# In the matter of Shubham Corporation Private Limited vs. Kotoju Vasudeva Rao & Ors.

> NCLAT judgment dated 2024-05-22. Citation: TCN-2024-NCLAT-00417. The appeal was filed against the order dated 18.04.2023 passed by the Adjudicating Authority…

- **Court:** NCLAT
- **Order date:** 22 May 2024
- **Citation:** TCN-2024-NCLAT-00417
- **Category:** IBC
- **Source page:** https://caseease.in/cases/ibc/nclat-new-delhi/shubham-corporation-private-limited-vs-kotoju-vasudeva-rao-ors-f2efe082

## Summary

### Background

The appeal was filed against the order dated 18.04.2023 passed by the Adjudicating Authority (National Company Law Tribunal, Hyderabad Bench-1) in I.A. No. 1384/2022 in CP (IB) No. 35/9/HDB/2021. The application was filed under Section 9 of the Insolvency and Bankruptcy Code, 2016 by Vajra IOT Private Limited (Operational Creditor) against M/s Navayuga Infotech Private Limited (Corporate Debtor). The CIRP was initiated against the Corporate Debtor, and Mr. Kotoju Vasudeva Rao was appointed as the Interim Resolution Professional (IRP). The IRP issued a public announcement inviting claims from the creditors. Subsequently, Shubham Corporation Private Limited (Appellant) submitted a claim, which the IRP initially approved as a financial debt, including the Appellant in the

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## Facts

Shubham Corporation Private Limited (Appellant) advanced unsecured loans to Navayuga Infotech Private Limited (Corporate Debtor) between 2012 and 2020. The total amount due was Rs. 110,85,44,776/-. The Corporate Debtor offered to issue Compulsory Convertible Debentures (CCDs) carrying 0% interest in lieu of the debt. The Appellant agreed, and a Debenture Subscription Agreement (DSA) was executed on 02.03.2020. The DSA stipulated that the CCDs would automatically convert into equity shares at the end of 10 years. A debenture certificate was issued to the Appellant dated 31.03.2020. Vajra IOT Private Limited (Operational Creditor) initiated CIRP against the Corporate Debtor. The Appellant filed a claim as a financial creditor, which was initially admitted by the IRP. The

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## Issues and analysis

### Issue 1: Whether the Compulsorily Convertible Debentures (CCDs) which do not carry any obligation to repay …

**Ratio:** Compulsorily convertible debentures are considered equity instruments if they do not

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**Reasoning:** The court relied on the Supreme Court's judgment in M/s IFCI Limited vs. Sutanu Sinha,

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**Interpretation:** The interpretation of commercial documents, particularly those involving hybrid

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**Application:** In this case, the DSA clearly stipulated that the CCDs were to be compulsorily

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## Parties

- **Judges:** Ajai Das Me…; Rakesh Kuma…
- **Appellants:** Shubham Corporatio…
- **Respondents:** Navayuga Infotech…; Kotoju Vasudeva…
- **Advocates:** Sourav Ag…; Sandeep Kumar…; +2 more

## Timeline

- **2012-01-01 — Loan Advan…**: Appellant advanced unsecured loans to the…
- **2020-02-03 — Offer for CCD…**: Corporate Debtor offered to issue Zero Coupon Compulsory Convertible Debentures (CCDs) to…

## Legal provisions

- [Insolvency and Bankruptcy Code, 2016, Section 9 — Application for initiation of corporate insolvency…](https://caseease.in/legal-provisions/insolvency-and-bankruptcy-code-2016/section-9)

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