Fully compulsorily convertible debentures without repayment obligation, interest, or time value of money are equity instruments, not financial debt under IBC Section 5(8), based on subscription agreement terms and intent.

ORDER

Per: Rekha Kantilal Shah, Member (Technical)

1. The present application has been preferred by Tuticorin Electricity Supply Private Limited (hereinafter referred to as “TESPL”) under Section 60(5) of the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as “IBC”) praying for the following reliefs:-

“a. Mandatory order be passed directing the resolution professional to accept and restore the claim of the applicant herein;.

b. An order be passed setting aside the decision of the Respondent contained in his email dated 28^th March, 2024, being Annexure “P-9” hereto.

c. Pending the hearing of the present application, the Respondent be restrained from giving effect to and/or further effect to the email dated 28^th March, 2024 and taking any further steps in the instant CIRP proceedings.

d. Ad interim orders in terms of prayers above.

e. Such further or other orders be passed and/or direction or directions be given as this Hon’ble Tribunal may deem fit and proper.”

2. BACKGROUND OF THE CASE

2.1 The Corporate Debtor is a company incorporated under the Companies Act, 1956 and is engaged in the business of power generation. REC Limited, a financial creditor of the Corporate Debtor filed an application for initiation of a corporate insolvency resolution process (“CIRP”) of the Corporate Debtor under Section 7 of IBC before this Hon'ble Tribunal (“Insolvency Petition”). Accordingly, the Corporate Debtor was admitted into CIRP vide order of the Hon’ble Tribunal dated 02^nd January 2024.

2.2 Pursuant to the admission of the Insolvency Petition, the IRP took over the management and business affairs of the Corporate Debtor on a going concern basis to carry out the functions as mentioned in the IBC the rules and regulations made thereunder.

2.3 The public announcements as required under Section 13(2) of the IBC read with Regulation 6 of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulation, 2016 were made by the IRP on 04^th January, 2024. Pursuant to the public announcement the applicant filed its claim before IRP, which forms the basis of the dispute in the instant application.

3. SUBMISSIONS BY THE APPLICANT

3.1 It has been submitted that the CD entered into an “Fully and Compulsory Convertibles Debentures Subscription agreement” 1, Annexure P1. dated 24^th June, 2015, with Indian Power Corporation Limited (“IPCL”). In terms of the agreement, IPCL infused a sum of Rs.500 Crores in the CD against subscription of 49,04,60,660/- of the FCCDs of the CD.

3.2 Thereafter, the IPCL entered into an “Securities Purchase Agreement”, P3 dated 30^th March 2017, for selling the 49,04,60,660/- number of FCCDs, to Power Trust. Subsequently, the applicant entered into an advance agreement, P4 dated 1^st April 2017, with Power Trust for the purpose of purchasing the said FCCDs against the advance for a sum of Rs 306.00 cr.

3.3 Subsequently, in terms of the order dated 2^nd January 2024, the said Resolution Professional made a public announcement on 4^th January 2024 in Form-A inviting claims from the creditors of the Corporate Debtor. The Applicant herein stating itself to be a Financial Creditor of the Corporate Debtor submitted its claim for an amount of Rs 1847,32,39,950/- in the prescribed Form-C.

3.4 In the interregnum, the Power Trust vide a letter dated 9 January 2024, intimated to the applicant that due to the pending approval from the lenders of the corporate debtor, the securities could not be transferred and accordingly requested the applicant, to claim the advance amount which was lent out for the purchase of securities of the corporate debtor, directly from the corporate Debtor.

3.5 Pursuant to the claim submitted by the applicant, the respondent vide its e-mail dated 26^th January 2024, informed the applicant that the claim of the applicant for Rs. 1847,32,39,950/- towar