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

> NCLT judgment dated 2023-03-31. Citation: TCN-2023-NCLT-03895. The case involves an application filed by Mahesh Sharma, a financial creditor, under Section 7…

- **Court:** NCLT
- **Order date:** 31 Mar 2023
- **Citation:** TCN-2023-NCLT-03895
- **Category:** IBC
- **Source page:** https://caseease.in/cases/ibc/nclt-division-bench-court-i-chenn/onspon-services-pvt-ltd-cp-ib-no-392-ald-2019-938d78e9

## Summary

### Background

The case involves an application filed by Mahesh Sharma, a financial creditor, under Section 7 of the Insolvency and Bankruptcy Code, 2016, 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 Mahesh Sharma. The corporate debtor disputes the claim, arguing that Mahesh Sharma is a shareholder, not a financial creditor, and that no default has occurred as per the Shareholders Agreement and the Companies Act, 2013.

## Facts

Mahesh Sharma invested Rs. 15,00,000 in Onspon Services Pvt Ltd on 2016-06-13 and was allotted 1486 Optionally Convertible Preference Shares (OCPS) of Rs. 1000 each and 1 equity share of Rs. 14000 on 2016-06-15. The Share Subscription Cum Shareholders Agreement stipulated that if the OCPS were not converted within two years, they would be redeemed with 6% simple interest per annum. Mahesh Sharma did not exercise the conversion option within the stipulated two years. The agreement also stated that redemption required a collective decision by all investors. After three years, on 2019-06-14, Mahesh Sharma sought redemption, which Onspon Services failed to fulfill. Mahesh Sharma sent reminder letters on 2019-07-09 and 2019-07-29 and a notice on 2019-08-01, demanding Rs.

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## Issues and analysis

### Issue 1: Whether the Optionally Convertible Preference Shares (OCPS) due for redemption can be considered as …

**Ratio:** The ratio is that a preference shareholder cannot automatically become a creditor simply

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**Reasoning:** The NCLT reasoned that the OCPS holder's claim for redemption does not automatically

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**Interpretation:** The interpretation is that the nature of OCPS is capital, not debt, until the

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**Application:** In this case, the NCLT found that the company's inability to redeem the OCPS

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## Parties

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

## Timeline

- **2016-06-13 — Investment by Mahesh…**: Mahesh Sharma invested Rs.…
- **2016-06-15 — Allotment of OCPS and…**: Mahesh Sharma was allotted…

## 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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