Saira Projects Limited (SPL) is a listed public company engaged exclusively in setting up, execution and financing of long-gestation infrastructure…

CA Intermediate · Corporate and Other Laws · PYQS · May 2026
Saira Projects Limited (SPL) is a listed public company engaged exclusively in setting up, execution and financing of long-gestation infrastructure projects such as highways, ports, and metro corridors. Its equity shares are listed on recognized stock exchanges in India. As per the latest audited financial statements, SPL has a net worth of 1,020 crore. During FY 2025-26, SPL issued 7,20,000 instruments of 1,000 each, described in the offer document as, "Secured Redeemable Convertible Debentures with Deferred Optional Equity Conversion Feature". The issue was made by way of private placement to four Category II Alternative Investment Funds, all of which qualify as Qualified Institutional Buyers (QIBs). The principal terms were as follows: Tenure: 16 yearsCoupon rate: 8.75% per annum, payable annually Conversion feature- At the end of the 13th year, the debenture holder may, at its discretion, convert up to 30% of the outstanding principal into equity shares of SPL. Security is exclusive first charge on immovable property of the company situated outside India, with a second charge on movable fixed assets of it located in India. A debenture trustee was appointed, but SPL did not create any Debenture Redemption Reserve (DRR), relying on the following grounds recorded in the Board note: (A) Listed company status (B) Private placement restricted to QIBs (C) Infrastructure company classification With reference to the above case, critically examine and answer the followings: (i) Whether the 16-year tenure is permissible? (ii) Whether creation of security on assets situated outside India affect the validity of the debenture issue? (iii) Whether SPL is legally justified in not creating a Debenture Redemption Reserve (DRR)? (5 Marks)

Suggested Answer and Working Notes:

OR (a) (i) According to Rule 18 (1) (a) of the Companies (Share Capital and Debentures) Rules, 2014, an issue of secured debentures may be made, provided the date of its redemption shall not exceed ten years from the date of issue. Provided that the companies engaged in setting up of infrastructure projects may issue secured debentures for a period exceeding ten years but not exceeding thirty years. In the given question, Saira Projects Limited (SPL) is exclusively engaged in infrastructure projects such as highways, ports and metro corridors. Therefore, being an infrastructure company, SPL is permitted to issue secured debentures having a maximum tenure of 30 years. Hence, the 16-year tenure is permissible. (ii) According to Rule 18 (1) (d), the security for the debentures by way of a charge or mortgage shall be created in favour of the debenture trustee on: (i) any specific movable property of the company or its holding company or subsidiaries or associate companies or otherwise. (ii) any specific immovable property wherever situate, or any interest therein. In the given question, SPL has created: exclusive first charge on immovable property situated outside India; andsecond charge on movable fixed assets situated in India. Therefore, the mere fact that part of the security is situated outside India does not affect the validity of the debenture issue. Hence, the debenture issue remains valid. (iii) As per Rule 18 (7) , for listed companies (other than All India financial Institutions and Banking Companies as specified in sub-clause (i) ), Debenture Redemption Reserve is not required in case of privately placed debentures. In the given question, SPL is a listed public company and the debentures were issued through private placement. Therefore, SPL falls within the category of listed companies exempted from the requirement of creating Debenture Redemption Reserve and hence it is justified in not creating a Debenture Redemption Reserve (DRR).

Topics: Share Capital and Debentures

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