NCLAT Sets Aside CIRP Admission Against Equinox India: Guarantee Was for Equity Infusion, Not Debt Repayment

NCLAT's Principal Bench set aside NCLT's admission of Canara Bank's Section 7 application against Equinox India Developments, finding the corporate guarantee covered equity infusion only and the application was barred by Section 10A.

The National Company Law Appellate Tribunal's Principal Bench, comprising Justice Ashok Bhushan (Chairperson) and Barun Mitra (Member, Technical), has set aside the order dated 9 December 2025 by which the National Company Law Tribunal, New Delhi Bench, Court IV admitted a Section 7 application filed by Canara Bank against Equinox India Developments Ltd. (formerly Indiabulls Real Estate Ltd.). The appeal was filed by Rajesh Kaimal, the suspended director of the corporate debtor. The Tribunal found that the corporate guarantee on which the bank relied obliged the corporate debtor only to infuse equity into a power project, not to discharge the principal borrower's loan. It further held that the Section 7 application was barred by Section 10A of the Insolvency and Bankruptcy Code, 2016, and that the NCLT had given two contradictory judgments on the same day on the same set of facts.

The Loan, the Guarantee, and the Power Project

Syndicate Bank (now Canara Bank) sanctioned a term loan of Rs. 100 crore on 26 February 2010 to Indiabulls Realtech Ltd. (subsequently renamed Sinnar Thermal Power Limited) for a power project at Village Sinnar, District Nashik, Maharashtra. Additional cost-overrun loans of Rs. 15.57 crore dated 26 March 2014 and Rs. 28.83 crore dated 30 August 2016 were extended, bringing the total facility to Rs. 144.40 crore.

As a pre-commitment condition, the sanction letter required corporate guarantees from Indiabulls Power Limited and Indiabulls Real Estate Limited (the corporate debtor) for infusion of equity in a timely manner in the project and to ensure that any cost overrun would be met from further equity without recourse to lenders or project assets.

A Corporate Guarantee Deed was executed on 30 June 2010. Its operative clause required the guarantors to “punctually infuse and bring Equity Share Capital in accordance with the Facility Agreement and Share Subscription, Retention Undertaking Agreement.” The event of default under that deed was defined as failure to contribute equity share capital, not failure to repay the loan.

The principal borrower's loan account was declared a Non-Performing Asset on 28 September 2017. On 30 September 2020, the financial creditor issued a recall notice invoking the corporate guarantee and demanding payment of Rs. 202,03,39,436/- as on 31 July 2020, requiring payment within three days.

The 2012 Substitution Deed and the Corporate Debtor's Discharge

A scheme of arrangement was approved by the Delhi High Court on 17 October 2011, under which the power business of the corporate debtor was demerged and transferred to RattanIndia Enterprises Limited. Following that scheme, a fresh Guarantee Deed was executed on 11 January 2012 between Rattan India Enterprises Ltd., Rattan India Power Ltd. and IDBI Trusteeship Services Ltd.

Clause (G) of the 2012 deed expressly stated that its purpose was “in order to release IBREL from its obligations under the existing Corporate Guarantee and to obtain an equivalent guarantee from the Guarantor.” Two new corporate guarantors — Indiabulls Infrastructure and Power Limited (now RattanIndia Infrastructure Limited) and Indiabulls Power Limited (now RattanIndia Power Limited) — replaced the corporate debtor.

Clause 11 of the 2012 deed preserved a residual obligation on the corporate debtor: it would remain responsible only if the substituted primary obligor, IIPL, failed to fulfil its obligations. The corporate debtor's liability was thus secondary and contingent, not primary.

When Canara Bank filed C.P. (IB) No. 317/ND/2025 under Section 7 against the corporate debtor in 2025, it did not disclose the 2012 Guarantee Deed. The corporate debtor raised this suppression in its reply to the Section 7 application, pleading that the bank had concealed a material document and that the corporate debtor had been discharged from its 2010 guarantee obligations.

The NCLT's Admission and the Contradictory Judgment on the Same Day

The NCLT, New Delhi Bench, Court IV admitted the Section 7 application by order dated 9 December 2025. In doing so, it relied on the NPA declaration date of 28 September 2017 to reject the corporate debtor's Section 10A objection, reasoning that the default predated the Section 10A period.

On the same day, 9 December 2025, the same NCLT bench dismissed C.P. (IB) No. 204/ND/2025, a Section 7 application filed by Canara Bank against RattanIndia Enterprises Limited, the other corporate guarantor under the same 2010 guarantee and the same recall notice dated 30 September 2020. In that order, the bench held that there was no financial debt. The Technical Member who authored the impugned order admitting the Section 7 application against the corporate debtor did not notice, let alone address, the Judicial Member's judgment of the same date dismissing the parallel application.

Arguments Before NCLAT

Senior Counsel for the appellant argued on three fronts. First, the 2010 guarantee was limited to equity infusion and never obliged the corporate debtor to repay the principal borrower's loan. Second, the guarantee was invoked on 30 September 2020, which fell within the Section 10A period, and the three-day payment window meant any default by the corporate guarantor occurred on or after 4 October 2020, still within that period. Third, the NCLT had itself held on the same day that the same recall notice gave rise to no financial debt against the other corporate guarantor, making the impugned admission order internally contradictory.

Senior Counsel for Canara Bank contended that the 2010 guarantee made the corporate debtor's liability co-extensive with the principal borrower, that the NPA declaration in 2017 fixed the date of default for Section 10A purposes, and that various subsequent undertakings — including a Share Retention and Management Undertaking dated 28 February 2015, an Indemnity-cum-Undertaking dated 28 March 2015, a Promoters' Deed of Undertaking dated 28 March 2015, and a Cost Overrun Undertaking dated 21 November 2016 — separately obliged the corporate debtor to the financial creditor. The bank also argued that a SARFAESI notice under Section 13(2) dated 9 June 2021 constituted a separate invocation.

How NCLAT Reasoned

The Tribunal examined the text of the 2010 guarantee in detail. Paragraph 2 of that deed required the guarantors to infuse equity share capital in accordance with the facility agreement. The event of default was defined as failure to contribute equity, not failure to repay the loan. Clause 8 required the Security Agent to issue a notice of demand specifying the total amount demanded before any liability could be triggered. The Tribunal found that no case had been made out by the financial creditor that the corporate debtor had defaulted in infusing equity after any such notice of demand for equity infusion. The guarantee, on its own terms, never contemplated discharge of the principal borrower's loan debt by the corporate guarantor.

On the 2012 deed, the Tribunal held that Clause (G) clearly discharged the corporate debtor from the 2010 guarantee and substituted two new guarantors. The corporate debtor's residual obligation under Clause 11 was only triggered if the primary obligor, IIPL, failed to perform. The NCLT had not examined either the 2010 or the 2012 guarantee deed, despite the corporate debtor having specifically pleaded both in its reply and having raised the suppression of the 2012 deed.

On Section 10A, the Tribunal held that the relevant date for the corporate guarantor's default was not the NPA declaration of the principal borrower on 28 September 2017 but the date on which the guarantee was invoked. The recall notice dated 30 September 2020 invoked the guarantee and gave three days to pay. The cause of action against the corporate guarantor therefore arose on 30 September 2020, and the default occurred on 4 October 2020, both within the Section 10A period. A subsequent SARFAESI notice dated 9 June 2021 could not shift the date of default, since the cause of action had already arisen on 30 September 2020.

On the contradictory judgments, the Tribunal observed that the same NCLT bench, on the same day, had rejected a Section 7 application against the other corporate guarantor under the same recall notice on the ground that there was no financial debt, yet admitted the application against the corporate debtor on the same facts. The Tribunal found this “unexplainable and un-understandable” and held that the Technical Member who authored the impugned order had failed to notice the Judicial Member's judgment of the same date.

The Tribunal also recorded its disapproval of the manner in which the Section 7 application had been filed. The financial creditor had concealed the 2012 Guarantee Deed, which was a material document directly relevant to the corporate debtor's liability, and had proceeded in a “casual and callous manner.”

Outcome

By its judgment dated 4 May 2026, the NCLAT allowed Company Appeal (AT) (Insolvency) No. 1964 of 2025. The impugned order dated 9 December 2025 passed by the NCLT, New Delhi Bench, Court IV in C.P. (IB) No. 317/ND/2025 was set aside. The Section 7 petition C.P. (IB) No. 317 of 2025 filed by Canara Bank against Equinox India Developments Ltd. was dismissed.