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

Tara Infra Ltd issued secured debentures to the public and the debenture trustee concludes that the company's assets are, or are likely to become, insufficient to discharge the principal when due. Which step does the Companies Act, 2013 provide for the trustee?

The trustee may file a petition before the Tribunal. Under Section 71(9), after hearing the company and interested persons, the Tribunal may impose restrictions on the company incurring further liabilities as it considers necessary to protect the debenture-holders.

  1. ASell the company's assets directly without any order
  2. BFile a petition before the Tribunal, which may restrict the company from incurring further liabilitiesCorrect
  3. CApply to the Registrar to strike off the company
  4. DRemove the directors by notice to the Board

Explanation

Section 71(9) lets the trustee file a petition before the Tribunal, which after hearing may impose restrictions on incurring further liabilities in the interest of debenture-holders. No power to sell assets directly or strike off arises from this provision.

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