# In the matter of Onspon Services Pvt. Ltd. CP (IB) No. 392-ALD-2019

> NCLT judgment dated 2023-03-31. Citation: TCN-2023-NCLT-03933. The case involves an application filed by Mahesh Sharma, the Applicant, under Section 7 of the…

- **Court:** NCLT
- **Order date:** 31 Mar 2023
- **Citation:** TCN-2023-NCLT-03933
- **Category:** IBC
- **Source page:** https://caseease.in/cases/ibc/nclt-division-bench-court-i-chenn/onspon-services-pvt-ltd-cp-ib-no-392-ald-2019-471e49f2

## Summary

### Background

The case involves an application filed by Mahesh Sharma, the Applicant, under Section 7 of the Insolvency & Bankruptcy Code, 2016, seeking to initiate Corporate Insolvency Resolution Process (CIRP) against Onspon Services Pvt Ltd, the Corporate Debtor. The application stems from a default in payment related to Optionally Convertible Preference Shares (OCPS) allotted to Mr. Sharma. The Corporate Debtor, engaged in event management and sponsorship, had allotted 1486 OCPS to Mr. Sharma in 2016, with a stipulation in the Share Subscription Cum Shareholders Agreement that if the OCPS were not converted within two years, they would be redeemed with a 6% per annum interest. Mr. Sharma did not exercise his conversion option, and upon the expiry of three years, he sought

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## Facts

Mahesh Sharma, the Applicant, invested in Onspon Services Pvt Ltd, the Corporate Debtor, by subscribing to 1486 Optionally Convertible Preference Shares (OCPS) of Rs. 1000 each and 1 Equity Share of Rs. 14000, totaling Rs. 15,00,000 on 13.06.2016. The Share Subscription Cum Shareholders Agreement stipulated that if the OCPS were not converted into equity within two years, they would be redeemed with a 6% per annum interest. Mr. Sharma did not exercise the conversion option. After three years, on 14.06.2019, Mr. Sharma sought redemption, claiming Rs. 17,70,000 (principal plus interest) was due as of 31.07.2019. The Corporate Debtor failed to redeem the OCPS. Mr. Sharma sent notices on 09.07.2019 and 29.07.2019 to exercise the PUT option for redemption. The Corporate

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## Issues and analysis

### Issue 1: Whether the non-redemption of Optionally Convertible Preference Shares (OCPS) constitutes a …

**Ratio:** The ratio is that OCPS, by its nature, is a preference share and not a debt instrument

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**Reasoning:** The court reasoned that the Applicant was primarily an investor, not a creditor, and that

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**Interpretation:** The interpretation is that the term 'financial debt' under Section 5(8) of the

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**Application:** In this case, the court found that the Corporate Debtor was not profitable and

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## Parties

- **Judges:** Praveen…; Ashish…
- **Appellants:** Mahesh S…
- **Respondents:** Onspon Services…

## Timeline

- **2016-06-15 — Allotment o…**: Onspon Services Private Limited allotted 1486 Optionally Convertible Preference Shares…
- **2019-06-14 — Expiry of 3-ye…**: The period of 3 years from the date of…

## Legal provisions

- [Insolvency and Bankruptcy Code, 2016, Section 7 — Initiation of corporate insolvency resolution…](https://caseease.in/legal-provisions/insolvency-and-bankruptcy-code-2016/section-7)

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