TaxTMI 
TaxTMI 
2026 (3) TMI 760
X X X X Extracts X X X X
X X X X Extracts X X X X
....structure Engineering Ltd. the holding company of the corporate debtor (principal borrower and corporate guarantor) challenging the order dated 04.11.2025 passed by the adjudicating authority (National Company Law Tribunal, New Delhi Bench, Court - IV) admitting Section 7 application filed by National Asset Reconstruction Company Ltd. (NARCL), the respondent No. 2 herein against the principal borrower and the corporate guarantor. By order of the same day, intervention petition filed by the appellant i.e., INV.P. No.59/2025 in C.P. (IB) No.172/2025 and in INV.P. No.60/2025 in C.P. (IB) No.774/2025 were rejected. Aggrieved by the aforesaid orders, these appeals have been filed. 2. Background facts and sequence of the events giving rise to these appeals need to be noticed first: i. The appellant, Era Infrastructure Engineering Ltd. (EIEL) is an Engineering Procurement and Construction Company engaged primary in Build-Operate-Transfer Infrastructure Projects. ii. Appellant was successful bidder for the Muzaffarnagar Haridwar section from 131 KM to 211 KM of NH-58 in state of Uttar Pradesh and Uttarakhand. iii. The Project was awarded by the National Highwa....
X X X X Extracts X X X X
X X X X Extracts X X X X
....pellant, assenting financial creditors including the NARCL to give effect to Part B of the resolution plan detailing terms and conditions for the distribution of proceeds from arbitration awards of SPVs in terms of the resolution plan. xv. NARCL filed an application under Section 7 against EIIL the corporate guarantor being C.P. (IB) No.172/2025 alleging default and principal amount of Rs. 143,75,79,510/- along with the interest. The corporate guarantor, EIIL had given corporate guarantee to the Bank of India for the amount of Rs. 143,75,79,510/-. Date of default mentioned in Part IV was 03.04.2019. xvi. Prior to filing of Section 7 application against the corporate guarantor, the NARCL has filed a Section 7 application being C.P. (IB) No.777/2024 against HHPL claiming total default of amount i.e. Rs. 2,386,51,75,911/- as on 08.08.2024 and date of default was mentioned on 24.02.2017. xvii. In the C.P. (IB) No.777/2024 notices were issued, corporate debtor HHPL filed its reply opposing the application. In C.P. (IB) No.777/2024, the appellant EIIL has filed an intervention application being INV.P. No.59/2025. Similarly, C.P. (IB) No.172/2025 filed against E....
X X X X Extracts X X X X
X X X X Extracts X X X X
....der of admission passed by NCLT is wholly unsustainable. It is submitted that after approval of the resolution plan by the adjudicating authority in the CIRP of the appellant dated 11.06.2024 and after the Sharing of Arbitral Process Agreement (SAP Agreement) was entered on 05.09.2025 between the appellant, lenders and NARCL providing for distribution of the receipt of arbitral proceeding relating to SPV, there was no occasion to file any Section 7 application by the NARCL against the principal borrower and corporate guarantor. It is submitted that the resolution plan approved by the adjudicating authority under Section 31 is binding on lenders which include NARCL, the assignee of the debt by lenders. Initiation of proceedings under Section 7 against HHPL and corporate guarantor shall lead to non- implementation of the resolution plan approved on 11.06.2024 which is impermissible. The debts of lender including the debt due on SPV i.e., HHPL having been admitted, addressed, resolved and extinguished after the approval of the resolution plan on 11.06.2024, there is no legally enforceable debt to initiate any proceedings under Section 7. It is submitted that intervention application f....
X X X X Extracts X X X X
X X X X Extracts X X X X
....igation of the personal guarantor for the debt of the corporate debtor and shall not discharg the claims of unsecured financial creditor who will continue to retain their rights for realisation of the debt from the principal debtor/any other guarantor. Sharing of arbitral proceeds does not discharge the secured financial debt of financial creditor against principal borrower. In any event, the said is private inter se arrangement for sharing of arbitral proceeds cannot, in law, operate as a waiver, novation, or satisfaction of a secured financial debt. It is submitted that Bareilly Highways Project Limited was also a SPV of the appellant who was also included in sharing of Arbitral Proceeds Agreement. SBI filed an application under Section 7 against Bareilly Highways Project Limited. It is submitted that adjudicating authority has rightly admitted Section 7 application. It is further submitted that appellant being a shareholder of the corporate debtor does not have any locus to challenge the admission of the CIRP. It is submitted that shareholder has no locus to challenge that admission of CIRP of the corporate debtor. 7. We have considered the submissions of the counsel for the ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....g is as follows: "5. UNDERTAKING FOR TERMINATION SHORTFALL In the event that the Termination Payments (as defined under the Concession Agreement) are not adequate to repay the Dues in full, then EIEL undertakes to pay to/deposit with the Senior Lender the Shortfall Amounts within three (3) days of the date of notice of demand from the Senior Lender/ Lender's Agent. For the purposes of this Agreement, the term "Shortfall Amounts" shall mean the Dues minus the amounts demanded from and payable by NHAI as Termination Payments pursuant to the notice of demand in this regard. EIEL shall forthwith on demand as stated herein (and in any event within three (3) Business Days of the demand) and without any contest, dispute or demur, pay to the Security Trustee the whole of the Shortfall Amounts, and/or any other monies as may be then due to the Senior Lender in respect of the Loan Facility. This undertaking shall remain in full force and effect until all the Dues of the Senior Lender has been discharged in full to the satisfaction of the Senior Lender and the Senior Lender certifies the same in writing." 11. Now we come to Form-C claim subm....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ders with respect to claim under shortfall undertaking against the EIEL was unsecured claim and was admitted as unsecured claim and treatment of unsecured claim was given in the resolution plan. Pay out to assenting financial creditors in the financial proposal in the plan is as follows: "PART - B: FINANCIAL PROPOSAL 1. BID AMOUNT For In Amount (INR in Crores) Details Upfront Payment Amount Committed Payment Residual Payment A. Mandatory Payments Payouts to Unsecured Assenting Financial Creditors 1 NA The Resolution Applicant proposes to share the proceeds received from arbitral awards in the manner as set out below: Proceeds from Arbitral Awards (Rs. Crores) % Proposed to be shared **** >3000 10% The Resolution Applicant proposes to issue 1% Equity Shares of the Company to the unsecured Assenting Financial Creditors on the Closing Date." 14. Release and securities interest were also mentioned in resolution plan. In clause 6, item No. 2 with regard to release and securities, following has been stated: "6. TERMS AND CONDITIONS OF THE COMMITTED PAYMENTS S. No. Particulars Heads and References ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... convenience compilation. The affidavit clearly mentioned that clarification shall be integral part of the resolution plan and in event of any contradiction between the proposal contained in the resolution plan and clarification, clarification shall prevail. Paragraph 8 of the affidavit is as follows: "8. Since, the clarifications as submitted by the Resolution Applicant are vital for proper understanding of the intent and overall effect of various proposals proposed by the Resolution Applicant vide its Resolution Plan, it is essential that the Resolution Applicant make a binding statement to affirm the true intent and effect of the said Clarifications in the context of the Resolution Plan as submitted by the Resolution Applicant in the CIRP of the Corporate Debtor, accordingly, by way of this affidavit, it is hereby duly affirmed and stated on behalf of the Resolution Applicant that: a. The Clarifications submitted by the Resolution Applicant as per the Annexures II & Annexure III attached, have been given in pursuance to the queries and clarifications sought by the CoC in the CIRP of the Corporate Debtor under section 30 of the Code with full knowledge and belie....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ghts of the secured Financial Creditors on any other securities provided by third parties as additional collateral for the debt of the Corporate Debtor in any manner whatsoever. Please note that these figures are approximate and might change slightly at the stage of finalisation of the Definitive Documents. It is clarified that 100% of the balance Admitted Unsecured Financial Debt (which are all in the nature of liabilities on account of Corporate Guarantees will be converted into 1% common equity of the Company and issued to the unsecured Financial Creditors in the ratio of their Admitted Unsecured Debt. It is also clarified that this transaction is proposed to be a discharge on the Claims of the unsecured Financial Creditors against the Corporate Debtor. The unsecured Financial Creditors will continue to retain all their rights for realization of their Debts from the principal debtor/any other guarantor as per the terms of the loan agreements. 17. The claim which was filed by the lenders in the CIRP of the appellant qua the SPV, HHPL was towards the shortfall undertaking. The appellant EIEL who had given sponsors undertaking was liabl....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... Gross Proceeds received from Arbitral Awards (INR Crores) % Proposed to be shared Upto 450 84% >450 - 1500 40% >1500-2500 50% >2500-3500 55% >3500 65% 2.2.2 Unsecured Creditors Gross Proceeds received from Arbitral Awards (INR Crores) % Proposed to be shared >3000 10% 19. When we look into the above Agreement at best which mentions that 10% arbitral proceed shall be shared entitlement of unsecured creditors, the said Agreement in no manner prohibit the financial creditor to exercise their statutory rights under Section 7 when a default is committed by HHPL to whom the lenders have advanced Term Loan I, Term Loan II & Term Loan III by separate Rupee Term Loan Agreement. We thus are not persuaded to accept the submission of the appellant that admission of Section 7 application against the HHPL shall make the resolution plan of EEIL unimplementable. The rights of the financial creditor under Section 7 to proceed against the principal borrower and the corporate guarantor are separate and independent rights, which rights can be exercised by the financial creditor without any kind of fetter from the approval of the resolut....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ation against the principal borrower which is subsidiary company of the appellant is not based only on the challenge that appellant is shareholder and holding company of the corporate debtor rather the challenge has been made on the ground that debt of lenders which were part of the CIRP of the EIEL had extinguished on account of the approval of the resolution plan and initiation of CIRP against the principal borrower and corporate debtor shall cause hinderance in the implementation of the resolution plan of EIEL, the above ground raised by the appellant were sufficient to hold that appellant are person aggrieved within meaning of Section 61 of the IBC to enable them to have locus to file an appeal under Section 61 against the order admitting Section 7 application. 22. Learned counsel for the appellant has also contended that adjudicating authority committed error in rejecting INV.P. No.59/2025 & INV.P. No.60/2025 due to which, the relevant facts could not be pleaded and placed before the adjudicating authority. In the proceeding under Section 7 initiated against the principal borrower and the corporate guarantor, the debt of the financial creditor against the principal borrower....