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Informist, Friday, Mar. 27, 2026

 

NEW DELHI – The Kolkata bench of the National Company Law Tribunal has rejected Tuticorin Electricity Supply Pvt. Ltd.'s INR-18.47-billion claim against debt-ridden Hiranmaye Energy Ltd. The tribunal said that the resolution professional of Hiranmaye Energy rightly rejected the claim of Tuticorin Electricity on the basis that the debentures were issued by the former in the nature of equity and not debt.

 

Power Trust, the entity from whom Tuticorin Electricity claims to have purchased the debentures, intended to utilise the debentures as equity rather than debt, said the tribunal. Even assuming that the debentures had been transferred to Tuticorin Electricity and vested in it, the same was rightly liable to be rejected by the resolution professional, said the tribunal. 

 

The case has its genesis from Hiranmaye Energy entering into a fully and compulsory convertible debentures subscription agreement with Indian Power Corp. Ltd. in 2015. In terms of the agreement, Indian Power Corp. infused a sum of INR 5 billion in Hiranmaye Energy against subscription of 490.46 million fully and compulsory convertible debentures of the latter.

 

Thereafter, Indian Power Corp. entered into an agreement for selling 490.46 million fully and compulsory convertible debentures to Power Trust. Tuticorin Electricity said that it had entered into an agreement with Power Trust for purchasing fully and compulsory convertible debentures for a sum of INR 3.06 billion. 

 

In 2024, the tribunal had admitted a petition by REC Ltd. to start insolvency proceedings against Hiranmaye Energy for dues of INR 21.80 billion. Power Trust said that due to the pending approval from the lenders of Hiranmaye Energy, the securities could not be transferred and accordingly requested Tuticorin Electricity to claim the amount which was lent out for the purchase of securities directly from Hiranmaye. 

 

In the insolvency process of Hiranmaye Energy, Tuticorin Electricity filed a claim of INR 18.47 billion. Tuticorin Electricity said that Power Trust had divested itself of the right, title, and interest in respect of the fully and compulsory convertible debentures of Hiranmaye Energy, by selling the same to the former. Mere failure on the part of Power Trust to get the securities registered in the name of Tuticorin Electricity does not mean that the sale would stand invalidated and such securities cannot be treated as equity, it said.

 

However, the resolution professional said that Tuticorin Electricity is not a financial creditor of Hiranmaye Energy as the fully and compulsory convertible debentures were issued to India Power Corp. and the latter continued to be its owner as per the debt-ridden company's books of accounts. Fully and compulsory convertible debentures are in the nature of equity instruments and do not qualify as "financial debt" in insolvency law, and, therefore, cannot be considered to be a financial liability of Hiranmaye Energy. The tribunal did not rule on whether the debentures had been transferred to Tuticorin Electricity, but agreed with the resolution professional's view of fully and compulsory convertible debentures being in the nature of equity.

 

Friday, shares of REC closed 2.8% lower at INR 318.45 on the National Stock Exchange.  End 

 

Reported by Surya Tripathi

Edited by Deepshikha Bhardwaj

 

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