Approval Of Era Infra Engg. Resolution Plan Does Not Extinguish Creditor Rights Against Borrower Subsidiary, Guarantor: NCLAT

The National Company Law Appellate Tribunal (NCLAT) at Delhi has held that approval of the resolution plan of Era Infra Engineering Ltd. (EIEL), the holding company of Haridwar Highways Project Ltd. (HHPL), does not prevent creditors from initiating insolvency proceedings against HHPL and corporate guarantor Era Infrastructure (India) Ltd. (EIIL), while dismissing appeals filed by EIEL challenging admission of Section 7 petitions.

A bench of Chairperson Justice Ashok Bhushan and Technical Member Barun Mitra observed that,

“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 resolution plan of the EIEL.”

The matter arose from orders passed by the National Company Law Tribunal, New Delhi Bench, on November 4, 2025, by which the NCLT admitted Section 7 applications filed by National Asset Reconstruction Company Ltd. (NARCL) against Haridwar Highways Project Ltd., the principal borrower, and Era Infrastructure (India) Ltd., the corporate guarantor. Intervention applications filed by EIEL were also rejected.

EIEL, an Engineering Procurement and Construction company engaged primarily in Build-Operate-Transfer infrastructure projects, had incorporated HHPL in 2010 as a special purpose vehicle to execute the Muzaffarnagar–Haridwar highway project, which had been awarded by the National Highways Authority of India. The project was financed through a consortium of lenders led by Axis Bank and other banks.

On June 29, 2016, a corporate guarantee was executed by Era Infrastructure (India) Ltd. in favour of Bank of India in respect of Term Loan I, Term Loan II and Term Loan III totalling ₹149.48 crore. The borrower's account was later classified as a non-performing asset, following which notice under Section 13(2) of the SARFAESI Act was issued.

Meanwhile, EIEL itself entered the corporate insolvency resolution process in 2018, and a resolution plan submitted by S.A. Infrastructure Consultants Pvt. Ltd. was approved on June 11, 2024. The lenders subsequently assigned their debts to NARCL, which filed Section 7 applications against HHPL alleging default of about Rs 2,386 crore and against EIIL alleging default of about Rs 143 crore under the corporate guarantee.

EIEL challenged the proceedings, contending that lenders had filed their claims in its CIRP and those claims were dealt with in the approved resolution plan. It argued that once the plan was sanctioned under Section 31 of the Insolvency and Bankruptcy Code, the debts stood resolved and no enforceable claim survived against HHPL or EIIL.

It further submitted that initiation of CIRP against the SPV and the guarantor would frustrate implementation of the resolution plan and defeat its binding effect.

NARCL opposed the appeal, submitting that the debt of HHPL arose from separate term loan agreements and was secured debt, whereas the claims filed in the CIRP of EIEL related to unsecured sponsor undertakings. It was contended that the resolution plan of EIEL did not extinguish the secured liabilities of HHPL or the obligations of EIIL as a corporate guarantor.

Reliance was also placed on a clarification affidavit filed by the successful resolution applicant in 2022 stating that unsecured financial creditors would continue to retain their rights to realise their dues from the principal borrower or any guarantor in accordance with the loan agreements.

NARCL also argued that the agreement for sharing arbitral proceeds was only an inter-se arrangement among the parties and could not curtail the statutory remedies available to financial creditors under the Insolvency and Bankruptcy Code.

The appellate tribunal agreed, observing that the liabilities of HHPL as principal borrower and EIIL as corporate guarantor arose from independent loan and guarantee obligations, and those liabilities did not stand extinguished merely because the resolution plan of EIEL had been approved.

The tribunal observed:

"We thus are of the view that the debt of lenders towards principal borrower and the corporate guarantor shall not be eclipsed by approval of the resolution plan of the appellant be order dated 11.06.2024 passed by the adjudicating authority.Relevant clauses of the resolution plan and clarification affidavit given by the SRA we have already noticed which clearly indicate that the debt of unsecured financial creditor with respect to HHPL was not to be extinguished with and financial creditors were fully entitled to proceed"

Holding that no error was committed by the NCLT in admitting the Section 7 applications or in rejecting the intervention petitions filed by EIEL, the appellate tribunal dismissed all the appeals.