Section 71 — Debentures

(1) A company may issue debentures with an option to convert such debentures into
shares, either wholly or partly at the time of redemption:
Provided that the issue of debentures with an option to convert such debentures into shares, wholly or
partly, shall be approved by a special resolution passed at a general meeting.
(2) No company shall issue any debentures carrying any voting rights.
(3) Secured debentures may be issued by a company subject to such terms and conditions as may be
prescribed.
(4) Where debentures are issued by a company under this section, the company shall create a debenture
redemption reserve account out of the profits of the company avai lable for payment of dividend and the
amount credited to such account shall not be utilised by the company except for the redemption of
debentures.
(5) No company shall issue a prospectus or make an offer or invitation to the public or to its members
exceeding five hundred for the subscription of its debentures, unless the company has, before such issue or
offer, appointed one or more debenture trustees and the conditions governing the appointment of such
trustees shall be such as may be prescribed.
(6) A debenture trustee shall take steps to protect the interests of the debenture-holders and redress their
grievances in accordance with such rules as may be prescribed.
(7) Any provision contained in a trust deed for securing the issue of debentures, or in any contract with
the debenture-holders secured by a trust deed, shall be void in so far as it would have the effect of exempting
a trustee thereof from, or indemnifying him against, any liability for breach of trust, where he fails to show
the degree of care and due diligence required of him as a trustee, having regard to the provisions of the trust
deed conferring on him any power, authority or discretion:
Provided that the liability of the debenture trustee shall be subject to such exemptions as may be agreed
upon by a majority of debenture-holders holding not less than three-fourths in value of the total debentures
at a meeting held for the purpose.
(8) A company shall pay interest and redeem the debentures in accordance with the terms and conditions
of their issue.
(9) Where at any time the debenture trustee comes to a conclusion that the assets of the company are
insufficient or are likely to become in sufficient to discharge the principal amount as and when it becomes
due, the debenture trustee may file a petition before the Tribunal and the Tribunal may, after hearing the

company and any other person interested in the matter, by order, impose such restrictions on the incurring
of any further liabilities by the company as the Tribunal may consider necessa ry in the interests of the
debenture-holders.
(10) Where a company fails to redeem the debentures on the date of their maturity or fails to pay interest
on the debentures when it is due, the Tribunal may, on the application of any or all of the debenture-holders,
or debenture trustee and, after hearing the parties concerned, direct, by order, the company to redeem the
debentures forth with on payment of principal and interest due thereon.
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(12) A contract with the company to take up and pa y for any debentures of the company may be
enforced by a decree for specific performance.
(13) The Central Government may prescribe the procedure, for securing the issue of debentures, the