Whether any instrument which is convertible into shares with Put Option is regarded as Financial Debt under IBC?, Obligations of Sponsor Company in a Debenture Subscription Agreement, Jurisdiction under Section 62 of Code – IFCI Ltd. Vs. Sutanu Sinha & Ors. – Supreme Court

In this case, Appellant had agreed to subscribe to the CCDs at the request of ICTL(Corporate Debtor). In terms of the agreement, there was a “put option” and thus, in the event of default on part of ICTL(Corporate Debtor) during the window period, these CCDs could be sold to a third party but the principal obligation of IVRCL continued to be in place. It also provides for automatic conversion into equity shares of ICTL on the relevant date. Hon’ble Supreme Court held that: (i) The debenture subscription agreement clearly defines ICTL(Corporate Debtor) as the special purpose vehicle while IVRCL is the sponsor company and IFCI is the lender. The appellant was provided security under the Debentures Subscription Agreement but the obligations are of the sponsor company. (ii) A contract means as it reads. It is not advisable for a Court to supplement it or add to it. (iii) Our jurisdiction comes from Section 62 of the Code. The jurisdiction is restricted to a question of law akin to a second appeal. The law does not envisage unlimited tiers of scrutiny and every tier of scrutiny has its own parameters.

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