SEBI Updates Permissible Uses of the Recovery Expense Fund for Debenture Trustees

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  • Last Updated on 27 November, 2025

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SEBI Recovery Expense Fund

Circular No. HO/17/11/12(3)2025-DDHS-POD1/I/145/2025; Dated 25.11.2025

1. Overview

SEBI has issued modifications to Chapter IV of the Master Circular for Debenture Trustees, originally dated August 13, 2025, which sets out the framework for the Recovery Expense Fund (REF).

The changes aim to provide greater clarity and operational flexibility to Debenture Trustees (DTs) in using the REF for recovery and enforcement-related activities in the event of a default.

2. Revised Scope of Reimbursement from REF

Reimbursement Allowed Upon Default

SEBI has clarified that, in the event of a default, a Debenture Trustee may be reimbursed from the REF for all activities undertaken for:

  • Enforcement of security, and
  • Legal proceedings connected to recovery.

This ensures that DTs have access to necessary funds to take swift and effective enforcement action.

3. Activities Eligible for Reimbursement

The modified provisions enumerate the types of expenses that may be drawn from the REF, including but not limited to:

3.1 Obtaining Consents from Debenture Holders

Expenses relating to:

  • Convening meetings,
  • Conducting e-voting,
  • Soliciting approvals or instructions from debenture holders.

3.2 Filing Court or Tribunal Applications

Costs incurred in:

  • Initiating legal proceedings,
  • Filing petitions or applications before courts, NCLT, or other authorities.

3.3 Legal Fees

Professional charges paid towards:

  • Advocates
  • Legal counsel
  • Law firms

engaged for enforcement or recovery actions.

3.4 Appointment of Legal Consultants or Enforcement Professionals

Fees for:

  • Enforcement consultants,
  • Security enforcement agencies,
  • Advisors assisting in repossession or enforcement proceedings.

These inclusions ensure that DTs have clarity on permissible reimbursements and can undertake recovery steps without financial constraints.

4. Significance

The modification strengthens the debenture trustee framework by:

  • Enhancing the operational capacity of DTs to act quickly in case of default,
  • Reducing financial bottlenecks for enforcement,
  • Improving the protection of debenture holders’ interests, and
  • Ensuring that recovery actions are not delayed due to lack of upfront funds.
Click Here To Read The Full Circular

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Author: Taxmann

Taxmann Publications has a dedicated in-house Research & Editorial Team. This team consists of a team of Chartered Accountants, Company Secretaries, and Lawyers. This team works under the guidance and supervision of editor-in-chief Mr Rakesh Bhargava.

The Research and Editorial Team is responsible for developing reliable and accurate content for the readers. The team follows the six-sigma approach to achieve the benchmark of zero error in its publications and research platforms. The team ensures that the following publication guidelines are thoroughly followed while developing the content:

  • The statutory material is obtained only from the authorized and reliable sources
  • All the latest developments in the judicial and legislative fields are covered
  • Prepare the analytical write-ups on current, controversial, and important issues to help the readers to understand the concept and its implications
  • Every content published by Taxmann is complete, accurate and lucid
  • All evidence-based statements are supported with proper reference to Section, Circular No., Notification No. or citations
  • The golden rules of grammar, style and consistency are thoroughly followed
  • Font and size that's easy to read and remain consistent across all imprint and digital publications are applied