on Bidder

A division bench of the Bombay High Court has refused to stay a voting planned for the bondholders of Reliance Commercial Finance (RCFL) to vet lenders’ selection of a preferred bidder for the Reliance Capital subsidiary. The Securities and Exchange Board of India (Sebi) had sought the stay after a single-judge bench of the high court ruled that the voting can be held based on the trust deed signed by the bondholders. This decision has significant implications for the debt resolution process at the two subsidiary companies and the insolvency process of Reliance Capital initiated by the RBI on November 29.

The division bench’s order clears the way for a vote on the resolution plan, increasing the chances of a resolution soon, which is good news for all creditors of the company. Lenders to RCFL and Reliance Home Finance had selected Authum Investment & Infrastructure as the preferred bidder for both companies earlier this year. However, their debt resolution proposals were delayed because of the Sebi rule. The process for voting has not yet started at Reliance Home Finance.

The whole issue has turned into a tussle between the two regulators. Lenders, who are governed by the Reserve Bank of India, follow the procedure laid by the central bank, which does not require all bondholders to vote. However, Sebi has been adamant that bond trustees, which it regulates, must act according to its rules. Reliance Capital has supported RBI’s action and looks forward to the expeditious resolution of its debt and continuation as a well-capitalized going concern through the IBC process, in the overall interests of all its stakeholders, including lenders, customers, employees, and shareholders.

The court’s decision has led to a situation where all parties have to file written submissions in the court by December 12, and the next date of hearing is December 16. This indicates that the legal battle is ongoing, and the outcome of the court’s decision will have a significant impact on the debt resolution and insolvency processes of the companies involved.

The court’s decision has also highlighted the conflict between the procedures laid out by the Reserve Bank of India and Sebi, indicating a broader regulatory dispute that could have implications for other similar cases in the future. The resolution of this case will likely set a precedent for how such conflicts between regulators are resolved in the future, potentially impacting the procedures and rules governing debt resolution and insolvency processes in India.

FAQ

Q1: What was the decision of the Bombay High Court regarding the voting for RCFL bondholders?

A1: The Bombay High Court refused to stay the voting planned for the bondholders of Reliance Commercial Finance (RCFL) to vet lenders’ selection of a preferred bidder for the Reliance Capital subsidiary.

Q2: What was the reason for the Securities and Exchange Board of India to seek a stay on the voting?

A2: The Securities and Exchange Board of India sought the stay after a single-judge bench of the high court ruled that the voting can be held based on the trust deed signed by the bondholders.

Q3: What is the expected outcome following the Bombay High Court’s decision?

A3: Vistra ITCL, the trustee for the bondholders, is now expected to go ahead with the vote on Wednesday, increasing the chances of a resolution soon, which is good news for all creditors of the company.