Q.Why is a debenture-holder described as a creditor of the company and not as its owner?

The answer to this question comes directly from what a debenture legally is — a debt, not a share of ownership.

Whether a person becomes an "owner" of a company or merely its "creditor" depends entirely on what kind of instrument the company issued in exchange for the money received, and a debenture is, by its very statutory definition, a debt instrument rather than an ownership instrument.

Section 2(30) of the Companies Act, 2013 defines a debenture as an instrument evidencing a debt of the company. This means that, when an investor buys a debenture, what he or she has actually done is lend money to the company under agreed terms — nothing about the transaction transfers any portion of the company's ownership, share capital, or membership to the lender. The company, in return, promises to pay interest at a fixed rate and to repay the principal on or by a specified date, exactly as it would with any ordinary lender, such as a bank. This is the same legal character a debenture-holder's claim has as, say, a supplier's unpaid invoice or a bank loan — a liability the company owes, not an equity stake it has issued. …