18 Debentures

(1) The company shall not issue secured debentures, unless it complies with the following conditions, namely:-

(a) An issue of secured debentures may be made, provided the date of its redemption shall not exceed ten years from the date of issue.

¹[Provided that the following classes of companies may issue secured debentures for a period exceeding ten years but not exceeding thirty years,

(i) Companies engaged in setting up of infrastructure projects;

(ii) 'Infrastructure Finance Companies' as defined in clause (vii a) of sub direction (1) of direction 2 of Non-Banking Financial (Non-depositaccepting or holding) Companies Prudential Norms (Reserve Bank) Directions, 2007;

⁷[(iii) Infrastructure Debt Fund Non-Banking Financial Companies’ as defined in clause (b) of direction 3 of Infrastructure Debt Fund Non-Banking Financial Companies (Reserve Bank) Directions, 2011;]

⁸[(iv) Companies permitted by a Ministry or Department of the Central Government oi by Reserve Bank of India or by the National Housing Bank or by any other statutory authority to issue debentures for a period exceeding ten years.]

(b) such an issue of Debentures shall be secured by the creation of a charge, on the properties or assets of the company, having a value which is sufficient for the due repayment of the amount of debentures and interest thereon; 

(c) the company shall appoint the debenture trustee before the issue of prospectus or letter of offer for subscription of its debentures and not later than sixty days after the allotment of the debentures, execute a debenture trust deed to protect the interest thereon;

(d) the security for the debentures  by way of a charge or mortgage shall be created in favour of the debenture trustee on:-

(i) ³[any specific movable property of the company; or

(ii) any specific immovable property wherever situate, or any interest therein.

Provided that in case of a non-banking financial company, the charge or mortgage under sub-clause (i) may be created on any movable property]

⁴[Provided further that in case of any issue of debentures by a Govemment company which is fully secured by the guarantee given by the Central Government or one or more State Government or by both, the requirement for creation of charge under this sub-rule shall not apply."

 Provided also that in case of any loan taken by a subsidiary company from any bank or financial institution the charge or mortgage under this sub-rule may also be created on the properties or assets of the holding company;]

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