# In the matter of IFCI Limited vs. Sutanu Sinha & Ors.

> SC judgment dated 2023-11-09. Citation: TCN-2023-SC-00017. The case revolves around a dispute regarding the nature of Compulsorily Convertible Debentures…

- **Court:** SC
- **Order date:** 9 Nov 2023
- **Citation:** TCN-2023-SC-00017
- **Category:** IBC
- **Source page:** https://caseease.in/cases/ibc/supreme-court-of-india/ifci-limited-vs-sutanu-sinha-ors-ef836558

## Summary

### Background

The case revolves around a dispute regarding the nature of Compulsorily Convertible Debentures (CCDs) issued by IVRCL Chengapalli Tollways Ltd (ICTL), a subsidiary of IVRCL, to IFCI Limited. IFCI invested in ICTL's highway project through CCDs. When ICTL faced financial difficulties, IFCI invoked corporate guarantees of IVRCL and initiated Corporate Insolvency Resolution Process (CIRP). The Resolution Professional rejected IFCI's claim, treating the CCDs as equity rather than debt. This rejection was based on the Debenture Subscription Agreement (DSA) and the project's financial structure, where CCDs were considered part of the equity component. IFCI challenged this decision, arguing that the CCDs should be treated as debt due to ICTL's insolvency.

## Facts

IFCI Limited invested in a highway project undertaken by IVRCL Chengapalli Tollways Ltd (ICTL), a subsidiary of IVRCL, through Compulsorily Convertible Debentures (CCDs). The Concession Agreement for the project was executed on 2010-03-25. The Debenture Subscription Agreement (DSA) was dated 2011-10-14, with IFCI subscribing to CCDs worth Rs. 125,00,00,000. The DSA included a 'put option' allowing IFCI to sell the CCDs to a third party if ICTL defaulted, but the principal obligation of IVRCL remained. ICTL faced financial difficulties, leading to a Corporate Insolvency Resolution Process (CIRP) initiated by both IFCI and the State Bank of India. IFCI's claim was rejected by the Resolution Professional on 2022-08-09, who treated the CCDs as equity based on the DSA and

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## Issues and analysis

### Issue 1: Whether the Compulsorily Convertible Debentures (CCDs) issued by IVRCL Chengapalli Tollways Ltd …

**Ratio:** The legal principle is that the nature of a financial instrument, whether debt or equity,

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**Reasoning:** The court reasoned that the CCDs were approved as equity under the financial package for

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**Interpretation:** The interpretation of the Debenture Subscription Agreement (DSA) and the

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**Application:** The court applied the ratio to the specific facts of the case, noting that the

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## Parties

- **Judges:** SANJAY KISH…; Sudhanshu…; +1 more
- **Appellants:** M/S. IFCI L…
- **Respondents:** IVRCL Chengapalli…; SUTANU SINHA &…

## Timeline

- **2010-03-25 — Concession Agreement…**: Concession Agreement dated 25.03.2010 executed between IVRCL Chengapalli Tollways Ltd…
- **2011-10-14 — Debenture Subscription…**: Debenture Subscription Agreement dated 14.10.2011, where IFCI agreed to subscribe to CCDs…

## Legal provisions

- [Insolvency and Bankruptcy Code, 2016, Section 3(11) — Definitions](https://caseease.in/legal-provisions/insolvency-and-bankruptcy-code-2016/section-3)

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