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Informist, Thursday, Dec. 11, 2025

 

--NCLAT stays insolvency proceedings against Embassy Developments 

--CONTEXT: NCLT had admitted Canara Bank's IBC plea vs Embassy Developments 

 

NEW DELHI – The National Company Law Appellate Tribunal Thursday stayed insolvency proceedings against Embassy Developments Ltd., formerly known as Equinox India Developments Ltd., which was a corporate guarantor for facilities advanced to principal borrower Sinnar Thermal Power Ltd. The appellate tribunal issued notices to the creditor Canara Bank on an appeal by Rajesh Kaimal, the suspended director of Embassy Developments, and the latter's resolution professional, listing the case for hearing on Jan. 22.

 

The appellate tribunal said that the appeal by Kaimal needs consideration and prima facie the insolvency application of Canara Bank was barred under Section 10A of the Insolvency and Bankruptcy Code, 2016, a temporary measure enacted during the COVID-19 pandemic to suspend the initiation of insolvency proceedings. The tribunal observed that it was of the view that prima facie Canara Bank's insolvency petition was also barred under limitation law as it was filed five years after a notice for invocation of guarantee. 

 

The appellate tribunal noted that the guarantee given by Embassy Developments was subsumed by a 2012 deed wherein the company was not the principal obliger and there was no guarantee with regard to payment of debt of Sinnar Thermal. The appellate tribunal said that Embassy Developments was the guarantor of the equity from Sinnar Thermal and since there was no equity shortfall, the guarantee stood discharged.

 

Further, the same Delhi bench of the National Company Law Tribunal, which had admitted Canara Bank's insolvency plea against Embassy Developments on Tuesday, had rejected the bank's plea against RattanIndia Power Ltd. for the same guarantee on equity in the same project, said the appellate tribunal. The Delhi tribunal had said that the guarantee of equity by RattanIndia Power did not constitute debt, said the appellate tribunal. 

 

On Tuesday, the Delhi tribunal admitted Canara Bank's plea to start insolvency proceedings against Embassy Developments and appointed Prabhat Ranjan Singh as the interim resolution professional to carry out the functions as per the Insolvency and Bankruptcy Code, 2016. The deed of guarantee between the parties in 2012 clearly mentions that Embassy Developments will be responsible for fulfilling obligations in the event of a default by substituted guarantors, the tribunal said, rejecting the company's argument that a scheme of arrangement entered into among it, RattanIndia Enterprises Ltd., Indiabulls Builders, RattanIndia Power Ltd., and Poena Power Supply Ltd., meant that its obligations as corporate guarantor stood discharged or novated. A restructuring scheme does not "ipso facto" extinguish existing guarantees unless the creditor expressly executes a written and unconditional release in favour of the guarantor, the tribunal said.

 

Canara Bank had said Embassy Developments was the guarantor for loans advanced to Sinnar Thermal, which was indebted to the bank for an aggregate amount of INR 3.72 billion, not including penalties and interest. A consortium of banks, which included Canara Bank, had sanctioned loans to Sinnar Thermal in 2010, 2014, and 2016. The other members of the consortium were Power Finance Corp. Ltd., REC Ltd., Life Insurance Corp. of India, Bank of India, Axis Bank Ltd., and Punjab National Bank.

 

As Sinnar Thermal defaulted on repayment of the loans, its account was declared a non-performing asset in 2017, after which loan recall notices were issued. Canara Bank said Embassy Developments was corporate guarantor by virtue of various undertakings and documents executed, such as the corporate guarantee, cost overrun deed of undertaking, deed of indemnity-cum-undertaking, share retention, and management undertaking and promoters' deeds of undertaking. These instruments, read collectively, were evidence of the company's unequivocal obligation to ensure repayment of the loans and, therefore, amounted to a corporate guarantee within the meaning of the 2016 Code, the bank said.

 

Last month, the tribunal had approved an INR-38-billion resolution plan by a consortium of Maharashtra State Power Generation Co. Ltd. and NTPC Ltd. for the debt-ridden Sinnar Thermal. The tribunal had admitted Shapoorji Pallonji & Co. Pvt. Ltd.'s plea to start insolvency proceedings against Sinnar Thermal in 2022.

 

At 1229 IST, shares of Embassy Developments Ltd. were trading up 3.5% at INR 72.92 and those of Canara Bank were up 1.4% at INR 147.60 on the National Stock Exchange.  End

 

IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT

 

Reported by Surya Tripathi

Edited by Deepshikha Bhardwaj

 

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