In the matter of SLS Power Corporation Limited

The present Application is filed by the RP seeking to condone the delay of 30 days in filing of the present application and allow the present application and extend the time of CIRP of the Corporate Debtor for a period of 90 days from 02.07.2026 to 30.09.2026, in order to successfully complete the Corporate Insolvency Resolution Process of the Corporate Debtor.

Jahnavi (Steno) RSN (PS)

Today, the Counsel for the Resolution Professional submitted that the CoC in its 12th meeting held on 13.07.2026, vide Agenda Item No.A7 resolved with 100% voting to extend the CIRP period of the Corporate Debtor by 90 days i.e., from 02.07.2026 and seek condonation of delay in filing the application.

However, it is observed that the above resolution passed by the CoC is not a proper resolution.

List the matter on 19.08.2026 for further consideration.

Sd/- Sd/- (UMESH KUMAR SHUKLA) (KISHORE VEMULAPALLI) MEMBER (TECHNICAL) MEMBER (JUDICIAL)

Jahnavi (Steno) RSN (PS)

AMARAVATI BENCH AT MANGALAGIRI (Exercising powers of Adjudicating Authority under The Insolvency and Bankruptcy Code, 2016)

IA (IBC) 209/2026 in CP (IB)8/7/AMR/2022 Application under Section 60(5) of the Insolvency and Bankruptcy Code, 2016 read with Rule 11 of National Company Law Tribunal Rules, 2016

IN THE MATTER OF CP (IB)/8/7/AMR/2022: Indian Renewable Energy Development Agency Limited …………... Financial Creditor Versus SLS Power Corporation Limited …………….... Corporate Debtor

AND IN THE MATTER OF IA (IBC)/209/2026 Mr. Kakaraparthi Kiran Kumar Residing at: 60-9-10, Flat No. 1709, GEV Radha Madhav Apartment, Pinnamaneni Polyclinic Road, Siddhartha Nagar, Vijayawada, Andhra Pradesh-520 010 …………………….... Applicant Versus Mr. Kammula Prabhakar Rao, Resolution Professional of S LS Power Corporation Limited Having his registered office at 39-4-1, S5, Koduru Enclave, Picchaiah Street, Labbipeta, Vijayawada, Krishna, Andhra Pradesh-520010. And having his address for correspondence at: Flat No.106, Sai Balaram Towers, Pitchaiah Street, Labbipet, Vijayawada, Andhra Pradesh-520010. …………………... Respondent

Order delivered on: 14.08.2026

CORAM: HON’BLE KISHORE VEMULAPALLI, MEMBER (JUDICIAL) HON’BLE UMESH KUMAR SHUKLA, MEMBER (TECHNICAL)

NCLT Amaravati Bench

PRESENT: For the Applicant : Mr. G. Aniruth Purusothaman, Adv. Respondent : Ms. Sarvani Desiraju, Adv. [ORDER] [PER: BENCH] The present Interlocutory Application bearing no. IA (IBC) 209/2026 (hereinafter referred to as the "IA” or “IA 209/2026"), has been filed vide Dairy No. 819 dated 08.05.2026, by Mr. Kakaraparthi Kiran Kumar (hereinafter referred to as the "Applicant") under Section 60(5) of the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as the "IBC" or the "Code"), read with Rule 11 of the National Company Law Tribunal Rules, 2016 (hereinafter referred to as the "NCLT Rules"), against Mr. Kammula Prabhakar Rao, Resolution Professional (hereinafter referred to as the "Respondent" or the “RP”) of SLS Power Corporation Limited (hereinafter referred to as the "Corporate Debtor") praying for the following reliefs:

a. Allow this application;

b. To direct the RP to reinstate the claim of the Applicant as that of the Unsecured Financial Creditor, as it stood in the List of Unsecured Financial Creditors as on 13.05.2025;

c. To direct the RP to restore the status quo ante by including the Applicant in the Committee of Creditors (hereinafter referred to as the "CoC") with same voting rights, as it stood in the List of Unsecured Financial Creditors as on 13.05.2025;

NCLT Amaravati Bench d. To direct the RP to reconstitute the CoC of the Corporate Debtor after giving effect to the above prayer clauses;

e. The decision of the RP on the basis of the legal opinion obtained by him to exclude/ remove/ delete the Applicant from the CoC, as recorded in the minutes of the 06th Meeting of the CoC held on 03.10.2025, be set aside and declared as null and void as well as bad in law;

f. Pending this IA, the RP be directed not to take any material decisions during the Corporate Insolvency Resolution Process (hereinafter referred as the "CIRP") of the Corporate Debtor and be further directed not to hold or conduct any CoC meeting, in which material decisions regarding the CIRP of the Corporate Debtor are taken;

g. During the pendency of this IA, the RP be restrained conducting a meeting for approval of the Resolution Plan and be further restrained from declaring the voting results on the Resolution Plan;

h. Such other or further relief(s) as the Tribunal may be pleased to grant.

BRIEF FACTS OF THE CASE:

2. The facts averred by the Applicant in the present IA are summarized as below:

(i) This Adjudicating Authority vide its Order dated 07.04.2025, admitted the Corporate Debtor into the CIRP under Section 7 of the IBC and appointed the Respondent herein as the Interim Resolution

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Professional (hereinafter referred as the "IRP"), who was. confirmed as the RP on 16.05.2025.

(ii) The IRP made a public announcement on 13.04.2025 inviting the claims from the creditors by 25.04.2025.

(i) The Applicant filed his claim before the IRP in Form-C1 dated 25.04.2025 for an amount of Rs.74,70,80,806/-, which is reproduced below:

1 Copy of Form 'C' dated 25.04.2025 (without annexures) is annexed as Exhibit ’C’ of the IA.

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NCLT Amaravati Bench (ii) The Applicant’s claim was fully admitted by the IRP and the Applicant was included in the CoC as an Unsecured Financial Creditor2 with a voting share of 8.86%. The relevant extract of admission of the Applicant’s claim and list of members of the CoC are reproduced below:

2 The List of Unsecured Creditors of the Corporate Debtor as on 13.05.2025 is annexed as Exhibit ’A’ of the IA.

NCLT Amaravati Bench (iii) Thereafter, the RP filed IA (IBC) No.147 of 2025 (hereinafter referred as the "IA 147/2025") on 05.05.2025 to take on record the report of the IRP certifying the constitution of the CoC, which was NCLT Amaravati Bench allowed vide this Adjudicating Authority Order dated 21.07.20253, the relevant extract of which is reproduced below:

(iii) The Applicant attended first meeting4 of the CoC held on 13.05.2025, wherein the IRP was confirmed and appointed as RP.

(iv) The RP vide Agenda Item no. A-5, submitted the Information Memorandum in the 5th meeting of the CoC held on 21.07.2025, wherein the of the Applicant is shown as Financial Creditors. The relevant extract of Information Memorandum are reproduced below:

3 Copy of the Order dated 21.07.2025 in IA 147/2025 taking on record the report certifying the constitution of the CoC of the Corporate Debtor is annexed as Exhibit ’F’ of the IA. 4 Copy of the notice dated 07.05.2025 and the Minutes of the 01st Meeting of the CoC held on 13.05.2025 are annexed as Exhibit ’E’ and Exhibit ’D’ respectively of the IA.

NCLT Amaravati Bench (iv) During the 6th meeting of the CoC5 held on 03.10.2025, the RP appraised the CoC that a legal opinion was obtained relating to the claim of the Applicant “Whether the holder of the Compulsorily Convertible Debentures (hereinafter referred as the " CCDs") in the Corporate Debtor, should be classified as a Financial Creditor (to be part of the CoC) or as an equity shareholder of the Corporate Debtor?” and the answer to the above question was recorded as under6: "Answer: Applying the ratio of the judgments referred to above, the CCDs cannot be treated as “financial debt" within the meaning of section 5(8) of the Code. Consequently, Mr. K. Kiran Kumar is to be classified as an equity holder of the Corporate Debtor and not a “financial creditor", as far as his claim qua the CCDs are concerned and hence not entitled to be part of the Committee of Creditors for such quantum of debt. Also, it is noteworthy to state that equity holders are ranked last in the waterfall mechanism under Section 53 of the Code. It is clarified that for any such remaining portion of the claim as claimed by the Claimant, which is not forming part of the CCDs, the Querist may take appropriate call based on the provisions, rules and regulations of IBC. Based on above, the CoC resolved that 5 Copy of the Notices dated 18.07.2025 of the 05th meeting of the CoC held on 21.07.2025 and dated 01.10.2025 of the 06th meeting of the CoC held on 03.10.2025 are annexed as Exhibit ’G’ and Exhibit ’I’ respectively of the IA. 6 Copy of the Minutes of the 06th meeting of the CoC held on 03.10.2025 is annexed as Exhibit ’J’ of the IA

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Mr. K Kiran Kumar should not treated as Financial Creditor, but should be treated as part of equity. The CoC needs to be reconstituted to this extent." (v) An extension of the CIRP period in IA(IBC) No. 331/2025 was allowed vide the Adjudicating Authority Order dated 28.10.20257. On perusal of the above Order, it seems that Indian Renewable Energy Development Agency Limited (hereinafter referred as the "IREDA") had an objection with respect to the inclusion of the Applicant in the CoC of the Corporate Debtor. The relevant extracts of the above Order is as below: "RP further submitted that the CoC in its 6th meeting held on 03.10.2025, the majority shareholder, IREDA objected and had decided to reconstitute the CoC as it was held that Mr. K. Kiran Kumar, another member of CoC, cannot be classified as a Financial Creditor of the CD, as he is the holder of the Compulsorily Convertible Debentures (CCD) and subsequently, he is to be treated as an equity shareholder of the CD. On a specific query by this AA, the RP undertook to take appropriate action for approval of this AA of the re-constitution of the CoC. After considering the above submissions made by the RP, the CIRP period is hereby extended for 90 days i.e., from 04.10.2025 to 02.01.2026. The RP is further directed to file an Interlocutory Application for approval of the re-constituted CoC. Accordingly, IA (IBC)/331/2025 is allowed and disposed of"

(v) Accordingly, in the revised list of Unsecured Financial Creditors as on 31.10.20258, the Applicant's claim was deleted and, since the 7 Copy of the Order dated 28.10.2025 passed in IA 331/2025 is annexed as Exhibit ’K’ of the IA. 8 Revised list of Unsecured Creditors of the Corporate Debtor as on 31.10.2025 is annexed as Exhibit ’B’ of the IA.

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Applicant was the only Unsecured Financial Creditor of the Corporate Debtor, the said list was reduced to "Nil". The relevant extract of list of members of the CoC are reproduced below:

NCLT Amaravati Bench (vi) Thereafter, the RP filed IA (IBC) No.28 of 2026 (hereinafter referred as the "IA 28/2026") seeking reconstitution of the CoC of the Corporate Debtor, which was allowed by this Adjudicating Authority vide its Order dated 04.02.20269 with the following observations: "Counsel appearing for the Resolution Professional submitted that initially there were two Financial Creditors, namely: (i) Indian Renewable Energy Development Agency Limited and (ii) Mr. Kakarorthi Kiran Kumar, who were the only members of the Committee of Creditors. Subsequently, based on the legal opinion obtained, it was opined that Mr. K. Kiran Kumar, as far as his claim is concerned, being a holder of CCDs, is not entitled to be considered as a financial creditor and so not entitled to be part of the CoC. Therefore, CoC in its 6th meeting held on 03.10.2025 resolved to reconstitute the CoC holding that Mr. K. Kiran Kumar, be treated as an equity shareholder and not as a financial creditor, and consequently, to reconstitute the CoC. Further, it was also resolved that IREDA, the Financial Creditor herein, remained the sole member of the CoC with 100% voting rights. Considering the aforesaid submissions, the re-constitution of CoC is approved and taken on record, subject to just exceptions. It is made clear that this order shall not be construed as acceptance or rejection of any of the averments made in the application or the report." (Emphasis Supplied)

(vii) Being aggrieved by the arbitrary and illegal steps of the RP in excluding the Applicant from the CoC, the present application has been filed.

9 Copy of the Order dated 04.02.2026 passed in IA 28/2026 to take on record the reconstitution of the CoC of the Corporate Debtor from which the Applicant was excluded, is annexed as Exhibit ’L’ of the IA.

NCLT Amaravati Bench (viii) The claim of the Applicant arises out of an Assignment Agreement dated 21.08.201910 executed between, IFCI Venture Capital Funds Limited (hereinafter referred as the "IFCI Venture”), which is the Assignor and Applicant, who is the Assignee. The Assignor, through its Investment Manager- IFCI Venture, had agreed to finance cost of the project of the Corporate Debtor in relation to setting up a small hydro-power plant named "Dummagudem Small Hydro Electric Project" on left flank of the branch anicut in the Godavari river to generate power with 24 MW capacity in Khammam District of Andhra Pradesh in the form of subscription to the CCDs aggregating to Rs.14 crores. The Assignor had entered into an Investment Agreement dated 14.04.201111 and 29.06.2011 with the Corporate Debtor. The purchase consideration for assignment was Rs.2.10 crore, which remains fully paid. As per Schedule I to the said Assignment Agreements, the Assignor had provided the financial assistance to the Corporate Debtor on 14.04.2011 and 29.06.2011 under Green India Venture Fund (hereinafter referred to as the "GIVF"), a SEBI registered Venture Capital Fund, by way of subscription to 14,00,000 CCDs of Rs.100/- each. The said financial assistance was secured by a pledge of 1.80 crore equity shares of the Corporate Debtor along with the personal guarantees given by the promoters and the corporate guarantees given by the promoter companies. By virtue of the Assignment Agreement dated

10 Copy of the Assignment Agreement dated 21.08.2019 entered into between the IFCI Venture and the Applicant is annexed as Exhibit ’P’ of the IA. 11 Copy of the Investment Agreement dated 14.04.2011 is annexed as Exhibit ’Q’ of the IA

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21.08.2019, the Assignor assigned the said financial assistance along with all right, title, interest and security to the Applicant.

(ix) The RP has no authority in law to remove, exclude or delete a creditor from the CoC. Once a claim has been admitted, the RP and/ or the CoC cannot unilaterally alter or modify the status of such creditor, as any such action would amount to an exercise of review or adjudicatory powers, which are neither vested in the RP nor with the CoC under the Code. The proper course of action would be to approach the Adjudicating Authority by way of an appropriate application seeking directions for reclassification of the creditor and its consequential removal, deletion, or exclusion from the CoC. Such a course would ensure compliance with the principles of natural justice by affording the concerned creditor an opportunity of being heard prior to the passing of any adverse order. However, in the present case, no such procedure has been followed by the RP. Instead, the RP proceeded to unilaterally delete the name of the Applicant from the list of unsecured financial creditors, purportedly on the basis of a legal opinion obtained and resolutions passed in the 06th meeting of the CoC. The impugned actions of the RP is therefore, ex facie illegal, without jurisdiction, manifestly arbitrary, and vitiated by material procedural irregularity. In support of the aforesaid contention, the following judicial precedents (i) Union Bank of India v. M/s. Rajdeep Clothing and Advisory Pvt. Ltd. & Ors, vide Judgement dated 05.12.2022 in CA(AT)(Ins.) No.

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399/202112; and (ii) HDFC Bank Ltd. Vs. Kailash Shah (RP), reported in (2025) ibclaw.in 2065 NCLT13 have been relied upon.

(x) Although the aforesaid judgments were rendered in the context of a financial creditor being a related party and the RP therein removed such creditor from the CoC after its inclusion in the CoC, the legal principles enunciated therein are of general application. In particular, the principles that the RP cannot reconstitute the CoC by excluding/ removing/ deleting a member/ creditor, cannot alter or modify the status of a creditor once its claim has been admitted, and cannot undertake a review of its own decision on merits, remain unaffected. Accordingly, the ratio laid down in the aforesaid judgment squarely applies to the facts of the present case and is fully applicable in the present factual matrix.

(xi) The legal opinion, on the basis of which the RP excluded/ removed/ deleted the Applicant from the CoC, was never furnished to the Applicant and no opportunity of being heard was afforded to the Applicant, either by the RP or by the other member of the CoC, who presently constitutes the sole member thereof, holding 100% voting share. In these circumstances, the impugned actions of the RP and the CoC are in clear violation of the principles of natural justice. This is further compounded by the fact that neither the RP nor the CoC

12 Copy of the Hon'ble NCLAT Judgement dated 05.12.2022 in Union Bank of India (Supra) is annexed as Exhibit ’N’ of the IA. 13 Copy of the Judgment of Hon'ble NCLT, Mumbai Bench III in HDFC Bank Ltd (Supra) is annexed as Exhibit ’O’ of the IA.

NCLT Amaravati Bench is vested with adjudicatory powers under the Code to undertake such actions.

(xii) Although the notice dated 01.10.2025 of the 6th meeting of the CoC held on 03.10.2025 was given to the Applicant, however, the Applicant was not allowed to participate and vote in the said meeting and the decision to remove the Applicant from the CoC was thus, unilaterally taken by the IREDA. The conduct of the RP in the said meeting was completely illegal and in gross violation of the provisions of the Code as well as the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 [hereinafter referred to as the “CIRP Regulations”]. The RP ought not to have conducted the said meeting, where the Applicant was not allowed to participate and vote, especially when the Applicant was put to notice of such meeting and there was no order from this Adjudicating Authority to exclude the Applicant from the CoC or to deprive him from exercising his voting rights.

(xiii) As per Article II of the Investment Agreement dated 14.04.2011, the conversion of the CCDs was scheduled to take place one year after the date of issue of CCDs, but before 28.02.2015. However, the CCDs were not converted into equity shares, therefore, even though such CCDs do not bear any interest rate, these continue to remain debt until and unless they are mandatorily converted into equity as per the Investment Agreement dated 14.04.2011. Therefore, the stand taken by the RP, as approved by the CoC that NCLT Amaravati Bench the Applicant is an equity holder cannot be sustained in facts as well as in law. Until and unless the CCDs are mandatorily converted into equity shares, the CCD holders cannot be treated as equity shareholders. Since the conversion has not taken place till date, there is no question of Corporate Debtor giving the promised premium of 19% p.a. either in cash or in equity. Therefore, the Corporate Debtor cannot be permitted to unjustly enrich itself at the cost of the CCD holders by treating them as equity shareholders without conversion and without payment of premium. In support of the above contention, reliance is placed on the Order dated 14.01.2020 of the Hon'ble NCLT, Principal Bench, New Delhi in the matter of SGM Webtech Pvt. Ltd. v. Boulevard Projects Pvt. Ltd., C.A. No.1340(PB)/2019 in CP(IB) No.967(PB)/201814.

(xiv) In the present case, it is an admitted fact that the CCDs have not been converted into debt and as per the Balance Sheet for the financial year ending on 31.03.202115, the CCDs subscribed by the Applicant have been shown as long term debt in the books of the Corporate Debtor. Applying the ratio laid down in SGM Webtech Pvt. Ltd. (Supra), the claim of the Applicant is bound to be treated as a financial debt under Section 5(8)(c) of the Code, and accordingly, the Applicant is required to be treated as a Financial Creditor, consequently, the Applicant needs to be reinstated to the 14 The Order dated 14.01.2020 of the Hon'ble NCLT, Principal Bench at New Delhi in in the matter of SGM Webtech Pvt. Ltd. (Supra) is annexed as Exhibit ’R’ of the IA. 15 Copy of the Sixth Annual Report of the Corporate Debtor for the financial year 2020-21 is annexed as Exhibit ’M’ of the IA.

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CoC of the Corporate Debtor with same voting rights, as it stood before excluding the Applicant from the CoC.

(xv) Merely because, the CCDs do not carry any interest, it would not cease to constitute a financial debt. In support of this contention, the reliance has been placed upon the judgment dated 26.07.2021 of the Hon'ble Supreme Court in Orator Marketing Pvt. Ltd. v. Samtex Desinz Pvt. Ltd., Civil Appeal No.2231 of 202116.

(xvi) No specific period of limitation has been prescribed for filing an application under Section 60(5) of the Code. The Order dated 04.02.2026 passed in IA 28/2026 for reconstitution of the CoC gives a continuing cause of action and, therefore, the present IA is not barred either by limitation or by delay and laches.

REPLY OF THE RESPONDENT/ RP

3. The RP, in his Counter filed vide Diary No. 1171 dated 08.06.2026, contended that the IA is wholly misconceived, frivolous and not maintainable either in law or on facts, as the Applicant has deliberately mischaracterized the nature of the CCDs held by him and projected the same as financial debt despite the settled legal position that compulsorily convertible instruments are in the nature of equity and not debt. The RP in the Counter, prayed to dismiss the IA with costs, based on the contentions, which are summarized below:

16 The copy of the Judgement dated 26.07.2021 passed by the Hon'ble Supreme Court of India in Orator Marketing Pvt. Ltd. (Supra) is annexed as Exhibit ’S’ of the IA.

NCLT Amaravati Bench (i) The Applicant has failed to disclose the complete terms governing the CCDs issued by the Corporate Debtor. The Investment Agreements dated 14.04.2011 and 29.06.2011 unequivocally establish that the CCDs were compulsorily convertible into equity shares within the stipulated period, carried no interest and did not envisage repayment of the principal amount as a debt obligation. The Applicant has relied only upon isolated clauses of the agreements, while suppressing the clauses mandating compulsory conversion.

(ii) The RP acted strictly in accordance with the provisions of the IBC and the CIRP Regulations. Upon objections raised by the sole Financial Creditor, IREDA, regarding the classification of the Applicant, an independent legal opinion was obtained from a Senior Insolvency Practitioner to ensure correct application of law. The relevant extracts of the legal opinion are reproduced below:

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NCLT Amaravati Bench (iii) In the 6th meeting of the CoC held on 03.10.2026, vide Agena Item No. A-6, the CoC took a note on the legal opinion on CCDs placed before it and, vide Agena Item No. A-6, decided to reconstitute the NCLT Amaravati Bench

CoC. The relevant extract of minutes of the meeting of the CoC are reproduced below:

xxxxxxxxxxxxxxxxxxxxxxxxxxxxxx (iv) The RP acted bona fide, transparently and solely in discharge of his statutory obligations, without favouring or prejudicing any stakeholder.

(v) The RP had duly informed the Applicant by e-mail dated 20.12.202517 that after his claim as a Financial Creditor stood rejected, he would be treated as an equity holder. Consequently, he would not be entitled to continue as a member of the CoC and accordingly, the CoC had been reconstituted pursuant to the resolution passed in the 6th meeting of the CoC18 held on 17 A copy of the email dated 20.12.2025 is attached as Annexure-A of the Counter. 18 A copy of the minutes of 6th meeting of the CoC is attached as Annexure-G of the Counter.

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03.10.2025. Since the Applicant was duly notified of his expulsion from the CoC along with reasons therefor, the Applicant cannot now contend that his expulsion from the CoC was effected without notice or the RP acted arbitrarily or behind his back. The said email dated 20.12.2025 was reproduced below:

(vi) A holistic reading of the Investment Agreement dated 14.04.201119 completely demolishes the Applicant's contention that the CCDs constituted a financial debt repayable by the Corporate Debtor:

19 Copy of the Investment Agreement is attached as Annexure-B of the Counter.

NCLT Amaravati Bench (a) Article II clause (b) of the Investment Agreement unequivocally records that the CCDs were issued without carrying any interest and were intended to be compulsorily converted into equity shares of the Corporate Debtor within the stipulated period and, in any event, not later than 28.02.2015. The Agreement further stipulates that the entire subscription amount of Rs.1,200 lakhs was to be utilised towards the fresh equity capital of the Corporate Debtor for completion of its 24 MW small hydro power project, thereby demonstrating that the investment was intended to strengthen the capital base of the Corporate Debtor and not to create a borrowing repayable as a debt.

(b) Significantly, the Agreement further provides in Article II clause (d), that where the CCDs were not earlier converted or bought back, the outstanding CCDs, together with the premium thereon, were liable to be converted into equity shares at the sole discretion of IFCI Venture. The contractual scheme, therefore, clearly establishes that compulsory conversion into equity constituted the primary and governing feature of the transaction, while any buy-back mechanism was merely one of the contractual exit options available to the investor and not an acknowledgment of an independent debt obligation on the part of the Corporate Debtor.

(vii) The exit provisions contained in Article III of the Investment Agreement reinforce the aforesaid position and negate the Applicant's attempt to characterise the CCDs as financial debt.

NCLT Amaravati Bench (a) Article III (c), merely provides a contractual exit mechanism whereby, upon failure of the Corporate Debtor to achieve listing of its equity shares within the stipulated period, IFCI Venture was entitled to exercise a ‘put option’ requiring the Promoters to purchase the equity shares held by it at a contractually determined value. Such a contractual exit right thus, is against the promoter and not on the Corporate Debtor to repay the subscription amount, nor does it alter the essential character of the CCDs as equity-linked instruments.

(b) Further, Article III(h) clearly stipulates that in the event of any liquidation, dissolution or winding up of the Corporate Debtor, IFCI Venture/ Investor shall be entitled to receive, prior to any distribution to any other shareholder of the Corporate Debtor, the investment along with interest - but does not still designate this amount to be financial debt. The clause is also in the nature of a liquidation preference ordinarily negotiated by the investors in equity investments and further shows that the investment was always in the nature of equity subscription.

(c) The Investment Agreement also imposed stringent obligations regarding the utilisation and monitoring of the subscription amount. Article VII, Clause 7.2(ii) specifically required that the entire subscription amount be utilised solely for the implementation of the small hydro power project, with the Corporate Debtor being obligated to furnish periodic statements to IFCI Venture detailing the manner, in which the funds had

NCLT Amaravati Bench been utilised and to comply with any directions issued by the IFCI Venture regarding such utilisation. Clause 7.2(iii) further required the subscription amount to be maintained in a designated special bank account, subject to verification by IFCI Venture, and prohibited its transfer or deployment without the prior approval of IFCI Venture. These provisions clearly demonstrate that the investment was made for financing and monitoring the implementation of the project through an equity-linked instrument, and not as a loan creating an unconditional repayment obligation in favour of the investor.

(viii) Even from the Clauses in the Investment Agreement, it is clearly evident that investment was of the nature of subscription to equity and not as a debt with an obligation to be repaid in monies along with interest. Further, there has neither been a recall of the debentures nor any determination of any outstanding amount payable to the Investor. Thus, as per the settled principles of law, the CCDs as per the aforementioned investment terms, can only be termed as equity and not as financial debt.

(ix) The Investment Agreements governing the present CCDs clearly provide that the debentures shall not carry any interest, shall compulsorily convert into equity shares within the stipulated period and do not create an enforceable obligation upon the Corporate Debtor to repay the principal amount as a debt. The predominant character of the instrument is therefore, that of an equity investment and not a borrowing capable of repayment. The legal opinion

NCLT Amaravati Bench obtained by the RP, specifically records that repayment of the principal was never envisaged and compulsory conversion remained the defining characteristic of the CCDs.

(x) The issue involved in the present case is no longer res integra. The Hon'ble Supreme Court in IFCI Ltd. v. Sutanu Sinha, (2024) 15 SCC 288, held that where debentures are compulsorily convertible into equity and the contractual arrangement does not confer an enforceable right of repayment upon the holder, such holder assumes the character of an equity participant rather than a financial creditor. The Hon'ble Supreme Court further observed that treating such compulsorily convertible instruments as financial debt would be contrary to the contractual arrangement executed between the parties. The ratio of the aforesaid judgment squarely applies to the facts of the present case and completely negates the Applicant's claim. In fact, the clauses of the investment agreement under scrutiny in the said case are comparable and similar to the investment agreement in the present case.

(xi) The aforesaid principle has been reiterated by the Hon'ble NCLAT in Shubham Corporation Pvt. Ltd. v. Kotoju Vasudeva Rao, 2024 SCC OnLine NCLAT 635, wherein it was held that where an instrument merely provides for compulsory conversion into equity without contemplating repayment of the amount invested, such instrument is in the nature of equity and cannot be treated as NCLT Amaravati Bench financial debt20. The Hon'ble NCLAT further distinguished CCDs from Optionally Convertible Debentures (hereinafter referred to as the "OCDs"), holding that only the latter continue to embody an obligation of repayment and therefore, may constitute financial debt. The Applicant's reliance on Section 5(8)(c) of the Code completely overlooks this settled distinction recognised by the Appellate Tribunal.

(xii) The Assignment Agreement dated 21.08.201921 merely transferred the rights originally held by IFCI Venture in favour of the Applicant. It is a settled principle of law that an assignee cannot acquire rights superior to those possessed by the assignor. Since the assignor itself held only the rights arising out of CCDs, which were essentially equity instruments, the Applicant cannot, merely by virtue of assignment, claim a superior status as a financial creditor under the Code.

(xiii) In respect of the Applicant's reliance upon HDFC Bank Ltd. (Supra)22, it is submitted that the verification and collation of claims is initially undertaken by the IRP under Section 18 of the Code. However, where a legitimate objection is subsequently raised regarding the classification of a claimant, the RP is duty-bound to examine the same in accordance with law to ensure that the CoC is 20 A copy of the above judgement is attached as Annexure-I of the Counter. 21 A copy of the Assignment agreement is attached as Annexure-C of the Counter. 22 A copy of the judgement of HDFC Bank Ltd (Supra) is attached herewith as Annexure-E of the Counter.

NCLT Amaravati Bench constituted correctly. In the present case, upon objections being raised by IREDA. the RP obtained an independent legal opinion23 and, based on the contractual terms governing the CCDs and the settled legal position, rightly reclassified the Applicant as an equity holder. Therefore, the Applicant cannot claim that the initial admission of his claim by the IRP creates a vested or immutable right to continue as a financial creditor or member of the CoC.

(xiv) The Applicant's reliance upon the judgement in IREDA vs. Waaree Energies Limited24 in Company Appeal (AT) (Insolvency) No. 1380 of 2024 in the present case is incorrect. In the said case, based on the terms contained therein and also in view of the arbitral award already passed in favour of the Claimant therein, whereby there was an obligation to pay the Applicant, the said decision came to be rendered. The clauses and the circumstances in the present case are vastly different and even as per the said order, the RP is entitled to examine the underlying contractual terms to ascertain the true nature of the transaction. In the present case, the Investment Agreement unequivocally establishes that the CCDs were compulsorily convertible into equity and did not create an unconditional repayment obligation.

(xv) The entire case of the Applicant is founded on the erroneous assumption that every debenture automatically constitutes a 23 A copy of the legal opinion is attached as Annexure-D of the Counter. 24 A copy of the above judgement is attached herewith as Annexure-F of the Counter.

NCLT Amaravati Bench "financial debt" under Section 5(8)(c) of the Code. Such proposition is legally untenable. While Section 5(8)(c) includes debentures within the ambit of financial debt, the true nature of the instrument has to be determined from its contractual terms and the substance of the transaction. Where the instrument merely represents an investment, which necessarily culminates in equity participation and does not contemplate repayment of the principal as debt, such instrument cannot be classified as a financial debt. The Clauses of the Investment Agreement clearly show that the nature of investment is in the nature of an equity instrument and the Investor is also given managerial rights including the right to appoint a nominee Director on the Board.

(xvi) The reliance placed by the Applicant upon SGM Webtech Pvt. Ltd. (Supra)25 is misconceived, as the said decision was rendered on its own contractual terms and prior to the authoritative pronouncement of the Hon'ble Supreme Court in IFCI Ltd. (Supra)26. In the present case, the contractual provisions unequivocally provide for compulsory conversion into equity without any enforceable obligation for repayment of principal. Consequently, the judgment relied upon by the Applicant is clearly distinguishable on facts and in any event cannot prevail over the law subsequently declared by the Hon'ble Supreme Court.

25 A copy of the judgement of SGM Webtech Pvt Ltd (Supra) is attached herewith as Annexure-J of the Counter. 26 A copy of the judgement of IFCI Ltd (Supra) is attached as Annexure-H of the Counter

NCLT Amaravati Bench (xvii) The judgment in Union Bank of India v. Rajdeep Clothing and Advisory Pvt. Ltd. (Supra)27 is clearly distinguishable. The said decision primarily dealt with the powers of the RP regarding review of claims and alteration of creditor status. In the present case, the RP has not acted arbitrarily or sou motu. The issue arose on account of objections raised by another financial creditor and was thereafter examined through an independent legal opinion based upon the latest binding judicial precedents before appropriate steps were taken for reconstitution of the CoC. Therefore, the said judgment has no application to the present facts.

(xviii) The Applicant has failed to establish the existence of a "financial debt" within the meaning of Sections 3(6), 3(11), and 5(8) of the Code. In the absence of any legally enforceable repayment obligation upon the Corporate Debtor, the Applicant cannot claim the status of a financial creditor or seek restoration of membership in the CoC.

4. During the course of hearing dated 13.07.2026, the Applicant submitted that initially the investment was done by the IFCI Venture, which was subsequently assigned to Applicant as per Assignment Agreement dated 21.08.2019 executed between Applicant and IFCI Venture. it was contended by the Applicant that he falls under the category of Financial Creditor, as the CCDs, based on the terms of the Investment Agreement dated 14.04.2011, executed between Corporate

27 A copy of the above judgement is attached as Annexure-K of the Counter.

NCLT Amaravati Bench

Debtor, Promoters and IFCI Venture, would amount to ‘financial debt’. In support of his submission, the Applicant referred to clauses (a), (d) and (e) of Article-II and clause (h) of Article-III of the Agreement and submitted that the CCDs are also reflected as Debentures in the Balance Sheet of the Corporate Debtor as at 31.03.2021. During his arguments, he also referred to the following Judgments:

(i) Hon’ble NCLAT, Principal Bench, New Delhi Judgment dated 10.01.2024 in the matter of Santosh Kumar vs. ASK Trusteeship Services Private Limited & Anr., in Company Appeal (AT) (Insolvency) No. 1575 of 2023 (Paras 9, 10).

(ii) Hon’ble NCLAT, Principal Bench, New Delhi Judgment dated 06.12.2024 in the matter of IREDA (Supra) (Paras 10, 11, 12, 13, 25 and 26).

(iii) Hon’ble Supreme Court Judgment dated 20.12.2024 in the matter of China Development Bank vs. Doha Bank Q.P.S.C. in Civil Appeal No. 7298 of 2022 (Para 65).

5. However, refuting the contention of the Applicant, the RP, referring to the legal opinion obtained by him from Mr. Amir Bavani, Advocate, contended that the Applicant was classified as an equity holder of the Corporate Debtor and not as a Financial Creditor as per the claim filed by him. He also referred to the clauses (a), (b), (c), (d) and (e) of Article- II, and Article-III of the Investment Agreement dated 14.04.2011. He submitted that the Judgment of the Hon’ble NCLAT in the matter of IREDA (Supra) relied upon by the Applicant is not applicable in the NCLT Amaravati Bench present case, as there was an arbitral award passed in favour of the IREDA, which is not there in the present case. He further relied on the Hon’ble Supreme Court Judgment in the matter of IFCI Ltd. (Supra) (paras 6, 7, 11, 23 and 26), and Hon’ble NCLAT Judgment dated 22.05.2024 in the matter of Shubham Corporation Pvt. Ltd. (Supra) (Para 8.15).

ANALYSIS AND FINDINGS

6. We have heard the Counsel of both the parties and perused the records carefully.

7. Since the Applicant is the Assignor of the Investment Agreements as per Assignment Agreement dated 21.08.2019 executed between Applicant and IFCI Venture, the first question before us is “What are the rights of the Applicant as an Assignor of the Investment Agreement in terms of the Assignment Agreement dated 21.08.2019”.

(i) As per the Assignment Agreement, the Assignor has assigned the Investment Agreements dated 14.04.2011 and 29.06.2011 in favour of the Assignee for a consideration of Rs.2.10 crores. The relevant extracts of the terms and conditions of the Assignment Agreement are reproduced below:

NCLT Amaravati Bench xxxxxxxxxxxxxxxxxxxxxxxxxx

NCLT Amaravati Bench (ii) The Assignment Agreement has been entered into between the IFCI Venture, who is the Assignor and Applicant, who is the Assignee. The relevant extracts of the said Assignment Agreement dated 21.08.2019 are reproduced below:

(iii) The Assignment Agreement is stated to have been entered into in pursuance of the Schedule Ill of Clause V sub-clause (f) of Investment Agreement, however, it is noted that the aforesaid sub-

NCLT Amaravati Bench clause/ clause of Schedule III of the Investment Agreement dated 14.04.2011 is regarding “Non-Compete Undertaking” and is not related to the assignment. The Clause V of the Schedule Ill of the Investment Agreements dated 14.04.2011 is reproduced below:

(iv) Be that it may be, the settled principles of law is that Assignee cannot have better rights than the assignor.

8. The next question before us is “Whether the CCDs subscribed vide Investment Agreement dated 14.04.2011 would fall under the Financial Debt or not”.

(i) The Applicant in his pleading, relying on the Order dated 14.01.2020 of the Hon'ble NCLT, Principal Bench, New Delhi in the matter of SGM Webtech Pvt. Ltd. (Supra) has contended that the claim of the Applicant would be financial debt, as the CCDs have not been converted into debt and have been shown as long term debt in the Balance Sheet for the financial year ending on 31.03.2021 of the Corporate Debtor.

(ii) It is noted that the aforesaid CCDs held by the Applicant are shown under Note 2(iv a) as “Other Long-term Liabilities” in the Balance Sheet as at 31.03.2021 read with para 2(xx): Contingent Liabilities

NCLT Amaravati Bench and para 2(xxii)(a): 19% CCDs of the Accounting Policy of the Corporate Debtor, which are reproduced below:

NCLT Amaravati Bench (iii) It is well settled law that accounting treatment cannot determine the legal character of an instrument, where the governing contractual documents disclose a different legal position. The classification adopted in the Balance Sheet is governed by accounting standards and disclosure requirements and cannot override the substantive contractual rights and obligations undertaken by the parties. In this regard, we rely on the Hon’ble Supreme Court Judgment dated 28.10.2025 in the matter of EPC Constructions India Ltd. Through Its Liquidator - Abhijit Guhathakurta v. M/s Matix Fertilizers And Chemicals Limited in Civil Appeal No.11077 of 2025, wherein at para 43, it was observed that the treatment in the accounts due to the prescription of accounting standards will not be determinative of the nature of relationship between the parties. The relevant extracts of the aforesaid Judgment is reproduced below: “ENTRIES IN BOOKS OF ACCOUNTS – NOT DETERMINATIVE: 43. Mr. Niranjan Reddy, learned Senior Counsel, contended that financial debt is an admitted liability in the books of accounts of Matix.

This was countered by the learned Senior Counsels for Matix by contending that entries in account books are not determinative of the true nature of the transaction. Accounting Standards (AS 32) prescribe that a preference share that provides for mandatory redemption by the issuer for a fixed or determinable amount at a fixed or determinable future date, or gives the holder the right to require the issuer to redeem the instrument at or after a particular date for a fixed or determinable amount, is a financial liability. However, the treatment in the accounts due to the prescription of accounting standards will not be determinative of the nature of relationship between the parties as reflected in the documents executed by them. Further the IBC has its own prerequisites which NCLT Amaravati Bench a party needs to fulfil and unless those parameters are met, an application under Section 7 will not pass the initial threshold. Hence, by resort to the treatment in the accounts this case cannot be decided.” (iv) The Applicant in its pleading has contended that merely because, the CCDs do not carry any interest, it would not cease to constitute a financial debt.

In support of this contention, he relied on para 31 of the judgment dated 26.07.2021 of Hon'ble Supreme Court in M/s. Orator Marketing Pvt. Ltd. (Supra), which reads as follows: “31. At the cost of repetition, it is reiterated that the trigger for initiation of the Corporate Insolvency Resolution Process by a Financial Creditor under Section 7 of the IBC is the occurrence of a default by the Corporate Debtor. ‘Default’ means non-payment of debt in whole or part when the debt has become due and payable and debt means a liability or obligation in respect of a claim which is due from any person and includes financial debt and operational debt. The definition of ‘debt’ is also expansive and the same includes inter alia financial debt. The definition of ‘Financial Debt’ in Section 5(8) of IBC does not expressly exclude an interest free loan. ‘Financial Debt’ would have to be construed to include interest free loans advanced to finance the business operations of a corporate body.” (v) However, we note that the Hon’ble Supreme Court in the matter of Orator Marketing Pvt. Ltd. (Supra) at para 29 has also observed that the interest free loans may amount to financial debt, only if it has the commercial effect of borrowing.

The relevant extracts of the Judgment is reproduced below: “29. …………………………………… Having regard to the Aims, Objects and Scheme of the IBC, there is no discernible reason, why a term loan to meet the financial requirements of a Corporate Debtor

NCLT Amaravati Bench for its operation, which obviously has the commercial effect of borrowing, should be excluded from the purview of a financial debt.” (vi) We note that subsequent to the above judgement, the Hon’ble NCLAT, Principal Bench, New Delhi, in the matter of Adhunik Corporation Limited v. Shivam India Limited, Company Appeal (AT) (Insolvency) No. 1427 of 2023 order dated 19.02.2025, has examined the concept of ‘commercial effect of borrowing’ in the light of the judgment of Orator Marketing Pvt. Ltd. (Supra) and observed that to ascertain the element of commercial borrowing for time value of money, various other contractual arrangement between the parties needs to be studied. The relevant extracts of the Judgement in Adhunik Corporation Limited (Supra) is reproduced below: “15. From a reading of the above judgments, broadly speaking, for a debt to be treated as financial debt there has to be an element of disbursal of money and the disbursal must be against the consideration for time value of money. The concept of time value of money has been further explained to also include a transaction which does not necessarily culminate into interest being paid in respect of money that has been borrowed. 16. The nature of underlying transaction is therefore a determinative factor in deciding whether infusion of funds can be classified as financial debt or not. To find out whether any element of commercial borrowing for time value of money is noticeable in the transactions which have taken place in the present facts of the case, we have to study the various relevant clauses of the MoA since it is the MoA which constitutes the underlying edifice of the transactions. xxxxxxxxxxxxxxxxxxxxxxxxxx

NCLT Amaravati Bench

25. The issue to be seen next is whether the disbursal made by the Appellant in the present context reflected consideration for time value of money. As per the Insolvency Law Report, 2018, time value of money means compensation or the price paid for the length of time for which money has been disbursed. Time value of money is not only a regular or timely return received for the duration for which the amount is disbursed as an amount in addition to the principal but also covers any other form of benefit or value accruing to the creditor as a return for providing money for a long duration. We need to see if the Appellant had envisioned enhancement of economic prospect in return for the funds disbursed and if so then the sum advanced would qualify to entail time value of money and acquire the colour and character of commercial borrowing. 26. The MoA is a matter of record. When we look at the MoA, it clearly provides for the Appellant to supply raw material and also the disposal of finished products. Merely because the MoA allowed the Appellant to monitor the production of the unit does not in any manner show that they were in control of the unit and were not entitled to receive back the funds infused by them.

This in way diminished the obligation of the Corporate Debtor to discharge their debt liability. It is further clear from the terms of the MoA that the Appellant was required to infuse funds to the Corporate Debtor to render the Corporate Debtor operational from its dysfunctional state. Moreover, the credit so provided was in the form of working capital and the entire amount was fully refundable. Even the funds provided for purchase of raw material at prevailing market prices was towards operationalization of the Corporate Debtor. The right of the Appellant to enjoy sales commission was also a form of return for the amount financed. From the judgment of the Hon’ble Supreme Court in Pioneer judgment supra the ratio is clear that even if transactions are not necessarily loan transactions, they still attract Section 5(8) of the IBC as long as the transactions have the commercial effect of a borrowing. The essential condition which NCLT Amaravati Bench needs to be fulfilled is disbursement against the consideration for time value of money. Since in the present case, the infusion of funds was a transaction which has direct bearing on the business carried out by the Corporate Debtor, raising of the amount through the above agreement has the commercial effect of borrowing.

The clauses of the MoA contain clear indication that the infusion of funds was being done with the intent of earning profits and the investments was therefore for consideration for the time value of money. Therefore, this transaction has the contours of a borrowing as contemplated under Section 5(8) of IBC. The investments made by the Appellant-Financial Creditor was with an eye for consideration for time value of money and therefore the transaction had commercial effect of borrowing. 27. Therefore, seen in totality, the disbursals clearly display commercial effect of borrowing. In our considered opinion the Adjudicating Authority committed an error in holding the transaction to be a business arrangement and nonsuiting of the Appellant on the ground of not being a financial creditor. The Appellant has been wrongfully ousted by the Adjudicating Authority on the ground that the Appellant was not a financial creditor and the infusion of fund was not in the nature of financial debt. We have no hesitation to observe that this is a case of financial debt and the Appellant is clearly a financial creditor in terms of statutory provisions of IBC.” (vii) The Applicant during the course of hearing 13.07.2026, has placed reliance on paras 9 and 10 of the judgment dated 10.01.2024 of the Hon'ble NCLAT in Santosh Kumar (Supra), which reads as below: “9.

Hon’ble Supreme Court held that issue was correctly determined that nowhere it is stipulated that investment as CCDs would partake the character of financial debt. In Para 24 and 31 following was held:

NCLT Amaravati Bench “24. A reading of the impugned judgment, specifically the rationale from para 19 onwards shows that the issue has been correctly crystallized as to whether CCDs could be treated as a debt instead of an equity instrument. In that sense, it was observed that treating them as a debt would tantamount to breach of the concessional agreement and the common loan agreement. The 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 financial debt on the happening of a particular event.” “31. We are thus of the view that the appeal does not raise any such question of law and that the findings of the Courts below are in accordance with settled principles.” 10. The above judgement does not help the Appellant in the present case. In present case, DSA in question is not CCD rather DSA in question is OCD with regard to which there is no dispute between the parties. Learned counsel for the Respondent has rightly relied on judgment of this Tribunal in “MAIF Investments India Pte. Limited” (Supra), where Section 7 application was filed by the Financial Creditor which was dismissed by the Adjudicating Authority. The Financial Creditor has entered into subscription agreement subscribing OCDs. Appeal was filed by the Financial Creditor challenging the order rejecting the application. This Tribunal in the aforesaid case examined the DAS and held that OCDs are financial debt within the meaning of Section 5(8)(c). In Para 23 following was held: “23. In the present case, there has been a disbursal of Rs. 102 Crores in favour of the ‘Corporate Debtor’ by way of ‘OCDs’. In terms of Section 5(8)(c), any amount raised pursuant any note purchase facility or the issue of bonds, notes, debentures, loan stock or any similar instrument, comes within the meaning of ‘financial debt’. Therefore, from the aforesaid fact,

NCLT Amaravati Bench we find that there is a disbursal of Rs. 102 Crores in favour of the ‘Corporate Debtor’ and the ‘OCDs’ originally met is against time value of money and per se, constitute 'financial debt’ in the light of Section5(8)(c) of the I&B Code.”

(viii) We observe that the aforesaid Judgement was delivered in the context of the Optional Convertible Debentures (hereinafter referred as “OCDs”) and thus is not applicable in the present case. It is further noted that the Supreme Court referring to the Judgement in the matter of IFCI Ltd. (Supra) has observed in the above case that the investment as CCDs would not be in the nature of financial debt.

(ix) The Applicant has also placed reliance on para 65 of the Judgment dated 20.12.2024 of the Hon’ble Supreme Court in the matter of China Development Bank (Supra), which reads as below:

“65. Another argument was canvassed based on the definition of ‘claim’ under Section 3(6) of the IBC. If the right to payment exists or if a breach of contract gives rise to a right to payment, the definition of ‘claim’ is attracted. Even if that right cannot be enforced by reason of the applicability of the moratorium, the claim will still exist. Therefore, whether the cause of action for invoking the guarantee has arisen or not is not relevant for considering the definition of ‘claim’.”

(x) We observe that the aforesaid Judgement was delivered in the different context and the question whether CCDs would amount to financial debt has not been dealt in the said Judgement and thus, is not applicable in the present case.

NCLT Amaravati Bench (xi) The RP relied on paras 6, 7, 11, 23 and 26 of the Judgment dated 09.11.2023 of the Hon’ble Supreme Court in the matter of IFCI Ltd. (Supra), which reads as below: “6. It will be noticed from the aforesaid that the fundamental principal for rejecting the debt claim was that in view of the appellant having invested the amount as per the CCDs, the same was to be treated as equity. The CCDs had been approved as equity under the financial package for the Concession Agreement dated 25.03.2010 and were towards the part of equity of the project cost approved by the NHAI having a debt equity ratio. There was never any re-categorization of CCDs from equity to debt. The lenders’ consortium had also approved the term of CCDs as equity. The endeavour of the appellant to challenge the position of the Resolution Professional vide IA No.1465/2022 did not succeed in terms of an order dated 14.03.2023, the said order relied upon the judgment of this Court in Narendra Kumar Maheshwari v. Union of India & Ors. It would be useful to extract that part of the judgment which has also been extracted in the impugned order of National Company Law Appellate Tribunal (NCLAT) as under: “A Compulsory Convertible Debenture does not postulate any repayment of the principle. The question of security becomes relevant for the purpose of payment of interest on these debentures and the payment of principle only in the unlikely event of winding up. Therefore, it does not constitute a ‘debenture’ in its classic sense. Even a debenture, which is only convertible at option has been regarded as a ‘hybrid’ debenture. Any instrument which is compulsorily convertible into shares is regarded as an “equity” and not a loan or debt.” (emphasis supplied) 7. We may note that the aforesaid order of the National Company Law Tribunal was further assailed before the NCLAT which dismissed the appeal as per the impugned order dated 05.06.2023.

NCLT Amaravati Bench

In the meantime, the Committee of Creditors (CoC) granted its approval on 08.03.2023 which was followed by the Adjudicating Authority accepting the resolution plan on 01.05.2023. This has not been specifically assailed by the appellant. xxxxxxxxxxxxxxxxxxxxxx 11. We may note that it is not disputed by him that the put option was never exercised. In effect, his submission was that whether CCDs should be categorized as debt or equity would depend on the status of the maturity of the CCDs and the position of the investor at the inaugural time, and this would vary in the facts and circumstances of each case. xxxxxxxxxxxxxxxxxxxxxxxxx 23. The effect of the aforesaid is that a contract means as it reads. It is not advisable for a Court to supplement it or add to it. It is an unfortunate scenario where the appellant is being left high and dry as there is nothing which it 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 benefit as none of the shareholders i.e. original investors and the appellant get any benefit under the scheme which has been approved. The debt assigned was of a lower rate, repurchased by a third party. However, these are commercial decisions of the respective parties. The obligations were of the sponsoring company and IVRCL in terms of Clause 2.4. xxxxxxxxxxxxxxxxxxxxxx 26. A significant aspect taken note of in the impugned order is that the terms of the various agreements prohibited the corporate debtor from taking further debt without the consent of the assignees. No such approval was sought or taken. The amount was treated as an equity alone and not as a debt.” (xii) However, we observe that the RP has ignored the para 21,22 and 24 of the IFCI Ltd. Judgment, which reads as below:

NCLT Amaravati Bench

21. We must note that the complexities of commercial documents depending 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. 22. Suffice for us to say that the aspect of interpretation of commercial documents was in extenso analyzed in Nabha Private Limited vs. Punjab State Power Corporation Limited. In respect of the factual scenario before us, it would suffice to extract para 72 as under: “72. We may, however, in the end, extend a word of caution. It should certainly not be an endeavour of commercial courts to look to implied terms of contract. In the current day and age, making of contract is a matter of high technical expertise with legal brains from all sides involved in the process of drafting a contract. It is even preceded by opportunities of seeking clarifications and doubts so that the parties know what they are getting into. Thus, normally a contract should be read as it reads, as per its express terms. The implied terms is a concept, which is necessitated only when the Penta test referred to aforesaid comes into play. There has to be a strict necessity for it. In the present case, we have really only read the contract in the manner it reads. We have not really read into it any “implied term” but from the collection of clauses, come to a conclusion as to what the contract says. The formula for energy charges, to our mind, was quite clear. We have only expounded it in accordance to its natural grammatical contour, keeping in mind the nature of the contract.” 24. A reading of the impugned judgment, specifically the rationale from para 19 onwards shows that the issue has been correctly crystallized as to whether CCDs could be treated as a debt instead of an equity instrument. In that sense, it was observed that treating

NCLT Amaravati Bench them as a debt would tantamount to breach of the concessional agreement and the common loan agreement. The 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 financial debt on the happening of a particular event. (xiii) The RP has further relied on para 8.15 of the Hon’ble NCLAT Judgment dated 22.05.2024 in the matter of Shubham Corporation Pvt. Ltd. (Supra), which reads as below: “8.15 We have noted the guidance approved by the Hon’ble Supreme Court in stating in para 23 of the IFCI judgment cited supra that it is not advisable for court to supplement or add to commercial contract. The DSA between the Appellant and the Corporate Debtor clearly had no clause regarding repayment and no clause regarding any option other than conversion of the debentures into shares. A convertible debenture can be regarded as “debt” or “equity” based on the test of liability for repayment. If the terms of convertible debentures provide for repayment of borrower’s principal amount at any time, it can be treated as a debt instrument but if it does not contemplate repayment of the principal amount at any time, that is, if it compulsorily leads to conversion into equity shares, it is nothing but an equity instrument.

Respectfully following the judgment of the Hon’ble Supreme Court in the case of M/s IFCI Limited vs. Sutanu Sinha & Ors., cited supra, we hold that the compulsorily convertible debentures held by the Appellant are equity instrument and accordingly, we do not find any reason or justification to interfere in the impugned order of the Adjudicating Authority. In the result, the Appeal is dismissed. All related IAs pending, if any, are closed. No order as to costs.” (xiv) However, both the Applicant and the RP have relied on the Hon’ble NCLAT, Principal Bench, New Delhi Judgment dated 06.12.2024 in NCLT Amaravati Bench the matter of IREDA (Supra). The Applicant has contended that the CCDs would be financial debt and relied on the paras 10, 11, 12, 13, 25 and 26 of the judgement, which reads as below: “10. ‘Debenture’ is defined in Companies Act, 2013 in Section 2, sub section (30), which is as follows: “2(30) “debenture” includes debenture stock, bonds or any other instrument of a company evidencing a debt, whether constituting a charge on the assets of the company or not;” 11. The definition of ‘debenture’ is ‘evidencing a debt’ as the definition of debenture itself suggest.

Thus, by issuing debenture, the Issuer has raised money for its capital and on plain reading of definition of ‘financial debt’, the debentures are fully covered under Section 5, sub-section (8) (c). 12. The question, which needs to be answered is as to whether there is time value of money in respect of the debt, which is reflected by debenture. For answering the above question, we need to notice certainother clauses of the DSA. Clause 1.1 of the DSA is a definition clause in which ‘Compulsorily Convertible Debentures’ is defined as follows: “Compulsorily Convertible Debentures., shall refer to the debentures issued by the Company and allotted to the Investor as per the applicable laws of the Act, and which are compulsorily convertible into equity shares of the Company at the option of the Investor as per terms of this Agreement.” 13. The above definition indicates that debentures are compulsorily convertible into equity shares of the Company at the option of the Investor. Clause 3.2 deals with ‘Conversion’, which is as follows: “3.2 Conversion The CCDs shall be compulsorily and mandatorily convertible into Equity Shares of the Company within a period of 65

NCLT Amaravati Bench

Months from the date of allotment of the CCDs to the Investor ("Long Stop Date") as per this Agreement.” xxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxxx 25. This Tribunal after relying on the judgment of Chennai Bench in IFCI Ltd. and the judgment of Hon’ble Supreme Court in IFCI Ltd. (supra) has come to the conclusion that compulsory convertible debentures held by the Appellant were equity instrument and the order of the Adjudicating Authority was not interfered with. 26. From the judgments relied by the parties as noticed above, it is clear that for finding nature of transaction, the documents entered between the parties are the best guide to find out nature of debt, as to whether there was time value of money or not. When we look into the clauses of DSA pertaining to the present case, we are of the considered opinion that the transaction, which was entered between the parties has time value of money and the redemption of debenture was also contemplated and conversion of debenture was operational at the option of Investor. The Issuer has raised the amount by issuance of debenture, which was clearly a ‘financial debt’ within the meaning of Section 5, sub section (8). In view of the foregoing discussions and conclusions, we do not find any good ground to interfere with the order of the Adjudicating Authority, allowing the Application of Respondent No.1. There is no merit in the Appeal. The Appeal is dismissed. There shall be no order as to costs.” (xv) The RP submitted that the Judgment of the Hon’ble NCLAT in the matter of IREDA (Supra) relied upon by the Applicant is not applicable in the present case, as there was an arbitral award passed in favour of the IREDA, which is not there in the present case.

(xvi) We observe that there are two major differences between the IREDA (Supra), and present case (i) The holder of CCDs in terms

NCLT Amaravati Bench of clause 4 of the DSA called upon the Corporate Debtor to repay the Investment amount along with applicable interest vide its letter dated 08.12.2017, while in the present case, there is no crystallisation of the debt; (ii) The holder of the CCDs invoked Arbitration clause and got an Arbitral Award in his favour directing the CD to pay the investment amount along with interest. These issues have been deliberated in the NCLAT order in the matter of IREDA (Supra) and after examining the Hon’ble Supreme Court Judgement in the matter of IFCI Ltd (Supra) and Hon’ble NCLAT Judgement in the matter of Shubham Corporation Pvt. Ltd. (Supra), the Hon’ble NCLAT has concluded at para 26 that for finding nature of transaction, the documents entered between the parties are the best guide to find out nature of debt, as to whether there was time value of money or not.

(xvii) The Applicant has considerably relied on the “commercial effect of borrowing” to contend his case of proving the CCDs as financial debt. However, in our view, first the debt needs to be established and thereafter, the commercial effect of borrowing needs to be established to prove that the debt falls under the category of ‘financial debt’. If we start examining the ‘commercial effect of borrowing’ before establishing the debt, all the share capital, whether, equity or preference, would qualify the criteria of ‘commercial effect of borrowing’, as laid down in Orator Marketing Pvt. Ltd. (Supra) read with Adhunik Corporation Limited (Supra)..

NCLT Amaravati Bench (xviii) In view of the above analysis of the judgements, we consider it appropriate to examine the investment agreements entered between the parties to understand the nature of debt.

(xix) It is noted that both the parties have stated to have entered into two Investment Agreements dated 14.11.2011 and 29.06.2011, however, the copy of the Investment Agreements dated 29.06.2011 has not been placed on record by either of the parties. Therefore, we examine the Investment Agreement dated 14.11.2011 submitted in the pleadings of the parties.

(xx) The Investment Agreement dated 14.11.2011 was entered into between the Corporate Debtor & its Promoters and IFCI Venture, which is discussed as below:

(a) The IFCI Limited (hereinafter referred to as the “IFCI”), to invest in Indian companies in projects aiming to reduce negative ecological impact such as energy, power etc., floated GIVF, which was registered with Securities Exchange Board of India (hereinafter referred to as the “SEBI”) and entrusted the Fund to IDBI Trusteeship Services Ltd.. (hereinafter referred to as the “IDBI”) as Trustee. The IFCI Venture was appointed as Investment Manager of GIVF by the Trustee to manage, invest and provide administrative services to GIVF and to grant to the company the financial assistance and to enter into the Agreement:

NCLT Amaravati Bench (b) The Investment Agreement was entered into among the Corporate Debtor, its 12 Promoters (6 individual and 6 companies) and IFCI Venture. The relevant extract of the Agreement is reproduced below:

NCLT Amaravati Bench

NCLT Amaravati Bench (c) The terms for subscription have been elaborated in Article II of the Investment Agreement. As per the clause (a) of the Article II of the Investment Agreement, IFCI Venture agreed to subscribe to 12,00,000 CCDs of Rs.100 each for cash at par aggregating Rs.1200 lakhs, which do not carry any interest and were convertible into equity shares at par any time, but before 28.02.2015. On conversion of the CCDs, the premium @ 19% p.a. was to be paid by the Corporate Debtor or at the option of IFCI Venture, the CCDs were to be converted into its equity shares at par. The Corporate Debtor/ its promoters also had the option to redeem/ purchase the CCDs with annualized compounded return of 19% p.a. in accordance with the provisions of the term sheet. clause (b) of the Article II further provides that the entire amount of Rs.1200 lakhs was to be utilised for subscription to the fresh equity capital of the Corporate Debtor. The Article II of the Investment Agreement are reproduced below:

NCLT Amaravati Bench (d) The Article III of the Investment Agreement provides for the terms for exit from the investment by the IFCI Venture. The Clause (a), (b) and (c) of Article III provides for the exit option for the IFCI Venture and Clause (d) of Article III provides that if none of the options materialises by 31.07.2025, the IFCI Venture may require the promoters to sell their shares. Clause (h) of Article III prescribes the rights of the IFCI Venture, in NCLT Amaravati Bench liquidation, dissolution or winding up of the Corporate Debtor, to receive, prior to any distribution to any· other shareholder of the Corporate Debtor. The Article III of the Investment Agreement are reproduced below:

NCLT Amaravati Bench (e) Article IV of the Investment Agreement prescribes that as a security for investment by the IFCI Venture, the promoters will pledge their 160 lakh equity shares of Rs.10 each aggregating to, Rs.1600 lakhs. The relevant extracts of the Article IV of the Investment Agreement are reproduced below:

(f) Article XI of the Investment Agreement provides that the Agreement shall be in force during the period IFCI Venture holds any CCDs or equity shares subscribed and Article XII of the Investment Agreement provides the jurisdiction of the court at Delhi/ New Delhi only. The Article XI and XII of the Investment Agreement are reproduced below:

(xxi) Now, we consider it to peruse the provisions of the IBC to examine the contention of the Applicant. Section 3 (11) defines debt as under: -

NCLT Amaravati Bench “3(11) “debt” means a liability or obligation in respect of a claim which is due from any person and includes a financial debt and operational debt;”

(xxii) As per Section 5(8) of the Code, one of the basic requirements for qualifying as a financial debt is that there should be a debt. The Section 5(8) of the Code is as under: “5(8) “financial debt” means a debt along with interest, if any, which is disbursed against the consideration for the time value of money and includes— (a) money borrowed against the payment of interest; (b) any amount raised by acceptance under any acceptance credit facility or its de-materialised equivalent; (c) any amount raised pursuant to any note purchase facility or the issue of bonds, notes, debentures, loan stock or any similar instrument; (d) the amount of any liability in respect of any lease or hire purchase contract which is deemed as a finance or capital lease under the Indian Accounting Standards or such other accounting standards as may be prescribed; (e) receivables sold or discounted other than any receivables sold on non-recourse basis; (f) any amount raised under any other transaction, including any forward sale or purchase agreement, having the commercial effect of a borrowing; Explanation.—For the purposes of this sub-clause,— (i) any amount raised from an allottee under a real estate project shall be deemed to be an amount having the commercial effect of a borrowing; and (ii) the expressions, “allottee” and “real estate project” shall have the meanings respectively assigned to them in clauses (d) and (zn) of section 2 of the Real Estate (Regulation and Development) Act, 2016 (16 of 2016); (g) any derivative transaction entered into in connection with protection against or benefit from fluctuation in any rate or price

NCLT Amaravati Bench and for calculating the value of any derivative transaction, only the market value of such transaction shall be taken into account; (h) any counter-indemnity obligation in respect of a guarantee, indemnity, bond, documentary letter of credit or any other instrument issued by a bank or financial institution; (i) the amount of any liability in respect of any of the guarantee or indemnity for any of the items referred to in sub-clauses (a) to (h) of this clause;” (xxiii) As per Section 5(7) of the Code, for becoming a financial creditor, the person has to prove that there is a financial debt and he is either owner or assignor of that financial debt. Section 5(7) of the IBC defines a financial creditor as under: “5(7) “financial creditor” means any person to whom a financial debt is owed and includes a person to whom such debt has been legally assigned or transferred to;” (xxiv) A conjoint reading of the aforesaid provisions demonstrates that the existence of a "financial debt" is the foundational requirement for a person to qualify as a Financial Creditor under Section 5(7) of the Code and a financial debt necessarily presupposes the existence of a "debt" within the meaning of Section 3(11).

(xxv) During the course of hearing dated 13.07.2026, the Applicant, referring to clauses (a), (d) and (e) of Article-II and clause (h) of Article-III of the Investment Agreement dated 14.04.2011, contended that the CCDs would amount to ‘financial debt’. The RP also referred to the clauses (a), (b), (c), (d) and (e) of Article-II, and Article-III of the Investment Agreement dated 14.04.2011 to contend that the CCDs would not fall under the category of financial debt. However, both the Applicant and the RP have failed to notice

NCLT Amaravati Bench

Schedule I, II and III enclosed to the Investment Agreement dated 14.04.2011, from which it is noted that the Corporate Debtor had set up a Small Hydro Power Plant at Khammam District, Andhra Pradesh with the project cost of Rs.21,996.60, which was agreed to be financed through equity of Rs.6845.60 lakhs (including IFCI Venture’s assistance) and term loan of Rs.15151.00 lakhs. The relevant extracts of Investment Agreement are reproduced below:

xxxxxxxxxxxxxxxxx

NCLT Amaravati Bench xxxxxxxxxxxxxxxxxx (xxvi) From the above it is clear that the cost of the project of Rs.21,996.60 lakhs was agreed to be financed through equity of Rs.6845.60 lakhs (including IFCI Venture’s assistance} and term loan of Rs.151.00 lakhs. Thus, it is evident that the CCDs were subscribed as a part of the equity and therefore, does not qualify as debt. Therefore, subsequently treating the same as debt by the parties would not only be against the holistic interpretation of section 5(7) of the Code, but also amount to deviation from the contractual arrangement between them.

(xxvii) Since there is no debt, there cannot be any financial debt and when there is no financial debt, there is no need to examine the commercial effect of borrowing and Article II and III of the Investment Agreement as contended by the Applicant and the RP.

(xxviii) The character of the transaction has to be determined from the original Investment Agreement dated 14.04.2011 and the Schedules thereto. Since the CCDs formed part of the equity component of the project financing, the foundational requirement of NCLT Amaravati Bench “financial debt” under Section 5(8) is absent. Therefore, the expression “commercial effect of borrowing” or the concept of time value of money cannot, in the absence of an underlying debt, convert the equity investment into financial debt.

9. In view of the foregoing discussion, and upon a conjoint consideration of the Investment Agreement dated 14.04.2011 and the Schedules thereto, we are of the considered view that the CCDs subscribed pursuant thereto partook the character of equity and did not constitute a debt owed by the Corporate Debtor. Consequently, the said CCDs do not satisfy the foundational requirement of “debt” under Section 3(11) and, therefore, cannot constitute “financial debt” within the meaning of Section 5(8) of the Code. The Applicant, accordingly, does not fall within the definition of “Financial Creditor” under Section 5(7) of the Code and, on that basis, has no right to claim membership of the Committee of Creditors. In view of the aforesaid finding, the other issues raised by the Applicant concerning the treatment of the CCDs as financial debt and the constitution or reconstitution of the Committee of Creditors do not require separate adjudication.

10. As a sequel to the above, IA(IBC) 209/2026 in CP (IB)8/7/AMR/2022 is dismissed and disposed of.

Sd/- Sd/- (UMESH KUMAR SHUKLA) (KISHORE VEMULAPALLI) MEMBER (TECHNICAL) MEMBER (JUDICIAL)

Anusha.