what are facts of your case .? generally in term loan agreement there is clause for conversion of loan amount into equity
Conversion of paid up Equity duly alloted into a Term Loan. Is it unlawful act?
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what are facts of your case .? generally in term loan agreement there is clause for conversion of loan amount into equity
ABC is a Registered Charitable Trust & reputed NGO, working for Empowerment of Women. It was approached by a Govt. Agency [XYZ] to set up an Agri processing (mfg.) unit with promise of Venture Capital Assistance by way of Equity investment in the new company to be set up [LMN Ltd. promoted by a senior Trust Official, as an Individual]. Project commenced production in Nov. 03. XYZ had an option to buy back the Eq. shares after 3 years but did not exercise it. In the meanwhile, XYZ 'arm twisted' ABC & lured it to sign a new Agreement to convert the paid up equity into TL at their discretion. LMN Ltd. became NPA in March, 2009 & now is a dormant company. XYZ is chasing the Trust Chairman, a Sr. Citizen & Chairman of ABC to repay the so called VCA, with interest. Promoter of LMN has left long back. Old man has approached me, for guidance
once ABC/ LMN ltd has signed agreement with XYZ giving XYZ an option convert paid up equity into term loan at its discretion it would be binding on ABC /LMN .
if subsequently new company has becoming NPA chairman is not personally responsible .
if LMN became NPA in 2009 and no legal proceedings were taken to recover the loan claim would be barred by limitation as on date . suit ought to have been filed within period of 3 years to recover loan