Compulsorily Convertible Debentures cannot be considered as "Financial Debt" to initiate CIRP

Appeal is preferred by IFCI Limited ("Appellant") under Section 61 of the Insolvency and Bankruptcy Code, 2016 (hereinafter referred to as the 'Code') against the Impugned Order dated 14/03/2023 passed by the National Company Law Tribunal, Hyderabad Bench -||

Facts of the Case:

Before Initiation of CIRP

In 2011, IFCI agreed to provide financial assistance to the Corporate Debtor, IVRCL Chengapalli Tollways Ltd. (ICTL), through 'Compulsorily Convertible Debentures' ("CCDs") amounting to Rs. 125,00,00,000/- vide a Debenture Subscription Agreement (DSA) dated 14/10/2011.

IFCI, IVRCL Ltd (acting as Sponsor) and ICTL entered into a Share Buy Back Agreement, dated 14/10/2011, wherein the terms and conditions of the buyback of CCDS subscribed by the Applicant were detailed. The Applicant by exercising this option agreed to buy back Rs. 12.5 Crore CCDs any time between the end of the 3rd year and the 6th year from the date of issue of CCDs and in the event of default on behalf of ICTL, the Applicant would be at liberty to sell the CCDs to a third party.

In 2014, ICTL sought restructuring of the terms of repayment of the CCDs vide letter dated 21/11/2014 and the Applicant had approved restructuring of the CCD Facility.

In February 2017, ICTL suggested a 'One Time Settlement' ("OTS") and the Applicant agreed to the same on the condition that the amount of Rs. 135 crores shall be paid by 31/03/2017. On default, IFCI, revoked the Concession granted under restructuring of CCDs and therefore the OTS stood withdrawn. Subsequent to this, Corporate Guarantee of IVRCL was invoked by the Applicant. Subsequently, 'Corporate Insolvency Resolution Process' ("CIRP") was initiated by SBI against IVRCL on 23/02/2018.

The Applicant had filed its claim for Rs. 663.08 Cores, in relation to IVRCL's Corporate Guarantee Applications against IFCI's Facilities provided to ICTL