No company shall, after the commencement of this Act, issue any debentures carrying voting rights at any meeting of the company, whether generally or in respect of particular classes of business.
117A - 1* Debenture trust deed
( 1) A trust deed for securing any issue of debentures shall be in such form and shall be executed with in such period as may be prescribed.
(2) A copy of the trust deed shall be open to inspection to any member or debenture holder of the company and he shall also be entitled to obtain copies of such trust deed on payment of such sum as may be prescribed.
(3) If a copy of the trust deed is not made available for inspection or is not given to any member or debenture holder, the company and every officer of the company who is in a default, shall be punishable, for each offence, with fine which may extend to five hundred rupees for every day during which the offence continues. ]
117B -1* Appointment of debenture trustees and duties of debenture trustees
(1) No company shall issue a prospectus or a letter of offer to the public for subscription of its debentures, unless the company has, before such issue, appointed one or more debenture trustees for such debentures and the company has, on the face of the prospectus or the letter of offer, stated that the debenture trustee or trustees have given their consent to the company to be so appointed: Provided that no person shall be appointed as a debenture trustee, if he-
(a) Beneficially holds shares in the company;
(b) Is beneficially entitled to moneys which are to be paid by the company to the debenture trustee;
(c) Has entered into any guarantee in respect of principal debts secured by the debentures or interest thereon.
(2) Subject to the provisions of this Act, the functions of the debenture trustees shall generally be to protect the interest of holders of debentures (including the creation of securities within the stipulated time) and to redress the grievances of holders of debentures effectively.
(3) In particular, and without prejudice to the generality of the foregoing functions, a debenture trustee may take such other steps as he may deem fit-
(a) To ensure that the assets of the company issuing debentures and each of the guarantors are sufficient to discharge the principal amount at all times;
(b) To satisfy himself that the prospectus or the letter of offer does not contain any matter which is inconsistent with the terms of the debentures or with the trust deed;
(c) To ensure that the company does not commit any breach of covenants and provisions of the trust deed;
(d) To take such reasonable steps to remedy any breach of the covenants of the trust deed or the terms of issue of debentures;
(e) To take steps to call a meeting of holders of debentures as and when such meeting is required to be held.
(4) Where at any time the debenture trustee conies to a conclusion that the assets of the company are insufficient or are likely to become insufficient to discharge the principal amount as and when ii becomes due, the debenture trustee may file a petition before the2*[Central Government] and the2*[Central Government] may, after hearing the company and any other person interested in the matter, by an order, impose such restrictions on the incurring of any further liabilities as the2*[Central Government] thinks necessary in the interests of holders of the debentures.]
3*[Provided that in the case of revival and rehabilitation of a sick industrial company under Part VIA, the provisions of this section shall have effect as if for the words "Central Government", the word "Tribunal" had been substituted.]
117C -1* Liability of company to create security and debenture redemption reserve
(1) Where a company issues debentures after the commencement of this Act, it shall create a debenture redemption reserve for the redemption of such debentures, to which adequate amounts shall be credited, from out of its profits every year until such debentures are redeemed.
(2) The amounts credited to the debenture redemption reserve shall not be utilised by the company except for the purposes aforesaid.
(3) The company referred to in sub-section (1) shall pay interest and redeem the debentures in accordance with the terms and conditions of their issue.
(4) Where a company fails to redeem the debentures on the date of maturity, the4*[Tribunal] may, on the application of any or all the holders of debentures shall, after hearing the parties concerned, direct, by order, the company to redeem the debentures forthwith by the payment of principal and interest due thereon.
(5) If default is made in complying with the order of the4*[Tribunal] under sub-section (4), every officer of the company who is in default, shall be punishable with imprisonment which may extend to three years and shall also be liable to a fine of not less than five hundred rupees for every day during which such default continues.]
(1) A copy of any trust deed for securing any issue of debentures shall be forwarded to the holder of any such debentures or any member of the company, at his request and within seven days of the making thereof, on payment -
(a) In the case of a printed trust deed of1*[such sum as may be prescribed]; and
(b) In the case of a trust deed which has not been printed, of2*[such sum as may be prescribed] for every one hundred words or fractional part thereof required to be copied.
( 2) If a copy is refused, or is not forwarded within the time specified in sub-section (1), the company, and every officer of the company who is in default, shall be punishable, for each offence, with fine which may extend to3*[five hundred rupees] and with a further fine which may extend to4*[two hundred rupees] for every day during which the offence continues.
(3) The5*[Central Government] may also, by order, direct that the copy required shall forthwith be sent to the person requiring it.
(4) The trust deed referred to in sub-section ( 1) shall also be open to inspection by any member or debenture-holder of the company in the same manner, to the same extent, and on payment of the same fees, as if it were the register of members of the company.
(1) Subject to the provisions of this section, any provision contained in a trust deed for securing an issue of debentures, or in any contract with the holders of debentures secured by a trust deed, shall be void insofar as it would have the effect of exempting a trustee thereof from, or indemnifying him against, liability for breach of trust, where he fails to show the degree of care and diligence required of him as trustee, having regard to the provisions of the trust deed conferring on him any powers, authorities or discretions.
(2) Sub-section (1) shall not invalidate-
(a) Any release otherwise validly given in respect of anything done or omitted to be done by a trustee before the giving of the release; or
(b) Any provision enabling such a release to be given-
(i) On the agreement thereto of a majority of not less than three-fourths in value of the debenture-holders present and voting in person or, where proxies are permitted, by proxy, at a meeting summoned for the purpose; and
(ii) Either with respect to specific acts or omissions or on the trustee dying or ceasing to act.
(3) Sub-section (1) shall not operate-
(a) To invalidate any provision in force at the commencement of this Act so long as any person then entitled to the benefit of that provision or afterwards given the benefit thereof under sub-section (4) remains a trustee of the deed in question; or
(b) To deprive any person of any exemption or right to be indemnified in respect of anything done or omitted to be done by him while any such provision was in force.
(4) While any trustee of a trust deed remains entitled to the benefit of a provision saved by sub-section (3), the benefit of that provision may be given either-
(a) To all trustees of the deed, present and future; or
(b) To any named trustee or proposed trustees thereof; by a resolution passed by a majority of not less than three-fourths in value of the debenture-holders present in person or, where proxies are permitted, by proxy, at a meeting called for the purpose in accordance with the provisions of the deed or, if the deed makes no provision for calling meetings, at a meeting called for the purpose in any manner approved by the court.
A condition contained in any debentures or in any deed for securing any debentures, whether issued or executed before or after the commencement of this Act, shall not be invalid by reason only that thereby, the debentures are made irredeemable or redeemable only on the happening of a contingency however, remote, or on the expiration of period, however long.
(1) Where either before or after the commencement of this Act, a company has redeemed any debentures previously issued, then,-
(a) Unless any provision to the contrary, whether express or implied, is contained in the articles or in the conditions of issue, or in any contract entered into by the company; or
(b) Unless the company has by passing a resolution to that effect or by some other act manifested its intention that the debentures shall be cancelled; the company shall have, and shall be deemed always to have had, the right to keep the debentures alive for the purposes of re-issue; and in exercising such a right, the company shall have, and shall be deemed always to have had, power to re-issue the debentures either by re-issuing the same debenture or by issuing other debentures in their place.
(2) Upon such re-issue, the person entitled to the debentures shall have, and shall be deemed always to have had, the same rights and priorities as if the debentures had never been redeemed.
(3) Where with the object of keeping debentures alive for the purpose of re-issue, they have, either before or after the commencement of this Act, been transferred to a nominee of the company, a transfer from that nominee shall be deemed to be a re-issue for the purposes of this section.
(4) Where a company has, either before or after the commencement of this Act, deposited any of its debentures to secure advances from time to time on current account or otherwise, the debentures shall not be deemed to have been redeemed by reason only of the account of the company having ceased to be in debit whilst the debentures remained so deposited.
(5) The re-issue of a debenture or the issue of another debenture in its place under the power by this section given to, or deemed to have been possessed by, a company, whether the re-issue or issue was made before or after the commencement of this Act, shall be treated as the issue of a new debenture for the purposes of stamp duly, but it shall not be so treated for the purposes of any provision limiting the amount or number of debentures to be issued:
Provided that any person lending money on the security of a debenture re-issued under this section which appears to be duly stamped may give the debenture in evidence in any proceedings for enforcing his security without payment of the stamp duty or any penalty in respect thereof, unless he had notice or, but for his negligence, might have discovered, that the debenture was not duly stamped; but in any such case the company shall be liable to pay the proper stamp duty and penalty.
(6) Nothing in this section shall prejudice-
(a) The operation of any decree or order of a court of competent jurisdiction pronounced or made before the twenty-fifth day of February, 1910, as between the parties to the proceedings in which the decree or order was made;
(b) Where an appeal has been preferred against any such decree or order, the operation of any decree or order passed on such appeal, as between the parties to such appeal; or
(c) Any power to issue debentures in the place of any debentures paid off or otherwise satisfied or extinguished, reserved to a company by its debentures or the securities for the same.
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