NCLAT Sets Aside Order Admitting Equinox India Developments Ltd. Into Insolvency

The National Company Law Appellate Tribunal (NCLAT) has set aside the admission of Canara Bank's insolvency plea against Equinox India Developments Ltd., a real estate company formerly known as Indiabulls Real Estate Ltd.

It held that the corporate guarantee relied on did not constitute a financial debt under the Insolvency and Bankruptcy Code.

The order came in an appeal filed by Rajesh Kaimal, suspended director of Equinox India Developments Ltd. (formerly Indiabulls Real Estate Ltd.).

The tribunal found that the corporate guarantee relied upon by the financial creditor was confined to equity infusion obligations and did not contemplate repayment of the principal borrower's debt. It therefore did not constitute a financial debt within the meaning of Section 5(8) of the Insolvency and Bankruptcy Code.

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

“The order passed by the Adjudicating Authority shows complete non-application of mind and the conclusion that financial debt is proved has been arrived without even looking into the guarantee deed and nature of guarantee undertaken by the corporate guarantor.”

The dispute arose from financial facilities extended by Canara Bank to Indiabulls Realtech Ltd. (later Sinnar Thermal Power Ltd.), the principal borrower, for setting up a power project in Nashik, Maharashtra. A rupee term loan of Rs 100 crore was sanctioned in 2010.

This was followed by cost overrun loans in 2014 and 2016, taking the total exposure to Rs 144.4 crore.

To secure these facilities, a corporate guarantee dated June 30, 2010 was executed by Indiabulls Real Estate Ltd. (the corporate debtor, later Equinox India Developments Ltd.) and Indiabulls Power Ltd., which later became RattanIndia Enterprises Ltd.

Subsequently, pursuant to a scheme of arrangement approved by the Delhi High Court, the power business of the corporate debtor was demerged.

A fresh guarantee deed dated January 11, 2012 brought in new guarantors, Indiabulls Infrastructure and Power Ltd. and Indiabulls Power Ltd., in place of the earlier arrangement.

With this, the corporate debtor stood released from its obligations, except in limited situations where the substituted guarantors failed to meet theirs.

Even so, Canara Bank issued a loan recall notice on September 30, 2020, invoking the 2010 guarantee and seeking payment of Rs 202 crore from the corporate debtor along with other guarantors.

The bank subsequently moved a Section 7 CIRP application before the NCLT in 2025, which came to be admitted on December 9, 2025.

Kaimal's case was that the 2010 guarantee was only meant to secure equity infusion and did not extend to repayment of the principal debt. He also maintained that the 2012 deed had effectively replaced the original guarantors and discharged the corporate debtor, except in narrowly defined fallback scenarios.

He further submitted that the recall notice dated September 30, 2020 invoked the guarantee during the Section 10A moratorium period.

It was also pointed out that the NCLT ignored its own order passed on the same day dismissing another Section 7 petition filed against RattanIndia Enterprises Ltd., another corporate guarantor under the same recall notice, holding that no financial debt existed.

Canara Bank contended that the corporate debtor remained liable under the 2010 guarantee and subsequent undertakings.

These included the Cost Overrun Undertaking of 2016, Share Retention Undertaking of 2015, and Promoters' Deed of Undertaking. The bank argued that these created obligations amounting to financial debt and justified admission of the Section 7 petition.

The NCLAT, however, found that the 2010 guarantee was confined to equity infusion and cost overrun funding. It did not contemplate repayment of the loan.

It observed that,

“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”

The tribunal further noted that the 2012 guarantee deed expressly substituted new guarantors and released the corporate debtor, except in limited fallback circumstances.

It held that the corporate debtor never undertook to pay or discharge any financial debt obligation of the principal borrower. The tribunal added that the entire proceeding initiated by the Financial Creditor by issuing Loan Recall Notice dated September 30, 2020 and filing application under Section 7 was wholly misconceived and without any basis.

The bench also held that the undertakings of 2015 and 2016 related to shareholding retention and cost overruns.

It found that these did not create any liability to repay the principal borrower's debt.

On limitation and maintainability, the tribunal clarified that default by a corporate guarantor arises only upon invocation of the guarantee.

Since the guarantee was invoked on September 30, 2020 and payment was demanded within three days, default occurred on October 4, 2020. This fell within the Section 10A period, making the application barred.

It held that the NCLT erred in relying on the principal borrower's NPA date of 2017 as the date of default.

Accordingly, the appeal was allowed, and the impugned order dated December 9, 2025 was set aside.