Money Raised out of Optional Convertible Debentures Classifiable as Financial Debt u/s 5(8): NCLAT Dismisses Appeal of IREDA

The National Company Law Appellate Tribunal (NCLAT) dismissed an appeal filed by the Indian Renewable Energy Development Agency (IREDA) regarding the classification of money raised through optional convertible debentures (OCDs). The NCLAT ruled that funds raised via OCDs should be classified as financial debt under Section 5(8) of the Insolvency and Bankruptcy Code (IBC). IREDA had contended that the money raised was not a financial debt, but the Tribunal disagreed, stressing the importance of correct categorization for proper resolution under the IBC. This judgment clarifies the legal interpretation of OCDs in the context of financial debt and sets a precedent for similar cases in the future, ensuring that debt classification is in line with the provisions of the IBC.