Queries at MONEYLIFE FOUNDATION’S Legal Resource Centre
Recovering Money Invested in Debentures

Along with some of my friends, I invested invested Rs3.88 crore in secured non-convertible debentures (NCDs) of a company. However, since December 2013, the company has not paid us any money and its cheques bounced. IDBI Trusteeship, the trustee of the secured NCDs, has secured the company’s assets and can sell them to repay the money with interest to debenture-holders. I would like to know:
1. Is this the right approach to get help from IDBI for debenture-holders to encash their hard-earned money?
b) Is there any other legal course or action to be taken by all debenture-holders simultaneously? 
LRC’s Reply: Today, a debenture-holder who fails to get back his principal amount, or the interest due thereon, from a company has multiple remedies available to him for recovering his dues. A debenture-holder who wishes to realise his security and get his money back may either exercise the remedies given by the debenture trust deed without recourse to the court (listed below) or may proceed legally to enforce his rights.
Complain to the Trustees: A debenture-holder has the right to receive a copy of the trust deed which he should study to ascertain the remedies provided therein in case of default by the company. Refusal to give a copy of the trust deed is a punishable offence.
Section 117B of the Companies Act, 1956, has empowered the trustees and also conferred certain duties on them as under:
A debenture trustee has to take such steps as he may deem fit:
(a) to ensure that the assets of the company issuing debentures and each of the guarantors are sufficient to discharge the principal amount at all times;
(b) to ensure that the company does not commit any breach of covenants and provisions of the trust deed;
(c) to take such reasonable steps to remedy any breach of the covenants of the trust deed or the terms of issue of debentures;
(d) to take steps to call a meeting of holders of debentures as and when such meeting is required to be held.
The Section further provides that at any time if the debenture trustee comes to a conclusion that the assets of the company are insufficient, or are likely to become insufficient, to discharge the principal amount, the debenture trustee may file a petition before the Company Law Board (CLB). The CLB may impose such restrictions on incurring any further liabilities as it may deem necessary in the interest of holders of the debentures.
Complain to SEBI: For non-receipt of debenture certificates, interest, redemption amount, interest on delayed interest payment, interest on delayed redemption amount, etc, a complaint can be filed with the Securities and Exchange Board of India (SEBI) in the prescribed form.
Complain to Company Law Board:
Section 117C gives a right to debenture-holders to seek relief from CLB. The Section provides that where a company fails to redeem the debentures on the date of maturity, on the application by the holders of debentures, CLB can direct the company to redeem the debentures forthwith by payment of the principal and the interest due thereon. Failure by the company to comply with CLB’s order is punishable with imprisonment and fine.
Appointment of Receiver by the Court: Debenture-holders can approach the court for appointment of a receiver to take charge of the assets of the company until the debenture-holders are paid their dues.
Winding Up: Debenture-holders can present a petition for winding up to the concerned High Court as they are creditors for the amount of their principal and interest. As the company has failed to meet its commitments, it is liable to be wound up by the court.

Have a legal question? Try our Moneylife Foundation’s Legal Resource Centre. Check out http://lrc.moneylife.in and register at http://moneylife.in/lrc.html



Ramesh Poapt

3 years ago

very good efforts by MLF LRC. Pl continue...

Rajiv Gandhi assassination case referred to Constitution Bench

The Constitution Bench, will also decide within next three months, whether the sentence of a prisoner, whose death penalty has been commuted to life, can be remitted by the government

The Supreme Court on Friday referred the matter on remission of life imprisonment of seven convicts in the Rajiv Gandhi assassination case to a Constitution Bench. The apex court also said its interim order staying the Tamil Nadu government's decision to free them will continue.


A bench headed by Chief Justice P Sathasivam said that the petition filed by the Centre, challenging the Tamil Nadu government's decision to remit the sentences, will be decided by the Constitution Bench and framed seven questions to be decided by it.


It said that the Constitution Bench, which will take up the matter within three months, will also decide whether the sentence of a prisoner, whose death penalty has been commuted to life, can be remitted by the government.


The court had on 20th February stayed the decision to release three convicts--Murugan, Santhan and Arivu-- whose death sentence was commuted to life term by it on 18th February in the case, saying there had been procedural lapses on the part of the state government on the decision to release them.


The apex court later on had also stayed release of convicts Nalini, Robert Pious, Jayakumar and Ravichandran in the case.


The Jayalalithaa government had on 19th February decided to set free all the seven convicts in the assassination case.


Santhan, Murugan and Arivu are currently lodged in the Central Prison, Vellore and they are in jail since 1991.


The other four are also undergoing life sentence for their role in Gandhi's assassination on 21 May 1991 in Sriperumbudur.


Maruti Suzuki Q4 net profit falls 35% on low volumes, higher expenses

Maruti Suzuki said lower volumes, higher sales promotion expense and a stock compensation paid to dealers owing to reduction in excise duty affected its net profit during the March quarter

Maruti Suzuki India Ltd (MSIL), the country's largest car maker, on Friday reported over 35% fall in its fourth quarter net profit on lower volumes, higher sales promotion expense and stock compensation paid to dealers.


For the quarter to end-March, the company, a unit of Japanese Suzuki Motor Corp (SMC) said, its net profit fell to Rs800 crore from Rs1,239 crore, while its total revenues, including sales, declined 9.5% to Rs11,818 crore from Rs13,056 crore, same period last year. However, MSIL said, its fourth quarter results are not strictly comparable with same period last year as Suzuki Powertrain India Ltd was merged with the company during the March 2014 quarter.


"Lower volumes, higher sales promotion expense and a stock compensation to dealers owing to reduction in excise duty (exceptional expense) impacted the company's bottomline during the quarter," MSIL said in a regulatory filing.


Between January to March 2014, the carmaker sold 3.25 lakh units, a drop of over 5%, compared with 3.43 lakh units it sold during same period a year ago.


For the 12-months to end-March, MSIL said its net profit increased 16.3% to Rs2,783 crore mainly on favourable foreign exchange as well as its cost reduction and localisation initiatives.


During FY2013-14, Maruti Suzuki said its total revenues, including sales, inched marginally to Rs42,644 crore.


MSIL said its sales during the 12-months to end-March, declined 1.4% to 11.55 lakh units, mainly due to lower exports. During FY14, Maruti Suzuki's experts fell 15.8% to 10.13 lakh units.


The company declared a dividend of 240% or Rs12 per share. For FY13, MSIL had declared a dividend of 160% or Rs8 per share.


At 2.30pm Friday, Maruti Suzuki was trading 2.5% down at Rs1,935 on the BSE, while the 30-share Sensex was marginally down at 22,701.


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