The code of conduct and operational regulations covering Debenture Trustee are covered under

1. Securities and Exchange Board of India (Debenture Trustees) Rules, 1993

2. Securities and Exchange Board of India (Debenture Trustees) Regulations, 1993

The Rules define a debenture trustee to an Issue as under:-

"debenture trustee" means a trustee of a trust deed for securing any issue of debentures of a body corporate; The trust deed is a prescribed formality to be executed by the body corporate in favour of the trustees named therein for floating new debenture issues. It is a measure to safeguard the interest of the debenture holders, who are themselves not organised.

A Debenture Trustee is a SEBI registered Intermediary pertaining to the Primary Market. To he eligible to act as debenture trustee the person so appointed must hold a certificate granted by SEBI under the regulations. The certificate is issued valid for a period of three years, subject to further renewal.

To be eligible fo consideration of grant of certifcate by SEBI, the applicant -

1. must have the necessary infrastructure like adequate office space, equipments, and manpower to effectively discharge his activities;

2. Whether the applicant possesses any past experience as a debenture trustee or has in his employment minimum two persons who had the experience in matters which are relevant to a debenture trustee;

3. or any person, directly or indirectly connected with he applicant has not been granted registration by the Board under the Act;

4. has in his employment at least one person who possesses the professional qualification from an institution recognised by the Government in finance, accountancy, law or business management;

5. or any of its director or principal officer is or has at any time been convicted for any offence involving moral turpitude or has been found guilty of any economic offence.

6. that he is a fit and proper person

No applicant shall be entitled to act as a debenture trustee unless the applicat is either -

1. a scheduled bank carrying on commercial activity; or

2. a public financial institution within the meaning of Section 4A of the Companies Act, 1956; or

3. an insurance company; or

4. body corporate;

Obligation before appointment as debenture trustees (but after registration with SEBI)

The Debtenrure Trustee must enter into a written agreement with the body corporate before the opening of the subscription list for issue of debentures; The agreement to be entered into shoud provide that the debenture trustee has agreed to act as such under the trust deed for securing an issue of debentures for the body corporate. It must also specify the time limit within which the security for the debentures shall be created.

No debenture trustee shall act as such for any issue of debentures in case-

1. it is an associate of the body corporate or

2. it has lent or is proposing to lend money to the body corporate.

'associate' in relation to a debenture trustee, or body corporate shall include a person, -

1. who, directly or indirectly, by himself, or in combination with relatives, exercises control over the debenture trustee or the body corporate, as the case may be, or

2. in respect of whom the debenture trustee or the body corporate, as the case may be, directly or indirectly, by itself, or in combination with other persons, exercises control, or

3. whose director, is also a director, of the debenture trustee or the body corporate, as the case may be;

Every debenture trustee shall ensure that the trust deed executed between a body corporate and debenture trustee shall amongst others provide for the following matters namely: -

1. provisions for redressal of grievances of debenture holders;

2. time limit for creation of the security for issue of debentures as specified in Securities and Exchange Board of India (Disclosures and Investor Protection) Guidelines, 2000.

3. obligation not to create further charge or encumbrance of the trust property without the prior approval of the trustee;

4. obligations of the body corporate to the debenture trustees and debenture holders;

5. events constituting defaults;

6. procedure for appointment of new trustees and their removal;

7. removal of debenture trustees on a resolution passed by at least 75% of the total debenture holders of a body corporate;

8. rights of debenture holders in case of default by the body corporate;

9. fee or commission of debenture trustees;

10. circumstances when the security will become enforceable;

11. redemption of the debentures in terms of the issue to the debenture holders;

12. obligation to convert the debentures into equity in accordance with the terms of the issue;

13. debt equity ratio and debt service coverage ratio;

14. method and mode of preservation of assets charged as security for debenture holders;

15. circumstances specifying when the security may be disposed off or leased out with the approval of trustees;

16. procedure for allowing inspection of charged assets by trustees or any person or persons authorised by them;

17. obligation to inform debenture trustee about any change in nature and conduct of business by the body corporate before such change;

18. obligation of body corporate to keep the debenture trustee informed of all the orders, directions or notices of court or tribunal affecting or likely to affect the charged assets;

19. obligation to inform debenture trustee of any change in composition of its Board of directors;

20. obligation of the body corporate to forward a quarterly report to debenture trustees containing the prescribed particulars(as given Schedule 4 of the Regulations):

It shall be the duty of every debenture trustee to -

1. call for periodical reports from the body corporate;

2. inspect books of accounts, records, registers of the body corporate and the trust property to the extent necessary for discharging his obligations;

3. take possession of trust property in accordance with the provisions of the trust deed;

4. enforce security in the interest of the debenture holders;

5. do such acts as are necessary in the event the security becomes enforceable;

6. 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;

7. ensure that the -

   1. 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 Registrar of Companies

   3. debenture certificates have been despatched to the debenture holders in accordance with the provisions of the Companies Act;

   4. interest warrants for interest due on the debentures have been despatched to the debenture holders on or before the due dates;

   5. debenture holders have been paid the monies due to them on the date of redemption of the debentures;

8. exercise due diligence to ascertain whether or not the assets of the body corporate which are available by way of security or otherwise are sufficient or are likely to be or become sufficient to discharge the claims of debenture holders as and when they become due.

9. 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;

10. 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;

11. 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;

12. inform the Board immediately of any breach of trust deed or provision of any law.

13. appoint a nominee director on the Board of the body corporate in the event of;

    1. two consecutive defaults in payment of interest to the debenture holders; or

    2. default in creation of security for debentures; or

    3. default in redemption of debentures.

14. 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 therefore.

A debenture trustee shall call or cause to be called by the body corporate a meeting of all the debenture holders on -

1. a requisition in writing signed by at least one tenth of the debenture holders in value for the time being outstanding; or

2. the happening of any event, which constitutes a default or which in the opinion of the debenture trustees affects the interests of the debenture holders.

1. Every debenture trustee shall maintain high standard of integrity, dignity and fairness in discharging his functions as debenture trustees.

2. Every debenture trustee shall fulfil his obligations in an ethical manner.

3. Every debenture trustee shall at all times exercise due diligence, ensure proper care and exercise independent professional judgement.

4. Every debenture trustee shall disclose to the Issuer Company his possible source or potential areas of conflict of duties and interest while acting as debenture trustee.

5. Debenture trustee shall not indulge in any unfair competition, which is likely to be harmful to the interest of other debenture trustees or debenture holders.

6. No debenture trustee shall make any statement, either oral or written, which would misrepresent the services that the debenture trustee is capable of performing for the, or has rendered to other Issuer Company subject to the secrecy he is expected to keep about Issuer Company's affairs;

7. No debenture trustee shall wilfully make untrue statement or suppress any material fact in any documents, reports, papers or information furnished to the Board.

8. (a) A debenture trustee or any of his employees shall not render, directly or indirectly, any investment advice about any security in the publicly accessible media, whether real-time or non real-time unless a disclosure of his interest including long or short position in the said security has been made, while rendering such advice.

8. (b) In case, an employee of the debenture trustee is rendering such advice, he shall also disclose the interest of his dependent family members and the employer including their long or short position in the said security, while rendering such advice.

Every debenture trustee shall appoint a compliance officer who shall be responsible for monitoring the compliance of the Act, rules and regulations, notifications, guidelines, instructions etc. issued by the Board or the Central Government and for redressal of investors' grievances. The compliance officer shall immediately or independently report to the Board any non-compliance observed by him.

Every debenture trustee shall as and when required by the Board submit the following information and documents namely:-

1. the number and nature of the grievances of the debenture holders received and resolved;

2. copies of the trust deed;

3. non-payment or delayed payment of interest to debenture holders if any in respect of each issue of debentures of a body corporate;

4. details of despatch and transfer of debenture certificates giving therein the dates, mode, etc

5. any other particular or document which is relevant to debenture trustee.

Where any information is called for under sub-regulation above it shall be the duty of the debenture trustees to furnish such information.

Board's right to inspect: where it appears to the Board so to do, it may appoint one or more persons as inspecting authority to undertake the inspection of the books of accounts, other records and documents of the debenture trustee for undernoted purposes

1. to ensure that the records and documents which are relevant to debenture trustees are being maintained in the manner required by the Board;

2. that the provisions of the Companies Act 1956,rules and regulations are being complied with;

3. to ascertain as to whether there exists any circumstances, which would render the debenture trustee ineligible for grant of registration or continuance thereof;

4. to investigate into the complaints received from investors, other debenture trustees or any other person on any matter having a bearing on the activities of the debenture trustee; and

5. to investigate suo-moto in the interest of Securities business or investors interest into the affairs of the debenture trustee.

Covered under Regulation Nos.25 & 26 (not discussed here)