If Rights Under Debenture Deed Are Transferred Without Prior Approval From Holders, Liabilities Of Corporate Debtor Remain Undischarged: NCLAT

The National Company Law Appellate Tribunal (NCLAT) has ruled that the liabilities of a corporate debtor remain undischarged if the rights under a debenture trust deed are transferred to another entity without obtaining the prior approval of the debenture holders. The case involved a situation where the original debenture trustee had transferred its rights and responsibilities to a new trustee without the consent of the debenture holders, who are the beneficiaries. The NCLAT held that such a transfer is not valid in the eyes of the law. It affirmed that the original obligations of the corporate debtor towards the debenture holders, as per the trust deed, continue to exist and are not discharged by this unauthorized transfer. This judgment protects the rights of debenture holders and ensures that their interests are not compromised by unilateral actions of the company or the trustee.