JUDGMENT :

SANJAY KISHAN KAUL, J.

1. Commerce has evolved. The documents forming the base of commerce have also evolved and created a hybrid nature of documents. Thus, what was earlier labelled as a debenture, now has hybrid versions such as partly convertible debentures, optionally convertible debentures and Compulsorily Convertible Debentures (CCDs). We may note that traditionally debentures were treated as a floating security with a covenant for payment on a specified date.¹[In re Crompton & Co. Ltd. [1914] 1 Ch. 954.

2. In the factual scenario of the present case, we are concerned with a Highway project in which the appellant has made investments through the CCDs. The National Highways Authority of India (NHAI) had awarded the project in question in terms of a Concession Agreement dated 25.03.2010 executed between it and the IVRCL Chengapalli Tollways Ltd (ICTL). ICTL was in turn a subsidiary Company of IVRCL which was holding 100 per cent share capital of ICTL. A consortium of lenders had provided term loan facility to the ICTL to execute various documents including the company loan agreement dated 24.11.2010 and the balance project was to be financed by IVRCL through equity infusion. As a part of the equity component of the project, the financing was to be obtained through CCDs. It is not in dispute that what the appellant subscribed to was the CCDs, albeit with other debentures being executed simultaneously. The date of conversion into equity from the CCDs was December, 2017. The formal issuance of shares was however, not done after the said date. We may note that the appellant had agreed to subscribe to the CCDs at the request of ICTL and amount of Rs.125,00,00,000/- in terms of a Debenture Subscription Agreement dated 14.10.2011. In terms of the aforesaid agreement, there was a “put option” and thus, in the event of default on part of ICTL during the window period, these CCDs could be sold to a third party but the principal obligation of IVRCL continued to be in place. However, the factual scenario in respect thereof never arose.

3. It appears that the project ran into financial difficulties and ICTL even suggested a one time settlement which had been agreed to but even terms thereof were not honoured. Corporate guarantees of IVRCL were invoked by the appellant. Corporate Insolvency Resolution Process was initiated both by the appellant and the State Bank of India and claims were filed. The process under the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as the said Code) was thereby triggered.

4. The appellant claimed that the amount owing to it had a status of a debt, and lodged a claim in that behalf. However, this was rejected by the Resolution Professional vide letter dated 09.08.2022.

5. The entire amount claimed was refused and the reasons for the non-admission were recorded after noting that various inter se correspondence and supporting documents had been supplied. It would be relevant to reproduce the grounds for rejection as under:-

“a. As per Debenture Subscription Agreement (“DSA”) dated 14th October, 2011 entered between ICTL/Corporate Debtor, IVRCL Limited (erstwhile IVRCL. Assets & Holdings Limited) and IFCI, Compulsorily Convertible Debentures (“CCDs”) were to be treated as equity. The same is observed from the recording of the CCDs component as equity under Schedule III of the DSA. The CCDs are also approved as equity under the financial package for the Concession Agreement dated 25th March, 2010 executed between ICTL/Corporate Debtor and National Highways Authority of India (“NHAI”).

b. The CCDs were part of equity in the project cost approved by NHAI and debt equity ratio is required to be maintained by IVRCL Limited. There was no recategorization of the CCDs from equity to debt and as stated in your email of 19th May, 2022, no approval was sought from NHAI in this respect. The DSA recognizes that any act in contravention of the Concession Agreement is void.

c. Lenders consortium had approved