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CS Executive · Company Law and Practice · Debt Instruments - Concepts

Lotus Chemicals Ltd. failed to redeem its debentures on the maturity date. Which remedy is available to the debenture-holders under the Companies Act, 2013?

Debenture-holders, or the debenture trustee, may apply to the Tribunal. After hearing the parties, the Tribunal may order the company to redeem the debentures forthwith by paying the principal and interest due, as the Act provides for default in redemption or interest payment.

  1. AThey may apply to the Tribunal, which may direct the company to redeem the debentures forthwith with principal and interest dueCorrect
  2. BThey may apply to the Registrar, who may sell the company's assets
  3. CThey may vote the directors out at the next general meeting using their debenture voting rights
  4. DThey must wait until the debenture redemption reserve is fully built up

Explanation

Section 71(10) provides that where a company fails to redeem debentures on maturity or to pay interest when due, the Tribunal may, on application of any or all debenture-holders or the debenture trustee, direct the company to redeem them forthwith on payment of principal and interest due. Debentures carry no voting rights, so the voting option fails.

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