Care Ratings Limited vs Srei Equipment Finance Limited

IN THE MATTER OF: CARE RATINGS LIMITED Having its registered office at: 4th Floor, Godrej Coliseum, Somaiya Hospital Road, Off Eastern Expressway, Sion (East) Mumbai, Maharashtra - 400022 Through its Authorised Signatory Shri Debal Mitra ... Appellant No. 1 ACUITE RATING & RESEARCH LIMITED Having its registered office at: A-812, The Capital, G Block, BKC, Bandra (E), Mumbai, Maharashtra - 400051 Through its Authorised Signatory, Shri Indranil Thakurta - ... Appellant No. 2 Vs. SREI EQUIPMENT FINANCE LIMITED Having its registered office at: Vishwakarma 86C, Topsia Road (South) Kolkata - 700046 ... Respondent No. 1

SECURITIES & EXCHANGE BOARD OF INDIA Having its office at:

NBCC Complex, Office Tower - 1, 8th Floor, Plate B, East Kidwai Nagar, New Delhi - 110023 ... Respondent No. 2 2

Present:

For Appellant:- Mr. Nikhil Nayyar, Sr. Advocate with Mr. Ravi Bharuka and Mr. Ankit Agrawal, Advocates. For Respondent:- Ms. Liz Mathew and Ms. Sonali Jain, Advocates for R1.

With I.A. No. 2867 of 2021 In Company Appeal (AT) No. 34 of 2021

IN THE MATTER OF:

BRICKWORKS RATINGS INDIA PRIVATE LIMITED A Company Incorporated under the Companies Act, 1956 and registered as a Credit Rating Agency with SEBI Having its registered office at:

3rd Floor, Raj Alkaa Park, No. 29/3 & 32/3 Kalena Agrahara Bannerghatta Road, Bengaluru 560 076 ... Appellant Vs SREI EQUIPMENT FINANCE LIMITED Having its registered office at: Vishwakarma 86C, Topsia Road (South) Kolkata - 700046 ... Respondent No. 1 SECURITIES & EXCHANGE BOARD OF INDIA Market Intermediaries Regulation and Supervision Department, Having its registered office at: Plot No. C4 - A, 'G' Block, Bandra Kurla Complex, Bandra (E), Mumbai 400 051 Maharashtra ... Respondent No. 2

I.A. No. 2868 of 2021 In Company Appeal (AT) No. 31 of 2021, I.A. No. 2867 of 2021 In Company Appeal (AT) No. 34 of 2021 & Company Appeal (AT) No. 39 of 2021 3

Present:

For Appellant:- Mr. Nikhil Nayyar, Sr. Advocate with Mr. Ankur Singh, Mr. Naveen Hedge, Mr. Arjun Krishnan and Ms. Khushboo Mittal, Advocates. For Respondent:- Ms. Liz Mathew and Ms. Sonali Jain, Advocates for R1.

Mr. Arpan Behl, Advocate for R2.

With Company Appeal (AT) No. 39 of 2021

IN THE MATTER OF:

RESERVE BANK OF INDIA Department of Supervision (Non-Banking) Having its regional office at 15, N.S. Road, Kolkata - 700001. ... Appellant Vs SECURITIES & EXCHANGE BOARD OF INDIA Plot No. Y-10, Block EP, Sector - V, Salt Lake City, Kolkata - 700091 ... Respondent Present:

For Appellant:- Mr. Arun Kathpalia, Sr. Advocate with Mr. V.P. Singh, Ms. Vatsala Rai, Mr. Sayobani Basu, Ms. Bani and Ms. Vanya Chhabra, Advocates. For Respondent:- Ms. Liz Mathew and Ms. Sonali Jain, Advocates.

JUDGMEMT

[Per: Shreesha Merla, Member (T)]

This Interlocutory Application No. 2868 of 2021 preferred by the

Administrator of the First Respondent Company namely 'SREI Equipment

Finance Ltd.' under Rule 11 of National Company Law Appellate Tribunal

Rules, 2016 seeking to withdraw the Scheme of Amalgamation (herein

referred as the 'Scheme'), proposed by the First Respondent with its creditors.

I.A. No. 2868 of 2021 In Company Appeal (AT) No. 31 of 2021, I.A. No. 2867 of 2021 In Company Appeal (AT) No. 34 of 2021 & Company Appeal (AT) No. 39 of 2021 4

2. Ld. Counsel appearing on behalf of the Administrator of the erstwhile

management had filed an Application No. 1106/KB/2020 under Section

230(1) of the Companies Act, 2013 (the 'Act') seeking directions to convene

meetings of its creditors for approval of the proposed 'Scheme' before the

National Company Law Tribunal (NCLT), Kolkata. By the impugned order

dated 30.12.2020, NCLT has directed the convening of the meetings of the

creditors of the First Respondent and also passed a certain direction against

the Credit Rating Agencies qua the First Respondent, which is reproduced

herein: -

"It is further directed that the Credit Rating Agencies shall not consider any such non-payment to be default under the respective debt documents and shall maintain the rating(s) of SEFL at least that of investment grade"

3. In this background, the Appellant 'M/s Brickworks Ratings India Pvt.

Ltd.' preferred Company Appeal (AT) No. 34 of 2021 under Section 421 of the

Companies Act, 2013 assailing the above direction in the impugned order.

4. The Ld. Counsel for the Appellant submitted that the 'Scheme' stands

rejected by a majority of the creditors of the First Respondent Company and

accordingly, stands infructuous; that the Reserve Bank of India (RBI) vide its

Notification Bearing No. 2021-2022/981 dated 04.10.2021, in exercise of its

powers under the Reserve Bank of India Act, 1934, superseded the Board of

Directors of the SREI Equipment Finance Ltd. and appointed Mr. Rajneesh

Sharma as the Administrator of the First Respondent Company and that

subsequently RBI filed a Petition seeking initiation of CIRP against SREI

Equipment Finance Ltd./the First Respondent Company. The Petition was

I.A. No. 2868 of 2021 In Company Appeal (AT) No. 31 of 2021, I.A. No. 2867 of 2021 In Company Appeal (AT) No. 34 of 2021 & Company Appeal (AT) No. 39 of 2021 5

admitted vide order dated 08.10.2021 and hence, the Applicant/Appellant

seeks withdrawal of the ''Scheme' and submits that I.A. No. 2868 of 2021 may

be allowed and the main Appeal also be disposed of as the 'Scheme' stands

rejected.

5. The Applicant has filed 'Declaration of the Result of Meetings' dated

27.05.2021 and 03.07.2021, whereby and whereunder the 'Scheme' was

rejected by a majority of 71.65% and 93.80% respectively. The Copy of the

order dated 08.10.2021 whereby the Adjudicating Authority has admitted the

Petition preferred by RBI against the First Respondent, is also appended with

this Application.

6. Having regard to the fact that the 'Scheme' stands rejected by majority

of the creditors of the First Respondent and the said Company is also

undergoing Insolvency proceedings, we are of the view that the relief prayed

for in the present Application, be allowed. For all the aforestated reasons, I.A.

No. 2868 of 2021 filed in Company Appeal (AT) No. 31 of 2021 is allowed.

7. Company Appeal (AT) No. 31 of 2021 has been preferred by M/s CARE

Ratings Ltd. & Anr. against the impugned order dated 30.12.2020 passed in

the matter of SREI Equipment Finance Ltd. under Section 230 (1) of the

Companies Act, 2013 in CA (CAA) No. 1492/KB/2020 to a limited extent

whereby the Tribunal had directed the Credit Rating Agencies not to consider

any non-payment of dues by the First Respondent to its creditors as default

under respective debt documents and shall maintain the ratings of the First

Respondent. By the impugned order, NCLT has observed as follows:-

I.A. No. 2868 of 2021 In Company Appeal (AT) No. 31 of 2021, I.A. No. 2867 of 2021 In Company Appeal (AT) No. 34 of 2021 & Company Appeal (AT) No. 39 of 2021 6

"34. In exercise of powers conferred Under Section 230 of the Companies Act, 2013 read with Rule 11 of the National Company Law Tribunal Rules, 2016 and until the Scheme is considered by the said Creditors and this Hon'ble Tribunal and to protect the Interest of stakeholders, we direct that in the meantime till further orders, the Creditors (including representative security or debenture trustees) of the Applicant Company covered under the Scheme shall maintain status quo with respect to their respective contractual terms dues claims and rights and the Creditors (including security or debenture trustees) and all governmental or regulatory authorities shall be estopped from taking any coercive steps including reporting in any form and/or changing the account status of the Company from being a standard asset which will prejudicially affect the Company and/or sanctioning and/or implementation of the Scheme. It is further directed that the Credit Rating Agencies shall not consider any such non-payment to be a default under the respective debt documents and shall maintain the rating(s) of SEFL at least that of investment grade."

8. In view of the crystalline fact that I.A. No. 2868 of 2021 filed by the First

Respondent/Administrator in Company Appeal (AT) No. 31 of 2021 'seeking

withdrawal of the scheme' is allowed by this Tribunal, as a logical corollary,

the Company Appeal (AT) No. 31 of 2021 stands allowed. No costs.

Resultantly, the impugned order dated 30.12.2020 in CA (CAA) No.

1492/KB/2020 on the file of National Company Law Tribunal is hereby set

aside.

9. I.A. No. 2867 of 2021 in Company Appeal (AT) No. 34 of 2021 has been

preferred by the Applicant/Appellant 'M/s Brickworks Ratings India Pvt. Ltd.'

seeking similar prayer of 'Withdrawal of the Scheme'

I.A. No. 2868 of 2021 In Company Appeal (AT) No. 31 of 2021, I.A. No. 2867 of 2021 In Company Appeal (AT) No. 34 of 2021 & Company Appeal (AT) No. 39 of 2021 7

10. In view of the fact that Company Appeal (AT) No. 31 of 2021 has been

allowed and the impugned order itself has been set aside, consequently, I.A.

No. 2867 of 2021 is allowed and as a logical corollary Company Appeal (AT)

No. 34 of 2021 stands allowed. No costs.

11. Company Appeal (AT) No. 39 of 2021 has been preferred by Reserve

Bank of India challenging the same impugned order dated 30.12.2020 which

is set aside. Resultantly, Company Appeal (AT) No. 39 of 2021 stands allowed.

No costs.

[Justice M. Venugopal] Member (Judicial)

[Ms. Shreesha Merla] Member (Technical)

New Delhi 11th February, 2022 SC

I.A. No. 2868 of 2021 In Company Appeal (AT) No. 31 of 2021, I.A. No. 2867 of 2021 In Company Appeal (AT) No. 34 of 2021 & Company Appeal (AT) No. 39 of 2021