- (1.) This is a case of a company seeking the Court's blessings for shortchanging its debenture-holders.
(2.) This is the usual practice that companies of such kind indulge in as matters remain pending in Courts for years together. The debenture issue in this case was of the year 1995 and such debentures were apparently redeemed in 2000.
(3.) In terms of the Investor Protection Guidelines issued by the Securities and Exchange Board of India (SEBI), the appellant company ought to have created a security commensurate with the value of the issue within six months from the date of issue of the debentures. The relevant guidelines for the protection of the interests of debenture-holders include Section N of the SEBI guidelines for disclosure and investor protection. Clause 2 of such part indicates the measures that ought to be taken for the protection of the debenture-holders' interest. Clause 2(e) of Section N of the said guidelines provides as follows: "2. Protection of Debentureholders' Interest: (a) ... (b) ... (c) ... (d) ... (e) The companies shall, along with their application, file with SEBI, certificates from their bankers that the assets on which security is to be created are free from any encumbrances and the necessary permissions to mortgage the assets have been obtained or a No Objection Certificate from the financial institutions or banks for a second or pari passu charge in cases where assets are encumbered. The security should be created within six months from the date of issue of debentures. If for any reasons the companies are not in a position to create security within 12 months from the date of issue of debentures the company shall be liable to pay 2 per cent penal interest to debentureholders. If security is not created even after 18 months, a meeting of the debentureholders should be called within 21 days to explain the reasons thereof and the date by which the security would be created. ..." ;