Summary
The Supreme Court upheld rejection of IFCI’s creditor claim against ICTL. The compulsorily convertible debentures formed part of the project’s agreed equity component, converted automatically under the subscription terms, and imposed repayment obligations on the sponsor rather than ICTL. Commercial loss and ineffective recovery against the sponsor could not rewrite those agreements. No question of law warranting interference under Section 62 arose.
Issues
- Whether the compulsorily convertible debentures constituted debt owed by ICTL in its insolvency process.
- Whether the contractual allocation of obligations could be altered because IFCI’s other remedies were commercially unproductive.
Provisions considered
- Section 3(11), Insolvency and Bankruptcy Code, 2016A debt required a liability or obligation of the corporate debtor. The agreements made IFCI an equity participant in ICTL and placed the relevant payment obligations on the sponsor. (¶ 13–20)
- Section 62(1), Insolvency and Bankruptcy Code, 2016The appeal jurisdiction was confined to a question of law arising from the NCLAT order; the contractual findings disclosed no such question warranting interference. (¶ 29–31)
Held
- The concession agreement, financing plan and subscription agreement consistently treated these CCDs as equity. No term converted them into financial debt on the occurrence of the asserted events. (¶¶ 12–17, 24–26)
- The agreed automatic conversion date was reached; outstanding corporate formalities did not create a repayment obligation of ICTL contrary to the contractual scheme. The put option had not been exercised. (¶¶ 2, 11, 16–17)
- Coupon, buy-back and security arrangements imposed the relevant obligations on the sponsor. Recovery as ICTL’s creditor required a debt owed by ICTL itself, which was absent. (¶¶ 16–20, 23–25)
- Expertly drafted commercial contracts ordinarily operate according to their express terms. Commercial hardship or failure of recovery against the sponsor did not justify adding a corporate-debtor repayment obligation. (¶ 21–25)
- The NCLAT’s rejection accorded with settled principles and raised no qualifying question of law under Section 62. (¶ 29–31)
Result
Appeal dismissed; parties to bear their own costs.