TaxTMI 
TaxTMI 
2026 (5) TMI 278
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....allenging the order dated 09.12.2025 passed by the adjudicating authority (National Company Law Tribunal, New Delhi Bench, Court - IV) admitting a Section 7 application (C.P. (IB) No. 317/ND/2025) filed by the Canara Bank. Appellant aggrieved by the said order has come up in this appeal. 2. Brief facts of the case giving rise to the appeal are: i. A Rupee Term Loan of Rs. 100 crore was sanctioned by the financial creditor to Principal Borrower- Indiabulls Realtech Ltd., now M/s. Simar Thermal Power Limited on 26.02.2010, Term Loan of cost overrun of Rs. 15.57 crore dated 26.03.2014 and Rs. 28.83 crore dated 30.08.2016 was also extended totalling to Rs. 144.4 crore. ii. A corporate guarantee dated 30.06.2010 was extended by India Bulls Real Estate Limited (subsequently M/s. Equinox Development Ltd., the corporate debtor) and India Bulls Power Limited who subsequently became Rattan India Enterprises Limited. A guarantee was extended to the Financial Facilities extended by virtue of Facility Agreement dated 30.06.2010. After the aforesaid guarantee dated 30.06.2010, a scheme of arrangement was approved by the Delhi High Court, whereas, the power business of the co....
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.... that Guarantee Deed dated 30.06.2010 and cost overrun Deed of Undertaking dated 21.11.2016 is not contract of guarantee. It was pleaded that in the application, Bank has suppressed the material facts that the Guarantee dated 30.06.2010 was subsequently by subsequent Guarantee Deed dated 11.01.2012, the corporate debtor as guarantor was discharged and the said subsequent guarantee dated 11.01.2012 have been concealed by the financial creditor. The obligation of the corporate debtor was only to infuse equity/funds in project as per the guarantee dated 30.06.2010 and by subsequent guarantee, guarantee was undertaken by two other corporate guarantors discharging the corporate debtor and corporate debtor's liability was only when new guarantors failed to discharge their obligation. It was pleaded that application filed by the Bank is abuse of process and has been initiated by the Bank with malicious intent for purpose other than for the resolution of the insolvency of the corporate debtor. x. Rejoinder affidavit was filed by the financial creditor to the reply. In the reply, the subsequent deed executed on 11.01.2012 was not denied but it was pleaded that corporate debtor is s....
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....dent refuting the submissions submits that all relevant documents which have been referred to in the impugned order in para 8 has not been brought on the record. The Appellant is required to bring all material which were there before the NCLT. He submits that default was committed on 20.09.2017, hence, the application was not barred by 10A. It is submitted that there are other documents and additional documents where the obligation was taken by the Appellant to pay on default of the debt. It is submitted that 2010 was not only the guarantee which was relied by the Bank. 8. Submissions made by the Ld. Counsel for the parties needs consideration. Prima facie we are of the view that when the guarantee was invoked on 30.09.2020 the application was hit by Section 10A and the Adjudicating Authority's observation in para 14 of the order that the date of default is 20.09.2017 cannot be a reason for rejecting the submissions on the basis of section 10A. 20.09.2017 was the date of default by the principal borrower and the copy of the notice by which guarantee was invoked has already been filed at Annexure A7 where both the Appellant and the Ratan India were mentioned as item no. 2 a....
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....r for which corporate guarantee was issued by Corporate Debtor on 30.06.2010 along with another Corporate Guarantor- Indiabulls Power Limited. The Corporate Guarantee given by Corporate Guarantor was only to punctually infuse and bring equity share capital in accordance with the Facility Agreement and Share Subscription, Retention Undertaking Agreement. The guarantors were only obliged towards infusion/contributing to the share capital from time to time in the project. The guarantors never undertook to discharge the liability of principal borrower which is clear from Deed of Guarantee. It is submitted that under Scheme of Arrangement approved by the Delhi High Court, the power business of the Corporate Debtor was demerged to company namely-Indiabulls Power Limited (subsequently known as Rattan India Power Limited). The resulting company constituted as per scheme of arrangement was Indiabulls Infrastructure and Power Limited (subsequently known as RattanIndia Infrastructure Limited). All rights and liabilities of the Corporate Debtor on demerging its power business were transferred to RattanIndia Enterprises Limited. Another guarantee was executed on 11.01.2012 whereas the new guara....
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.... M/s. Sinnar Thermal Power Limited. It is submitted that the CP (IB) No. 204/ND/2025 was filed by the Financial Creditor against RattanIndia Enterprises Limited, another Corporate Guarantor which application was dismissed by judgment of the same date dated 09.12.2025 passed by the same bench of the NCLT. In the order dated 09.12.2025 in CP (IB) No. 204/ND/2025, the very Bench of the NCLT took the view that there was no financial debt on the basis of the same corporate guarantee. The contrary judgment has been given in the impugned order in the present appeal admitting Section 7 application which shows clear non-application of mind and illegality on the part of the NCLT. 6. Shri Vashisht, Learned Senior Counsel appearing for the Financial Creditor refuting the submissions of the Counsel for the Appellant submits that the Guarantee Deed dated 30.06.2010 obliged the Corporate Debtor to pay the debt of the principal borrower, the liability of guarantor is co-extensive with the principal borrower. It is submitted that the default by principal borrower having been committed, declaration of the NPA in 2017 was made, the application was not barred by Section 10A. Referring to the subseq....
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....innar Thermal Power Limited) for establishing a power project located in Village Sinnar, District Nashik, State of Maharashtra. Syndicate Bank (now Canara Bank) which was one of the consortium lenders had extended a term loan facility of Rs. 100 Crore by sanction letter dated 26.02.2010 for establishing the power project. Sanction letter dated 26.02.2010 is brought on record as Annexure A-6 to the Appeal which contemplates issuance of corporate guarantee from Indiabulls Power Limited and Indiabulls Real Estate Limited (Corporate Debtor). The obligation of guarantee was for infusion of equity in a timely manner in the project. It is useful to notice paragraph 30 of the sanction letter which deals with 'pre-commitment conditions'. Paragraph 30 (a) is to the following effect:- "30) Pre-commitment conditions: Execution of Financing Agreements by the Lenders shall be subject to the satisfaction Including but not limited to the following: a) Corporate Guarantee from IPL & IBREL for infusion of equity, in a timely manner in the project and to the effect that any cost overrun of the project to be met from further equity funds to be contributed by IBREL & IPL with....
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....conditions contained in this Deed of Guarantee. The Guarantor(s) agrees to punctually infuse and bring Equity Share Capital in accordance with the Facility Agreement and Share Subscription, Retention Undertaking Agreement. (b) This Deed of Guarantee is for the Guaranteed Amounts to be brought in by the Guarantor(s) in the form of Equity Share Capital in the Project from time to time in terms of the Facility Agreement and Share Subecription, Retention Undertaking Agreement. (c) The Guarantor(s) hereby unconditionally, absolutely and irrevocably guarantees, and promises to bring Equity Share Capital in the Project forthwith without demur and upon the written demand of the Security Agent, in accordance with the terms of this Deed of Guarantee." 13. Clause 10 deals with the 'payment period' which provides as follows:- "10. PAYMENT PERIOD The Guarantor(s) agrees to infuse/bring the requite Equity Share Capital in the Project as required at any time under Facility Agreement and Share Subscription, Retention and Undertaking Agreement or any other Financing Documents within 5 days of receipt of the Notice of Demand, without any demur or objection." ....
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....therefore, subject to the terms of this Deed of Guarantee and in order to release IBREL from its obligations under the existing Corporate Guarantee and to obtain an equivalent guarantee from the Guarantor in favour of the Security Trustee pursuant to the aforementioned scheme, agreed to execute these presents, in the manner hereinafter expressed." 15. Clause (G) clearly mentioned that "the Parties have therefore, subject to the terms of this Deed of Guarantee and in order to release IBREL from its obligations under the existing Corporate Guarantee and to obtain an equivalent guarantee from the Guarantor in favour of the Security Trustee pursuant to the aforementioned scheme". The above clause (G) clearly indicate that the Corporate Debtor was replaced from Guarantee Deed dated 30.06.2010 and new guarantors have taken place. However, Corporate Debtor's obligation continued when certain circumstances which is noticed in paragraph 11. Paragraph 11 is as follows:- "11. OBLIGATION OF INDIABULLS REAL ESTATE LIMITED TO CONTINUE IN CERTAIN CIRCUMSTANCES The Parties hereby acknowledge that in terms of the Scheme, all debts, liabilities, loans raised, obligations incurre....
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....ply which is as follows:- "4. As will be elaborated in paragraphs hereunder, that present Application filed under Section 7 of the Code, is a gross abuse of the process of law and has been initiated by the Applicant Bank with malicious intent for purpose other than for the resolution of the insolvency and is liable to be dismissed inter alia on account of preliminary objections as raised to the maintainability of the instant Application against the answering Respondent, the alleged Corporate Debtor: (a) Initiation of CIRP by filing of the answering Application by invoking Section 7 of the Code against answering Respondent, the alleged Corporate Debtor, is expressly barred by virtue of Section 10A of the Code. (b) Neither the stated Corporate Guarantee allegedly dated 30.06.2010, nor the subsequent Deed of Undertaking constitutes an agreement(s) or contract(s) of Surety/Guarantee in terms of Section 126 read with Section 128 of the Indian Contract Act, 1872 whereby the answering Respondent agreed and/or contracted factually or legally obligated itself as a Surety/Guarantor to repay any of the stated loans granted to and availed by the said Principal Borrow....
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....R; iii. he addressed to the Guarantor(s); iv. be sent to the address as provided by the Guarantor(s) under clause 9 of this Guarantee: v. be signed by the Security Agent," 19. The Corporate Guarantee dated 30.06.2010 in no manner can be said to guarantee by Corporate Guarantor to discharge the debt of principal borrower and guarantee was given only to infuse the equity in the project as per the Facility Agreement. No case has been made out by the Financial Creditor that Corporate Debtor defaulted in infusing the equity, after any notice of demand for infusion of equity is made. In any manner the Corporate Guarantee never contemplated discharge of debt by the Corporate Guarantor. We have also noticed above by subsequent Corporate Guarantee dated 11.01.2012, where two corporate guarantors were substituted and corporate debtor was discharged from its corporate guarantee and only obligation which was therein clause 11 was to discharge/obligation if the substituted corporate guarantor failed to discharge their obligation. Adjudicating Authority has not even looked into the corporate guarantee dated 30.06.2010 nor even noticed the subsequent corporate guaran....
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....20. I hereby call upon you the addressee no. 2 to 4 to make payment of Rs. 202,03,39,436.49/- (Ra. Two Hundred Two Crore Three Lakh Thirty Nine Thousand Four Hundred Thirty Six and Forty Nine Paise Only due and payable as on 31.07.2020 along with future and pendent elite interest, cost and other charges to my client within 3 days from the receipt of this notice, failing which my client shall be constrained to take appropriate action against you the addressees before the competent court of law. You are further liable to pay a sum of Rs. 11,000/-towards cost of this legal notice." 20. The above notice clearly indicates that guarantee was invoked by notice dated 30.09.2020 and guarantee referred to and relied was Guarantee Deed dated 30.06.2010. The issuance of notice by asking the guarantor to pay the amount due to the principal borrower is wholly unauthorised and not in accordance with what guarantors have undertaken in the Deed dated 30.06.2010 as noted above. We, thus, are satisfied that the Corporate Debtor never undertook to pay/discharge any financial debt obligation of the principal borrower and the entire proceeding initiated by the Financial Creditor by ....
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....ity-cum-Undertaking dated 28.03.2015, Promoters' Deed of Undertaking dated 28.03.2015 and Cost Overrun Undertaking dated 21.11.2016. Submission of the Appellant is that by virtue of the above undertakings which was executed by the Corporate Debtor, Corporate Debtor was obliged to fulfil the undertaking. 23. The proceeding initiated against the Appellant where on the basis of Recall Notice dated 30.09.2020 which was notice to recall the guarantee issued by the Corporate Debtor. The guarantee which was referred to and relied in the Recall Notice was guarantee dated 30.06.2010. Notice also referred to the Additional Term Loans for Cost Overrun as well as Cost Overrun Facility 1 and Cost Overrun Facility 2 and the security document namely- Cost Overrun Undertaking dated 21.11.2016. We have already noted the details of Guarantee Deed dated 30.06.2010 which was not a guarantee for payment of debts of the principal borrower. We need to notice the Cost Overrun Undertaking dated 21.11.2016 and other undertakings as above. 24. The Financial Creditor in its Section 7 application has also relied on the Cost Overrun Deed of Undertaking dated 21.11.2016 which also need to be noticed. The c....
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....7 application Corporate Debtor has made all relevant pleadings including that Corporate Debtor was discharged from its guarantee by subsequent Guarantee Deed dated 11.01.2012 and further there was no undertaking to pay the debt of the principal borrower. Adjudicating Authority did not advert to any of the plea raised by the Corporate Debtor in the reply. The order impugned indicates that the Adjudicating Authority after noticing the pleadings of the parties has referred to Corporate Guarantee dated 30.06.2010, Cost Overrun Deed of Undertaking and another documents and has come to the conclusion that applicant has produced the Corporate Guarantee dated 30.06.2010 and Cost Overrun Deed of Undertaking dated 20.11.2016 which on plain collective reading along with all facilities sanctioned by the Bank create an obligation in respect of debt advanced to the principal borrower. The conclusion of the Adjudicating Authority is in paragraph 10. "10. The first issue is whether a financial debt exists and a default has occurred or not. A corporate guarantee is, by its nature, a contingent/liability which, when invoked, gives rise to a liability in respect of repayment of financial fac....
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....cle 2.1 above, there would be recourse against the respective Joint Obligor/Borrower and it shall be an Event of Default under the Facility Agreement, and Lenders shall have the right to, inter alia, accelerate the Rupee Term Loan Facility in terms of the Facility Agreement and take such other action as may be contemplated thereunder. 26.3 Notwithstanding the aforesaid, the obligations of IBREL shall automatically, without any affirmative action or event or notice, expire and be discharged upon the COD of the Project" 27. The second document relied on Indemnity-cum-Undertaking dated 28.03.2015 which is brought as Annexure 2 to the reply. Undertaking is contained in following words:- "NOW, THEREFORE, IN CONSIDERATION OF THE ABOVE, INDEMNIFIERS HEREBY IRREVOCABLY AND UNCONDITIONALLY ACKNOWLEDGE. UNDERTAKE, REPRESENT, DECLARE AND ASSURE THAT: A) Obligations of Indemnifiers 1. they shall indemnify PFC SCOR Lender and keep it indemnified at all times against any and all actual losses incurred, suffered or paid by it or required to be incurred, suffered or paid by it and also against all fosses of damage incurred. demands, actions, suit proceedings ....
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....urse to PFC SCOR. Lender and/or the Lenders/Project Assets and shall seek prior consent of the Lenders and PFC SCOR Lender if the equity fund is brought in by third parties. (c) they shall fund any/all liquidated damage/ penalty payable under the power purchase agreements and any financial implication caused as a result thereof shall be from their own resources without recourse to the Project Assets (d) they shall submit all documents/certificates deeds writings/ agreements statement of accounts evidencing the source of funds in respect of each tranche of Equity infused by them towards the Second COR Upfront Equity and every tranche thereafter to the satisfaction of PFC SCOR Lender (e) they shall cause and ensure that the Second COR-Upfront Equity shall be in the form of Equity only: (f) they shall, in consonance with their shareholding and to that extent, retain management control of the Barrower, and (g) they shall in consonance with their shareholding and to that extent, retain majority representation on the board of directors of RPL. ii. RRIPL, IBREL and RIL, shall, in consonance with their shareholding and to that extent, n....
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....rge financial obligation of the principal borrower towards lenders. Question No.(IV) 30. Corporate Debtor in reply to Section 7 has clearly pleaded that the application is barred by time. It was pleaded by the Corporate Debtor that Loan Recall Notice was issued on 30.09.2020 asking the Corporate Guarantor to make the payment within three days, hence, the default arose within 10A period. Section 7 application has also relied on Loan Recall Notice dated 30.09.2020 issued to the Corporate Debtor that was basis of filing Section 7 application. NPA date was also mentioned as 28.09.2017 in Part IV. Although Corporate Debtor has specifically pleaded that application was barred by Section 10A, Adjudicating Authority in the impugned order has come to the conclusion that default is shown to have arisen on 28.09.2017, Section 10A cannot be invoked. In paragraph 14 of the judgment following has been observed:- "14. Therefore, in accordance with this Section, no proceedings under Section 7, 9 and 10 of the IBC can be initiated against the Corporate Debtor for the default which has occurred between the period from 25.03.2020 till 24.03.2021. It is abundantly clear that the intenti....
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....interest, cost, charges, expenses and/or other money due thereon from time to time in terms of the Agreement of Loan for overall limits, Agreement of Hypothecation of Goods and Assets and Supplemental Agreements." 29. The notice dated 01.10.2020, thus, has been issued invoking the grantee which expression is used in Para 12 above. When the Bank has given time to the Guarantor to make payment on 01.10.2020, there can be no default on part of the Guarantor on any earlier date. The default on part of the Guarantor thus has to be subsequent to the notice dated 01.10.2020 i.e. Non-payment within seven days as required. 30. In Part IV of the application, date of declaration of the Principal Borrower's account as NPA i.e. 05.12.2019 was mentioned. Part IV also clearly mentions the invocation of guarantee by notice dated 01.10.2020. Relevant portion of Part IV reads as follows: "DATE OF DECLARATION OF THE BORRWER'S ACCOUNT AS NPA: December 5, 2019. (a) It is submitted that the Borrower failed in making payments under the Facilities from the year 2019 onwards. Accordingly, a breach of the contractual arrangement between the Financial Creditor and ....
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....te of default, Recall Notice dated 30.09.2020 was relied and CP (IB) No. 204/ND/2025 was filed by RattanIndia Enterprises Limited as Corporate Guarantor. Section 7 application filed by the Financial Creditor against other Corporate Guarantor-RattanIndia Enterprises Limited was rejected by judgment of the same date by the same Bench (Judgment authored by Judicial Member) holding that there was no financial debt. The Adjudicating Authority by the order of the same date rejected application under Section 7 filed against the other Corporate Guarantor against whom the same Recall Notice dated 30.09.2020 was claimed. 34. Copy of the judgment dated 09.12.2025 in CP (IB) No. 204/ND/2025 has been brought on record as Annexure A-19 to the Appeal which judgment was authored by Learned Judicial Member but pronounced by the same Bench. Same Bench having taken the view that there is no financial debt with regard to one Corporate Guarantor i.e. RattanIndia Enterprises Ltd. Same Bench in the impugned order has admitted Section 7 application which arose out of the same facts and same debt and pleadings with regard to other Corporate Guarantor. We fail to see that when against one Corporate Guara....