M/S. IFCI LIMITED versus SUTANU SINHA & ORS.

Citation: [2023] 15 S.C.R. 280 · Decided: 09-11-2023 · Supreme Court of India · Bench: SANJAY KISHAN KAUL · Disposal: Dismissed

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Judgment (excerpt)

[2023] 15 S.C.R. 280 : 2023 INSC 1023
280
CASE DETAILS
M/S. IFCI LIMITED
v.
SUTANU SINHA & ORS.
(Civil Appeal No. 4929 of 2023)
NOVEMBER 09, 2023
[SANJAY KISHAN KAUL, SUDHANSHU DHULIA AND 
AHSANUDDIN AMANULLAH, JJ.]
HEADNOTES
Issue for consideration: Whether the Compulsorily Convertible 
Debentures-CCDs with a “put option” and in the event of default on part of 
ICTL-borrower during the window period, can be said to be really a debt 
and not an equity. 
Insolvency and Bankruptcy Code, 2016 – s. 62 – Appeal to 
Supreme Court – Jurisdiction u/s. 62 – Compulsorily Convertible 
Debentures-CCDs to be categorised as debt or an equity – On 
facts, project awarded in terms of Concession Agreement executed 
between the Authority and IVRCL-ICTL – ICTL was a subsidiary 
company of IVRCL holding 100 per cent share capital of ICTL – 
Consortium of lenders provided term loan facility to the ICTL to 
execute company loan agreement, and the balance project was to be 
fi nanced by IVRCL through equity infusion – As a part of the equity 
component of the project, the fi nancing was to be obtained through 
Compulsorily Convertible Debentures-CCDs – Date of conversion into 
equity from the CCDs was stated – Appellant-IFCI subscribed to the 
CCDs at the request of ICTL in terms of a Debenture Subscription 
Agreement – Project ran into fi nancial diffi  culties – Invocation of 
Corporate guarantees of IVRCL and initiation of Corporate Insolvency 
Resolution Process-CIRP – IFCI claimed that the amount owing to it 
had a status of a debt, and lodged a claim in that behalf, however, was 
rejected by the Resolution Professional and an entire amount claimed 
was refused – NCLT and NCLAT upheld the same holding that any 
281
instrument which is compulsorily convertible into shares is regarded 
as an “equity” and not a loan or debt - Correctness:
Held: ICTL does not have a liability or obligation qua the appellant 
because the appellant is actually an equity participant and does not have a 
debt to be repaid – Debenture subscription agreement clearly defi nes ICTL 
as the special purpose vehicle while IVRCL is the sponsor company and 
IFCI is the lender – Appellant was provided security under the Debentures 
Subscription Agreement but the obligations are of the sponsor company, 
it cannot be of ICTL – Unless the debt is of the ICTL, the appellant 
cannot seek a recovery of the amount on the basis of being a creditor of 
the ICTL – Contract means as it reads – It is diffi  cult to read into or add 
to what the document says about a CCD – There is nothing which the 
appellant can recover from the sponsor company, there being no assets and 
funds – While in the ICTL it is being treated as a shareholder and thus, 
does not benefi t as none of the shareholders-original investors and the 
appellant get any benefi t under the scheme which has been approved – In 
the impugned judgment, it was held that treating them as a debt would 
tantamount to breach of the concessional agreement and the common loan 
agreement – Investment was clearly in the nature of debentures which 
were compulsorily convertible into equity and nowhere is it stipulated that 
these CCDs would partake the character of fi nancial debt on the happening 
of a particular event – Amount was treated as an equity alone and not as 
a debt – Furthermore, the jurisdiction comes from s. 62 – Jurisdiction is 
restricted to a question of law akin to a second appeal – Law does not 
envisage unlimited tiers of scrutiny and every tier of scrutiny has its own 
parameters – Thus, the lis inter se the parties has to be analyzed within 
the four corners of the ambit of the statutory jurisdiction conferred on 
this Court – Appeal does not raise any such question of law and that the 
fi ndings of the courts below are in accordance with settled principles. 
[Paras 14, 16, 20, 21, 23-26, 30, 31]
Insolvency and Bankruptcy Code, 2016 – s. 3(11) – Defi nition of 
Debt under:
Held: Would be the liability or obligation in respect of a claim which 
is due from any person – Success of a commercial venture pays benefi t to 
M/S. IFCI LIMITED v. SUTANU SINHA & ORS.
282 
SUPREME COURT REPORTS 
[2023] 15 S.C.R.
the equity participants but with income, which would not inhere in case of 
the failure of the venture. [Para 14]
Deeds and documents – Interpretation of commercial documents:
Held: Complexities of commercial documents depends on the nature 
of business – These are not layman’s agreements but agreements vetted by 
experts a

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