TaxTMI 
TaxTMI 
2022 (9) TMI 110
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............................................................... 10 B. Issues ............................................................................................................... 12 C. Submissions ................................................................................................... 12 D. Overview of contractual arrangements ......................................................... 19 i. The Debenture Trust Deeds ................................................................................. 19 ii. Steps taken by the DebentureTrustee (Vistra) .................................................... 23 E. Evolution of the law surrounding the resolution of debts .......................... 25 i. The framework for the resolution of debt under the Companies Act 1956 ....... 25 ii. The RBI Circular dated 6 July 2019 and the legal framework thereafter ........... 27 iii. SEBI (Debenture Trustees) Regulations 1993 ..................................................... 32 iv. The SEBI Circular dated 13 October 2020 and the legal framework thereafter 34 a. The SEBI Circular: Overview and Implications .....................................................................
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....ed categories of lenders. Other investors were outside its purview. SEBI issued a circular on 13 October 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 March 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 July 2021, the Resolution Plan submitted by Authum Investment and Infrastructure Limited "Authum" was approved by RCFL's lenders. ii. The suit before the Bombay High Court 4. Seventeen debenture holders instituted a suit on the Original Side of the Bombay High Court on 1 July 2021. The debenture holders instituted the suit for the protection of their interests with respect to the amounts due to them by RCFL. RCFL was impleaded as the first defendant to the suit. The debenture holders urged that Vistra, who was impleaded as the third defendant, should have taken necessary steps to protect their interests. The debenture holders also alleged that certain funds available with the Bank of Baroda, the second defendant, were distributed amongst creditors with....
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....meeting was to be held. It directed SEBI to respond to Vistra's representation on a "priority and extremely urgent basis". SEBI issued a clarificatory letter on 23 August 2021 in response to this representation. The clarificatory letter referred to Regulation 15(7) of SEBI (Debenture Trustees) Regulations 1993 "1993 Regulations" and the SEBI Circular and clarified that the voting would have to be conducted in accordance with the SEBI Circular. The relevant extract of this letter reads as follows: "5. In view of regulation 15(7) of the DT Regulations read with clause 3, 6.5, 6.6 and 7 of SEBI Circular, it is stated that it shall be mandatory for DTs to sign the Inter-Creditor Agreement (ICA) on behalf of debenture holders before considering the resolution plan to be implemented as a result of ICA proceedings." 7. SEBI was not impleaded as a party to the suit. On 17 September 2021, the Single Judge granted leave to the debenture holders to join SEBI as a respondent to an interlocutory application, Interim Application No. 14224 of 2021. SEBI entered appearance on 24 September 2021. SEBI in its affidavit before the High Court submitted that the debenture trustees are obligated to co....
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....his order ensuring that the calling and conduct of the meeting/s and the voting at such meetings conforms to the terms of the respective Debenture Trust Deeds. At such meeting/s, the 3rd Defendant will place for consideration and approval of the beneficial owners or debenture holders the settlement offer/compromise/arrangement as envisaged in the approved resolution plan, and as modified to the extent provided herein above. 14. If there is any further or later or supplementary trust deed, then the provisions of that supplementary trust deed will also be taken into account. 15. All parties agree and undertake to maintain confidentially of the settlement and/or compromise and/or arrangement arrived thereto. 16. In view of the above comprise arrived at between the parties, the suit stands disposed off in these terms. 17. It is made clear that the aforesaid order is passed considering the peculiar facts and circumstances of the present case. It also has consent of all the parties. 18. As regards SEBI, I am making it clear that this order will constitute no precedent against SEBI nor will SEBI be held to the terms of this order for other cases. This order is made on the peculi....
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....was issued or to defaults after 13 October 2020; d. Clause 23 of the Fifth Schedule to the Debenture Trust Deed(s) is consistent with the 1993 Regulations. Therefore, the SEBI Circular will not defeat the Debenture Trust Deed(s) in lieu of clause 59 of the Debenture Trust Deed(s); and e. The clarificatory letter dated 23 August 2021 issued by SEBI is also inapplicable since the SEBI Circular is inapplicable. The Court also observed that the application of the SEBI Circular would lead to a situation where one debenture holder holding debentures worth Rs. 5 crores could veto a Resolution Plan worth Rs. 9,017 crores. Thus, in the view of the Division Bench, holding an ISIN-wise meeting of debenture holders would defeat the interests of small investors, who were realizing 100% of the debt owed to them, under the Resolution Plan. B. Issues 15. Based on the submissions which have been canvassed by the parties, the issues which arise for determination are: a. Whether the debenture holders and other parties in the present case were required to follow the procedure under the SEBI Circular; and b. Whether the civil court had the jurisdiction to entertain the lis in this case. C. ....
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....ompanies Act; and g. After the SEBI Circular came into force on 13 October 2020, only two possible options were available to the debenture holders to restructure the debt: (i) a compromise independent of the NCLT under the SEBI Circular; or (ii) approaching the NCLT under section 230 of the Companies Act. No third option, especially under the Debenture Trust Deed, is available to the debenture holders. Contrary to the express provisions of law, the High Court incorrectly assumed jurisdiction and directed a meeting of debenture holders to consider the Resolution Plan in accordance with the terms of the Debenture Trust Deeds. The High Court could not have exercised jurisdiction to direct the calling of a meeting of debenture holders to consider the Resolution Plan without complying with the SEBI Circular. 17. Mr. Darius Khambata, learned senior counsel appearing for RCFL (Respondent No. 11) made the following submissions in support of his argument that the SEBI Circular does not apply retroactively or retrospectively to the present case: a. The language employed in the SEBI Circular and in Regulation 15(7) of the1993 Regulations is facilitative and not mandatory. There is no sep....
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....the aforesaid situations; f. The Supplementary Trust Deed does not expressly amend, substitute, or modify the provisions of Clauses 22 and 23 of the Fifth Schedule to the Debenture Trust Deeds. Even if it is assumed that the Supplementary Trust Deed incorporates each and every term of the SEBI Circular, this will not result in overriding or superseding the provisions of Clauses 22 and 23; g. The Resolution Plan places the debenture holders in a better position than they would be in under a new ICA process. It provides for 100% repayment to debentures holders with an exposure of upto Rs. 10 lakhs. The debenture holders will constitute only 21.02% of the total value of debt if they become a part of the ICA along with the lenders. Resultantly, they could be easily outvoted by the lenders, who would constitute 78.98% of the ICA by value; and h. SEBI's contention that Section 230 read with Section 430 of the Companies Act excludes the jurisdiction of the High Court is untenable because the law does not expressly bar a company from entering into a contractual compromise with any of its creditors. 18. It is necessary to record that Mr. Khambata does not contest the following princi....
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....ction to be invalid or unenforceable and contrary to Indian laws or existing or future applicable law, such invalidity shall not impair the operation or prevent those provisions of these presents which are valid. In that case, these presents shall be construed so as to limit any term or provision so as to make it enforceable or valid within the requirements of any applicable law and in vent such term or provision cannot be so limited, these presents shall be construed to omit such invalid or unenforceable provisions. Following the determination that any provision of these presents is unenforceable, the Parties shall negotiate in good faith a new provision that as far as legally possible, most nearly reflects the intent of the Parties and that restores these presents as nearly as possible to its original intent and effect. 59. CONFLICT OF TERMS The parties agree that in the event any of the terms or provisions as contained in this indenture are in conflict with the provisions of the SEBI (Debenture Trustees) Regulations, 1993 as amended from time to time, then such clauses shall stand null and void. Further the Parties have agreed that in case there is inconsistency in clauses m....
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.... day to day operations. Any amount in excess of Rs.100 crores may be utilised for the benefit of the lenders." 23. The Resolution Plan was submitted by Authum on 15 January 2021. The relevant terms and conditions of the Resolution Plan submitted by Authum were as follows: "Clause 7.5.ii - After the settlement of the Resolution Plan related expenses, employee related expenses in operations related expenses, the Resolution Applicant will settle the dues of the Dissenting Financial Creditors and Consenting Financial Creditors Clause 7.5.vi - It is clarified the FC claims of the Dissenting Financial Creditors shall be paid in priority to the payments to any Consenting Financial Creditors Clause 41 - Financial Creditors (FC) shall mean the existing secured and unsecured lenders to the Company including but not limited to ... debenture holders etc. as identified in the information memorandum of the company" Clause 40 - Financial Claims or FC Claims or Financial Creditor Claims or FC Dues means all amounts or claims to a financial creditor Clause 33 - Dissenting Financial creditors or Dissenting Lenders shall mean the financial creditors who vote against the Resolution Plan or ....
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....tely after the last provision/article/section clause of the respective Principal Deeds, the following shall be inserted: "In order to incorporate the terms of the SEBI Debenture Circulars within this Deed, all the provisions set out under the schedule hereto named "Schedule-SEBI AMENDMENTS 2020' is hereby included as an integral part of this Deed ... 2.3 A new Schedule as "Schedule-SEBI Amendments 2020‟ shall be inserted after the last existing Schedule of each respective Principal Deed as follows: ... 5. The Company shall ensure due compliance and adherence to the SEBI Debenture Circulars in letter and spirit." (emphasis supplied) The above contents of the Supplementary Trust Deed clearly take notice of the 1993 Regulations and the SEBI Circular, among others. Moreover, the Supplementary Debenture Trust Deed expressly incorporated the terms of SEBI's debenture circulars within its ambit and the requirement that RCFL shall ensure due compliance and adherence to SEBI's circulars in letter and spirit. The Resolution Plan submitted by Authum was approved thereafter on 15 July 2021. ii. Steps taken by the Debenture Trustee (Vistra) 25. In an affidavit filed before ....
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....t 2021, SEBI clarified that in consonance with the SEBI Circular, voting by the debenture holders would have to be conducted ISIN wise. Finally, Vistra clarified in its affidavit before the Bombay High Court that despite making several requests to debenture holders to provide instructions on whether to sign the ICA, it had not received any response. E. Evolution of the law surrounding the resolution of debts i. The framework for the resolution of debt under the Companies Act 1956 30. Prior to 6 July 2019, Section 391 of the Companies Act 1956 in Chapter V of the erstwhile legislation inter alia dealt with compromises, arrangements and reconstructions. Section 391 as its marginal notes indicated, elucidated upon the power to compromise or make arrangements with creditors and members. Under the provision, a compromise or arrangement could be contemplated between a company and; a. A creditor or any class of them; or b. Its members or any class of them. 31. In terms of sub-section (1) of Section 391, the Company Court (prior to the substitution of the National Company Law Tribunal for the Company Court) could order a meeting of the creditors or a class of creditors or of member....
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....ontributories of the company. Section 230 of the Companies Act provides for the manner in which dissenting or abstaining creditors within a class of creditors of the company (such as debenture holders) can be bound by the terms of the compromise or arrangement upon approval by a special majority and by the NCLT. 35. Section 1(4) of the Companies Act, 2013 stipulates that the provisions of the Act shall apply inter alia to: a. Companies incorporated under the Act or the previous company legislation; b. Insurance companies; c. Banking companies; d. Companies engaged in the generation or supply of electricity; e. Any other company governed by a special Act for the time being in force. ii. The RBI Circular dated 6 July 2019 and the legal framework thereafter 36. In exercise of its powers under the Banking Regulation Act 1949 and the Reserve Bank of India Act 1934, RBI issued directions on 7 June 2019 "with a view to providing a framework for early recognition, reporting and time bound resolution of stressed assets". The RBI Circular indicates that it applies to: a. Scheduled commercial banks excluding regional rural banks; b. Specified All India Term Financial Institut....
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....lause 10 provides as follows: "10. In cases where RP is to be implemented, all lenders shall enter into an inter-creditor agreement (ICA), during the above-said Review Period, to provide for ground rules for finalisation and implementation of the RP in respect of borrowers with credit facilities from more than one lender. The ICA shall provide that any decision agreed by lenders representing 75 per cent by value of total outstanding credit facilities (fund based as well non-fund based) and 60 per cent of lenders by number shall be binding upon all the lenders. Additionally, the ICA may, inter alia, provide for rights and duties of majority lenders, duties and protection of rights of dissenting lenders, treatment of lenders with priority in cash flows/differential security interest, etc. In particular, the RPs shall provide for payment not less than the liquidation value due to the dissenting lenders." Footnote 5 states: "In cases where asset reconstruction companies (ARCs) have exposure to the borrower concerned, they shall also sign the ICA and adhere to all its provisions." Clause 10 makes it mandatory for all lenders to enter into an ICA, where a Resolution Plan is to be i....
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...., among others, alteration of payment period / payable amount / the amount of instalments / rate of interest; roll over of credit facilities; sanction of additional credit facility / release of additional funds for an account in default to aid curing of default / enhancement of existing credit limits; compromise settlements where time for payment of settlement amount exceeds three months." 40. Since the circular issued by the RBI is under a special law within the meaning of Section 1(4)(e) of the Companies Act, Section C provides for implementation conditions for a Resolution Plan without a requirement of approaching the NCLT under Section 230, where the Resolution Plan is being implemented in relation to lenders governed by Clause 3 of the RBI Circular. 41. These provisions make it abundantly clear that the RBI Circular which traces its origin to the exercise of its statutory powers envisages that: a. All lenders must enter into an ICA where a Resolution Plan is being implemented; b. The ICA shall provide that a decision by lenders representing 75% by value and 60% by number shall bind all lenders, including those who may dissent. Entering into an ICA by the lenders is a man....
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....d in Clause 10. 44. Regulation 15(7) of the 1993 Regulations was inserted by the SEBI (Debenture Trustees) (Amendment) Regulation 2020 with effect from 8 October 2020. Regulation 15 (7) provides as follows: - "15(7) Subject to the approval of the debenture holders and the conditions as may be specified by the Board from time to time, the debenture trustee, on behalf of the debenture holders, may enter into inter-creditor agreements provided under the framework specified by the Reserve Bank of India." Regulation 15(7) contemplates that the debenture trustees "may" enter into ICAs provided under RBI's framework subject to: a. the approval of the debenture holders; and b. the conditions which may be specified by SEBI from time to time. 45. Regulation 15(7) is facilitative in character. Regulation 15(7) indicates that the debenture trustee may enter into an ICA in terms of RBI's framework with the approval of the debenture holders. But Clause 7 does not in and of itself specify the modalities or manner in which the approval by the debenture holders is to be provided. iv. The SEBI Circular dated 13 October 2020 and the legal framework thereafter a. The SEBI Circular: Overvi....
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....ult by registered post/acknowledgement due or speed post/acknowledgement due or courier or hand delivery with proof of delivery as also through email as a text or as an attachment to email with a notification including a read receipt, and proof of dispatch of such notice or email, shall be maintained. 6.2. The notice shall contain the following: 6.2.1. negative consent for proceeding with the enforcement of security; 6.2.2. positive consent for signing the ICA; 6.2.3. the time period within which the consent needs to be provided, viz. consent to be given within 15 days from the date of notice; and 6.2.4. the date of meeting to be convened, 6.3. Debenture Trustee(s) shall convene the meeting of all investors within 30 days of the event of default (as per para 6.1 above); Provided that in case the default is cured between the date of notice and the date of meeting, then the convening of such a meeting may be dispensed with. 6.4. In view of Regulation 15(2)(b) of SEBI (Debenture Trustees) Regulations, 1993, in case of debt securities issued by way of public issue, the notice sent by the Debenture Trustee(s) in para 6.2 shall not contain the consent as per para 6.2.1 an....
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....he event of default. Clause 6.5 mandates that the debenture trustee must take necessary action: a. To enforce the security; or b. To enter into the ICA; or c. As decided in the meeting of investors; subject to certain conditions namely: i. Where the majority of investors has expressed its dissent against the enforcement of the security, the security is not to be enforced by the debenture trustees; ii. Where the majority of investors has expressed its consent to enter into an ICA, the debenture trustees must enter into the ICA; iii. Where consents are not received for the enforcement of security or signing the ICA, the debenture trustee shall take further action according to the decision which is taken in the meeting of the investors. 49. Significantly, Clause 6 of the SEBI Circular contains mandatory language by the use of the expression "shall" when it relays the process to be followed for seeking the consent for enforcement of the security or entering into an ICA and the steps which are adopted thereafter. The expression "shall" is used in the prefatory part of Clause 6 and in Clauses 6.1, 6.2, 6.3. 6.5 and 6.6. However, in contradistinction, Clause 6.5.4 adopts the ....
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....sions of Section 230 of the Companies Act. 53. However, subsequent to the issuance of the SEBI Circular, debenture holders can bind dissenters by taking recourse to the SEBI Circular as well. The SEBI Circular facilitates the process of seeking consent for enforcement of security and/or entering into an ICA. The SEBI Circular recognizes that investors in debt securities who are financial creditors falling outside the purview of the RBI Circular are approached by other lenders to sign the ICA under the RBI Circular. SEBI's circular has enunciated the modalities for standardizing the procedure. 54. Clause 6.6 incorporates the requirement of a special majority by stipulating that the consent of the majority of investors shall mean the approval of not less than 75% of the investors by value of the outstanding debt and 60% of the investors by number at the ISIN level. We have already seen how a provision for a special majority is stipulated in Section 230(6) of the Companies Act. The RBI Circular on the one hand and the SEBI Circular on the other contain separate provisions indicating the nature of the majority necessary under each circular. The SEBI Circular stipulates the requireme....
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.... outstanding credit facilities and 60% of lenders by number. The SEBI Circular on the other hand mandates the approval of not less than 75% of the investors by value of the outstanding debt and 60% of the investors by number at the ISIN level. The majority prescribed in Section 230(6) would govern NCLT approved compromises within the meaning of Section 230 in its ability to bind those who do not consent to the compromise or arrangement. Likewise, the importance of the heightened majority prescribed in the RBI Circular lies in the consequence of binding dissenting lenders. In the same vein, the heightened majority prescribed in Clause 6.6 of the SEBI Circular has the consequence of binding dissenting debenture holders. b. Voting at the ISIN level 57. Each debenture instrument has an international security identification number (ISIN) related to a particular issue. Each ISIN forms a separate class or category having the same feature such as an issue date, face value, rate of interest, maximum duration or date of redemption. These features are homogenous for all debentures within the same ISIN or tranches when compared to debentures across different ISINs. In the present case there....
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....how of hands or if a poll is demanded by a majority representing not less than three-fourths in value of the votes cast on such poll. Such a Resolution is hereinafter called "Special Resolution"." 60. All the Debenture Trust Deeds were executed prior to the RBI Circular. Clause 22(ii) deals with voting on a compromise proposed to be made between the issuer company and the debenture holder. The concept of a third party resolution applicant stepping into a debtor company in terms of a Resolution Plan led by the lenders came in with the RBI Circular. The Debenture Trust Deeds which are earlier in point of time must consequently be with reference to a compromise under Section 230 of the Companies Act. Clause 22(ii) and 23 can therefore not have precedence over the requirement of the special majority prescribed by the circulars of the RBI or SEBI. c. The SEBI Circular has a statutory character 61. The SEBI Circular has been issued in exercise of the powers conferred by the SEBI Act, the 1993 Regulations, the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations 2015 and the Securities and Exchange Board of India (Issue and Listing of Deb....
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.... are regulated by other financial sector regulators, signing of the ICA by such creditors may be subject to permission from their respective regulators. In this connection, it is pertinent to note that SEBI vide circular SEBI/HO/MIRSD/CRADT/CIR/P/2020/203 dated October 13, 2020 has prescribed the conditions under which Debenture Trustees may sign an ICA under the Prudential Framework." 62. The above extract indicates that RBI's stated position was that: a. The prudential framework for the resolution of stressed assets formulated in the RBI Circular was in exercise of the powers conferred by the RBI Act 1934 and the Banking Regulation Act 1949; b. The provisions of the prudential framework are mandatory only for RBI regulated lenders; c. RBI's powers do not extend to other creditors of a borrower such as debenture holders who are primarily regulated by SEBI; d. Other creditors of a borrower may voluntarily agree to the ICA since it is a contract between creditors; e. Where the other creditors are regulated by a distinct financial sector regulator such as SEBI, the signing of the ICA by such creditors would be subject to permission by the concerned regulator; and f. In t....
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....ctions 15A, 15B, 15C, 15D, 15E, 15EA, 15EB, 15F, 15G, 15H, 15HA, 15HB. None of the sections mentioned in Section 15-I of the SEBI Act would confer jurisdiction on the adjudicating officer to grant the relief sought by the plaintiffs in the first instance. Hence, the bar in Section 15Y would not operate as against the suit in the present case. 66. Similarly, Section 430 of the Companies Act provides that no civil court shall have the jurisdiction to entertain any suit in respect of any matter which the National Company Law Tribunal or the National Company Law Appellate Tribunal is empowered to determine. 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 is not attracted. 67. The Single Judge of the Bombay High Court (in the first instance) as well as the Division Bench of the Bombay High Court properly exercised jurisdiction over the subject matter of the suit. ii. The SEBI Circular is applicable if debenture holders wish to implement a Resolution Plan to w....
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.... RBI Circular; it does not specify the conditions for the execution of an independent ICA or Resolution Plan which is separate from the ICA and Resolution Plan under 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 which states: "The Reserve Bank of India ("RBI"), vide Circular dated June 07, 2019 issued the Reserve Bank of India (Prudential Framework for Resolution of Stressed Assets) Directions 2019 which inter alia specified the mechanism for resolution of stressed assets by Lenders ... In terms thereof, investors in debt securities, being financial creditors, are approached by other lenders to sign an agreement; referred to as the Inter Creditor Agreement ("ICA"), under specific terms detailed In the framework as stipulated by RBI." (emphasis supplied) Further, Regulation 15(7) of the 1993 Regulations relates to the duties of Debenture Trustees. It provides: "Subject to the approval of the debenture holders and the conditions as may be specified by the Board from time to time, the debenture trustee, on behalf of the debenture holders, may enter into inter-cr....
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....e provisions of Companies Act, 2013 and the rules made thereunder, the Securities Contracts (Regulations) Act, 1956 and the Securities and Exchange Board of India Act, 1992 and the rules, regulations and circulars issued thereunder from time to time, then the Debenture Trustee(s) shall be free to exit the ICA altogether with the same rights as if it had never signed the ICA. Under these circumstances, the resolution plan shall not be binding on the Debenture Trustee(s). 7.3. The resolution plan shall be finalized within 180 days from the end of the review period. If the resolution plan is not finalized within 180 days from the end of the review period, then the Debenture Trustee(s) shall be free to exit the ICA altogether with the same rights as if it had never signed the ICA and the resolution plan shall not be binding on the *Debenture Trustee(s). However, if the finalization of the resolution plan extends beyond 180 days, the Debenture Trustee(s) may consent to an extension beyond 180 days subject to the approval of the investors regarding the total timeline. The total timeline shall not exceed 365 days from the date of commencement of the review period. 7.4. If any of the t....
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....ights through mechanisms other than the execution of a Resolution Plan. The language cannot be construed to be facilitative in the sense of providing debenture holders with the option of by-passing the modalities prescribed by the SEBI Circular while accepting a Resolution Plan. The ICA continues to be the foundation or mother document for the Resolution Plan. iii. Dissenting ISIN level debenture holders are bound by the ICA / Resolution Plan 77. Clause 6.6 of the SEBI Circular inter alia requires the "approval of not less than 60% of the investors by number at the ISIN level" for entering into an ICA. RCFL has argued that the ISIN level voting could potentially frustrate a Resolution Plan. The concern is that a single debenture holder who holds an entire ISIN (or more than one ISIN) can prevent the creditors from arriving at an ICA / a Resolution Plan, especially in the absence of a provision for their "exit" from this process. In response, SEBI has argued that the issuer company can "adjust" the size of the security by proportionally reducing it and releasing it to the extent that debenture holders agree to the ICA / Resolution Plan. Both these arguments miss the crux of the ma....
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..... not less than three-fourths in value of the votes cast on such poll". The SEBI Circular, it has been urged, changed the nature of the special majority required to sanction a compromise by introducing the requirement of a majority of 60% of ISIN level votes. 81. We are of the opinion that the SEBI Circular has retroactive application. In Principles of Statutory Interpretation by Justice G.P. Singh (14th edition, 2016 at page 583), it is stated that: "The rule against retrospective construction is not applicable to a statute merely because "a part of the requisites for its action is drawn from a time antecedent to its passing". If that were not so, every statute will be presumed to apply only to persons born and things which come into existence after its operation and the rule may well result in virtual nullification of most of the statutes." (emphasis supplied) 82. In Vineeta Sharma v. Rakesh Sharma, 2020 (9) SCC 1 this Court described the nature of prospective, retrospective, and retroactive laws: "61. The prospective statute operates from the date of its enactment conferring new rights. The retrospective statute operates backwards and takes away or impairs vested rights ....
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....L'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. 85. Even assuming that debenture holders were vested with the right to sanction a compromise or arrangement in terms of the special majority in Clause 23 to the Fifth Schedule of the Debenture Trust Deed, they were divested of such a right upon the issuance of the SEBI Circular. Clause 59 of the Debenture Trust Deed stipulates that any provision in the Debenture Trust Deed which is in conflict with the 1993 Regulations is null and void. In so doing, it lays down a trigger for the divestment of rights under the Debenture Trust Deed. A contractually vested right may be taken away by the operation of a statutory instrument. A fortiori, in the present case, the SEBI Circular owes its existence to statutory powers conferred by a special legislation enacted with a view to protect the interests of investors and to ensure the stable and orderly growth and development of the market for securities. 86. The SEBI Circular was issued partly in exerci....
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....ion 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. 90. Depending upon the facts and circumstances of a case, this Court can, having regard to Article 142 of the Constitution of India, stipulate suitable directions to mitigate the potential denial of rights. 91. In its decision in State v. Kalyan Singh (2017) 7 SCC 444 this Court observed that the jurisdiction under Article 142 can be used to relax the rigors of law depending upon the peculiar facts and circumstances. It was observed: "22. [...] This article gives a very wide power to do complete justice to the parties before the Court, a power which exists in the Supreme Court because the judgment delivered by it will finally end the litigation between the parties. It is important to notice that Article 142 follows upon Article 141 of the Constitution, in which it is stated that the law declared by the Supreme Court ....
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....used sparingly in cases which cannot be effectively and appropriately tackled by the existing provisions of law or when the existing provisions of law cannot bring about complete justice between the parties." (emphasis supplied) 93. The compromise presently arrived at, which is in the interests of all the parties, will be disturbed if a new process is directed to be commenced in accordance with the SEBI Circular at the present stage. 94. Pertinently, the SEBI Circular only contemplates two situations where ISIN-wise voting is mandated: (i) non-enforcement of security; and (ii) entering into an ICA. Although it applies retroactively, it admittedly does not contemplate a scenario where the debenture holders could give ex post facto consent to ICAs agreed prior to the commencement of the SEBI Circular, that is 13 October 2020. In the present case, the application of the SEBI Circular will lead to a scenario where a Resolution Plan validly agreed upon by the ICA lenders under the RBI Framework will have to be unscrambled. For this reason, we consider it necessary to extend the benefit under Article 142 to the retail debenture holders by allowing the Resolution Plan to pass muster. We....