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M/S. IFCI Limited Vs Sutanu Sinha & Ors
Case NameM/S. IFCI Limited Vs Sutanu Sinha & Ors
Citation2023 INSC 1023
Date of JudgementNovember 09, 2023
Case No.Civil Appeal No. 4929/2023
Case TypeCivil Appeal
PetitionerM/s. IFCI Limited
RespondentSutanu Sinha & Ors
BenchHon’ble Justice Sanjay Kishan Kaul
CourtSupreme Court of India


In the legal matter of M/S. IFCI LIMITED v. SUTANU SINHA & ORS., the case involves a dispute concerning investments made by the appellant, M/S. IFCI LIMITED, in a highway project through Compulsorily Convertible Debentures (CCDs). The project, awarded by the National Highways Authority of India (NHAI) to IVRCL Chengapalli Tollways Ltd (ICTL), faced financial challenges, leading to a legal contention over the nature of the appellant’s investments. The central issue revolves around the characterization of CCDs subscribed to by the appellant — whether they should be treated as a form of debt or equity. The court examines various agreements, including the Debenture Subscription Agreement, the Concession Agreement, and the common loan agreement, to discern the legal status of the CCDs within the financial structure of the project.

Throughout the proceedings, the court grapples with the complexities of financial arrangements, the parties’ obligations, and the implications of classifying the investment as either debt or equity. The judgment ultimately provides resolution by determining the legal nature of the CCDs and clarifying the rights and responsibilities of the parties involved.


The National Highways Authority of India (NHAI) had awarded the Highway project in terms of a Concession Agreement executed between it and the IVRCL Chengapalli Tollways Ltd (ICTL). ICTL was a subsidiary Company of IVRCL with a holding of 100% share capital. A group of lenders had provided term loan facility to the ICTL for execution of documents including the company loan agreement. The project was to be financed through equity infusion by IVRCL. The financing for the project was to be obtained through CCDs. M/s IFCI Limited (Appellant) subscribed to the CCDs, although other debentures were being executed simultaneously. The date of conversion of CCDs into equity was December 2017, however, formal allocation of shares was not done after that. 

At the request of ICTL, IFCI had agreed to subscribe to the CCDs amounting to Rs. 1,25,00,00,000/- in terms of a Debenture Subscription Agreement (DSA). The project faced financial difficulties and a one-time settlement was offered and agreed, but the same was not honored.

Corporate Insolvency Resolution Process (CIRP) was initiated against IVRCL under the IBC. It was claimed by IFCI that the amount that was due had a status of a debt. IFCI lodged a claim on that behalf, however, Resolution Professional rejected the entire claim. IFCI filed an application before the National Company Law Tribunal, (NCLT) to challenge the decision of the Resolution Profession. The NCLT rejected the application filed by IFCI. 

Against the order of the NCLT, an appeal was filed before the National Company Law Appellate Tribunal (NCLAT) by IFCI. The same was also rejected and the Appellant moved to the Supreme Court (SC)


  • Whether the Compulsorily Convertible Debentures (CCDs) subscribed to by M/S. IFCI LIMITED should be treated as a form of debt or equity.


  • The appellant’s counsel asserts that if the appellant’s investment is categorized as equity instead of debt, it would leave the appellant without a legal remedy.
  • Despite the maturity date of the Compulsorily Convertible Debentures (CCDs), the counsel contends that the financial difficulties of ICTL led to the practical treatment of the appellant’s investment as a debt.
  • The counsel argues that the insolvency of ICTL rendered the conversion of CCDs into equity impossible. As a result, the entire principal amount, along with accrued interest, should be considered due and payable.


  • The Respondent’s counsel points to the Concessionaire Agreement with the NHAI, where equity is defined as the sum representing paid-up equity share capital for meeting the equity component of the Total Project Cost. This definition explicitly includes convertible instruments, such as CCDs.
  • Emphasizing the definition, the counsel asserts that the concept of convertible instruments, specifically CCDs, falls within the defined scope of equity.
  • The financing plan of the Respondent inherently considers CCDs as part of the equity portion of the funding, reinforcing the argument that CCDs were intended to be treated as equity.
  • The counsel argues that ICTL (the Respondent) does not bear any liability or obligation toward the Appellant because the Appellant is characterized as an equity participant. This implies that the Appellant does not hold a debt claim against ICTL


The Supreme Court stated that “the definition of debt under Section 3(11) of the IBC would be the liability or obligation in respect of a claim which is due from any person. 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. The success of a commercial venture pays benefit to the equity participants but with income, which would not inhere in case of the failure of the venture.”

The Supreme Court highlighted that if it was a simpliciter debenture, then the same must have fallen under a financial debt along with bonds etc. The Supreme observed that we must note that the complexities of commercial documents depend on the nature of business. These are not layman’s agreements, but agreements vetted by experts and thus each of the parties knows its obligations and the benefits which can arise from the agreement. We thus find it difficult to read into or add to what the document says about a CCD”.

The Supreme Court stated that it is very unfortunate that the Appellant has left with such a situation where there is nothing, no assets or funds to recover from the sponsor company.

The Supreme Court further pointed out that “Commerce has evolved. The documents forming the base of commerce have also evolved and created a hybrid nature of documents.”

The Supreme Court underscored that “What was earlier labelled as a debenture, now has hybrid versions such as partly convertible debentures, optionally convertible debentures and Compulsorily Convertible Debentures (CCDs). We may note that traditionally debentures were treated as a floating security with a covenant for payment on a specified date”.


In the case of M/S. IFCI LIMITED vs. SUTANU SINHA & ORS., the Supreme Court addressed the classification of Compulsorily Convertible Debentures (CCDs) as equity or debt. The appellant’s investment in a highway project through CCDs was contested. The court emphasized the contractual terms, highlighting provisions for conversion and buyback, ultimately determining that CCDs were to be treated as equity. The decision underscored the significance of explicit contractual terms and cautioned against implying terms. The analysis focused on the specific language of the agreements, affirming the equity nature of the investment and aligning with the project’s financial plan.


The judgment in the present matter serves as an important reminder not only on the parameters of a second appeal under the IBC, but also on interpretation of commercial contracts and the boundaries within which, a court ought to interpret a commercial contract, which is assumed to always have been entered into by parties after negotiations and legal advice. The parties know their respective bargain and therefore it would be detrimental to commerce in general, if courts implied terms into commercial contracts. The Judgment importantly also observed that the nature of an instrument being debt or equity, would depend on facts and circumstances of each case, and hybrid instruments, such as CCDs, are to be read in context of a particular matter.


  1. Supreme Court’s Clarifies The Treatment Of Compulsorily Convertible Debentures – Equity Or Debt? – Financial Services – India (mondaq.com)
  2. SC: Convertible Debentures as IBC Equity (indialaw.in)
  3. 27290_2023_2_101_48280_Judgement_09-Nov-2023[1].pdf

This Article is written by Arohi Sharma student of Rajasthan School of Law, Jaipur; Intern at Legal Vidhiya

Disclaimer: The materials provided herein are intended solely for informational purposes. Accessing or using the site or the materials does not establish an attorney-client relationship. The information presented on this site is not to be construed as legal or professional advice, and it should not be relied upon for such purposes or used as a substitute for advice from a licensed attorney in your state. Additionally, the viewpoint presented by the author is of a personal nature.


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