Raising Money Through Optional Convertible Debentures Can Be Considered As Financial Debt U/S 5(8): NCLAT

The National Company Law Appellate Tribunal (NCLAT) ruled that money raised through optional convertible debentures (OCDs) can be considered financial debt under the Insolvency and Bankruptcy Code (IBC). In this case, the appellant argued that OCDs were equity in nature, but the NCLAT held that they represented a debt instrument, as they involved a commitment to repay the principal and interest. The ruling clarified the scope of financial debt under IBC, which includes not just loans but also instruments like debentures that carry an obligation of repayment. This decision may have significant implications for companies using similar instruments to raise funds and for the treatment of such debts during insolvency proceedings.