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Authum Investment and Infrastructure Limited vs. R.K. Mohatta Family Trust & Ors.

SLP(C) · 2023 INSC 205Decided 3 Mar 2023
SLP(C) No. 411 of 2023
B.R. Gavai · Aravind Kumar

Background

Reliance Home Finance Limited (RHFL) defaulted on loans worth roughly Rs. 11,540 crore and also defaulted on debentures owed to thousands of investors. A resolution plan proposed by Authum Investment and Infrastructure Limited (AIIL) was approved by 96% of the bank lenders and, separately, by 94.55% of debenture holders who voted, but the Bombay High Court refused to approve the plan for the debenture holders because it felt it lacked the power to do so under ordinary civil procedure. This appeal was filed after the Supreme Court, in an earlier case involving RHFL's sister company (Reliance Commercial Finance Limited), had already approved a nearly identical rescue plan.

Decision Breakdown

The Supreme Court found the facts of this case virtually identical to its own earlier ruling for the sister company, where small investors (holding up to a threshold amount) would recover 100% of their money under the plan, while going back to a fresh SEBI-mandated voting process would only cause delay and risk undoing gains already agreed to by an overwhelming majority of investors. Using its special constitutional power under Article 142 (which lets the Supreme Court mould relief to do complete justice in a case), the Court approved the resolution plan for all debenture holders except those who had specifically voted against it. Dissenting debenture holders were given a choice: accept the plan's terms anyway, or opt out and pursue their claims through other legal remedies. The company was directed to complete the payments by 31 March 2023.

Lesson Learnt

When a rescue plan for a defaulting company has already been overwhelmingly accepted by lenders and investors, courts may use their special equitable powers to approve it quickly rather than force a fresh, time-consuming procedural round that could end up hurting the very investors the process is meant to protect, while still preserving an exit option for those who genuinely object.

Official source (sci.gov.in)View Judgment (PDF)

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