Regulation 15 - Duties of the debenture trustees - Securities and Exchange Board of India (Debenture Trustees) Regulations, 1993

Duties of the debenture trustees. 15. 1 [(1) It shall be the duty of every debenture trustee to- (a) satisfy itself that the prospectus or letter of offer does not contain any matter which is inconsistent with the terms of the issue of debentures or with the trust deed; (b) satisfy itself that the covenants in the trust deed are not prejudicial to the interest of the debenture holders; (c) call for periodical status/ performance reports from the issuer company within 7 days of the relevant board meeting or within 45 days of the respective quarter whichever is earlier; (d) communicate promptly to the debenture holders defaults, if any, with regard to payment of interest or redemption of debentures and action taken by the trustee therefor; (e) appoint a nominee director on the Board of the company in the event of: (i) two consecutive defaults in payment of interest to the debenture holders; or (ii) default in creation of security for debentures; or (iii) default in redemption of debentures. (f) ensure that the company does not commit any breach of the terms of issue of debentures or covenants of the trust deed 10 [ by monitoring the same in the manner specified by the Board ] and take such reasonable steps as may be necessary to remedy any such breach; (g) inform the debenture holders immediately of any breach of the terms of issue of debentures or covenants of the trust deed; (h) 6 [ ensure the implementation of the conditions regarding creation of security for the debentures, if any, debenture redemption reserve and recovery expense fund; ] (i) ensure that the assets of the company issuing debentures and of the guarantors, if any, are sufficient to discharge the interest and principal amount at all times and that such assets are free from any other encumbrances except those which are specifically agreed to by the debenture holders; (j) do such acts as are necessary in the event the security becomes enforceable; (k) call for reports on the utilization of funds raised by the issue of debentures; (l) take steps to convene a meeting of the holders of debentures as and when such meeting is required to be held; (m) ensure that the debentures have been converted or redeemed in accordance with the terms of the issue of debentures; (n) perform such acts as are necessary for the protection of the interest of the debenture holders and do all other acts as are necessary in order to resolve the grievances of the debenture holders; (o) take possession of trust property in accordance with the provisions of the trust deed; (p) to take appropriate measures for protecting the interest of the debenture holders as soon as any breach of the trust deed or law comes to his notice; (q) ascertain and satisfy itself that,- (i) in case where the allotment letter has been issued and debenture certificate is to be issued after registration of charge, the debenture certificates have been dispatched by the body corporate to the debenture holders within 30 days of the registration of the charge with the Registrar of Companies; (ii) debenture certificates have been dispatched to the debenture holders or debentures have been credited in the demat accounts of the debenture holders in accordance with the provisions of the Securities and Exchange Board of India (Debenture Trustee) Regulations 1993, Securities and Exchange Board of India (Issue and Listing of Debt Securities) Regulations 2008, Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations 2015 and any other regulations issued by the Board; (iii) interest warrants for interest due on the debentures have been dispatched to the debenture holders on or before the due dates; (iv) debenture holders have been paid the monies due to them on the date of redemption of the debentures; (r) inform the Board immediately of any breach of trust deed or provision of any law, which comes to the knowledge of the trustee. Explanation: The communication to the debenture holders by the debenture trustee as mentioned in these regulations may be made by electronic media, press-release and placing notice on its website; (s) exercise due diligence to ensure compliance by the body corporate, with the provisions of the Companies Act, Securities and Exchange Board of India (Listing Obligations and Disclosure Requirement), Regulations, 2015, the listing agreement of the stock exchange or the trust deed or any other regulations issued by the Board pertaining to debt issue; 7 [ (t) In case where listed debt securities are secured 11 [ , ] it shall, - (i) on a Quarterly basis- (a) carry out the necessary due diligence and monitor the 12 [ security cover ] in the manner as may be specified by the Board from time to time. (ii) on a Half-Yearly basis- (a) obtain a certificate from the statutory auditor of the issuer 13 [ regarding security cover ] including compliance with the covenants of the Offer Document/Information Memorandum in the manner as may be specified by the Board from time to time. ] 2 [(1A) The debenture trustee shall: (a) obtain reports from the lead bank regarding progress of the project; (b) monitor utilisation of funds raised in the issue; 3 [(c) obtain a certificate from the issuer's Statutory Auditor: (i) in respect of utilisation of funds during the implementation period of the project; and (ii) in the case of debentures issued for financing working capital, at the end of each accounting year.]] (2) A debenture trustee shall call or cause to be called by the body corporate a meeting of all the debenture holders on- (a) a requisition in writing signed by at least one-tenth of the debenture holders in value for the time being outstanding; (b) the happening of any event, which constitutes a default 8 [ or breach of covenants (as specified in the Offer Document/Information Memorandum and/or debenture trust deed) ] or which in the opinion of the debenture trustees affects the interest of the debenture holders. 5 [ Provided that a debenture trustee may seek the consent of debenture holders through e-voting, wherever applicable; Provided further that the requirement to convene a meeting of all debenture holders in case of a default in payment obligation by the issuer, shall not be applicable in case of debentures issued by way of public issue. ] 4 [(3) No debenture trustee shall relinquish its assignments as debenture trustee in respect of the debenture issue of any body corporate, unless and until another debenture trustee is appointed in its place by the body corporate. (4) A debenture trustee shall maintain the networth requirements as specified in these regulations on a continuous basis and shall inform the Board immediately in respect of any shortfall in the networth and in such a case it shall not be entitled to undertake new assignments until it restores the networth to the level of specified requirement within the time specified by the Board. (5) A debenture trustee may inspect books of account, records, registers of the body corporate and the trust property to the extent necessary for discharging its obligations.] 9 [ (6) Before creating a charge on the security for the debentures, the debenture trustee shall exercise independent due diligence to ensure that such security is free from any encumbrance or that it has obtained the necessary consent from other charge-holders if the security has an existing charge, in the manner as may be specified by the Board from time to time. (7) Subject to the approval of the debenture holders and the conditions as may be specified by the Board from time to time, the debenture trustee, on behalf of the debenture holders, may enter into inter-creditor agreements provided under the framework specified by the Reserve Bank of India. ] ************* NOTES:- 1 Substituted ibid. Prior to the same, the provision read as follows: (1) It shall be the duty of every debenture trustee to- (a) call for periodical reports from the body corporate; (b) [***] (c) take possession of trust property in accordance with the provisions of the trust deed; (ca) supervise the implementation of the conditions regarding creation of security for the debentures and debenture redemption reserve, wherever applicable; (d) enforce security in the interest of the debenture holders; (e)do such acts as are necessary in the event the security becomes enforceable; (f) carry out such acts as are necessary for the protection of the debenture holders and to do all things necessary in order to resolve the grievances of the debenture holders; (g) ascertain and satisfy itself that the- (i) in case where the allotment letter has been issued and debenture certificate is to be issued after registration of charge, the debenture certificates have been despatched by the body corporate to the debenture holders within 30 days of the registration of the charge with the Registrar of Companies;] (ii) debenture certificates have been despatched to the debenture holders in accordance with the provisions of the Companies Act; (iii) interest warrants for interest due on the debentures have been despatched to the debenture holders on or before the due dates; (iv) debenture holders have been paid the monies due to them on the date of redemption of the debentures; (h) ensure on a continuous basis that the property charged to the debentures is available and adequate at all times to discharge the interest and principal amount payable in respect of the debentures and that such property is free from any other encumbrances save and except those which are specifically agreed to by the debenture trustee;] (i) exercise due diligence to ensure compliance by the body corporate, with the provisions of the Companies Act, the listing agreement of the stock exchange or the trust deed; (j) to take appropriate measures for protecting the interest of the debenture holders as soon as any breach of the trust deed or law comes to his notice; (k) to ascertain that the debentures have been converted or redeemed in accordance with the provisions and conditions under which they are offered to the debenture holders; (l) inform the Board immediately of any breach of trust deed or provision of any law; (m) appoint a nominee director on the Board of the body corporate in the event of: (i) two consecutive defaults in payment of interest to the debenture holders; or (ii) default in creation of security for debentures; or (iii) default in redemption of debentures; (n) communicate to the debenture holders on half yearly basis the compliance of the terms of the issue by the body corporate, defaults, if any, in payment of interest or redemption of debentures and action taken therefor. 2 Inserted by the Amendment to the SEBI (Debenture Trustees) Regulations, 1993 made by Schedule XX to the SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009 w.e.f. 26-08-2009. 3 Substituted by the SEBI (Debenture Trustees) (Amendment) Regulations, 2017, w.e.f., 13-7-2017. Prior to the same, clause (c) read as follows: obtain a certificate from the issuer's auditors: (i) in respect of utilisation of funds during the implementation period of the project; and (ii) in the case of debentures issued for financing working capital, at the end of each accounting year. 4 Inserted by the SEBI (Debenture Trustees) (Amendment) Regulations, 2003, w.e.f, 4-7-2003. 5. Inserted vide NOTIFICATION No. SEBI/LAD-NRO/GN/2019/14 dated 07-05-2019 6. Substituted vide Notification No. SEBI/LAD-NRO/GN/2020/34 dated 08-10-2020 before it was read as ensure the implementation of the conditions regarding creation of security for the debentures, if any, and debenture redemption reserve; 7. Substituted vide Notification No. SEBI/LAD-NRO/GN/2020/34 dated 08-10-2020 before it was read as (t) In case where listed debt securities are secured by way of receivables/ book debts it shall obtain the following,- (i) On Quarterly basis- (a) Certificate from the Director / Managing Director of the issuer company certifying the value of the book debts / receivables; (b) Certificate from an independent chartered accountant giving the value of book debts / receivables. (ii) On Yearly basis- (a) Certificate from the statutory auditor giving the value of book debts / receivables.] 8. Inserted vide Notification No. SEBI/LAD-NRO/GN/2020/34 dated 08-10-2020 9. Inserted vide Notification No. SEBI/LAD-NRO/GN/2020/34 dated 08-10-2020 10. Inserted vide Notification No. SEBI/LAD-NRO/GN/2022/78 dated 11-04-2022 11. Substituted vide Notification No. SEBI/LAD-NRO/GN/2022/78 dated 11-04-2022 before it was read as, by way of receivables/ book debts, 12. Substituted vide Notification No. SEBI/LAD-NRO/GN/2022/78 dated 11-04-2022 before it was read as, asset cover 13. Substituted vide Notification No. SEBI/LAD-NRO/GN/2022/78 dated 11-04-2022 before it was read as, giving the value of receivables/book debts