NCLT Delhi Admits Canara Bank's Insolvency Plea Against Equinox Over ₹372 Crore Guarantee Default

The National Company Law Tribunal (NCLT) at New Delhi has admitted Canara Bank's insolvency petition against Equinox India Developments Limited, earlier known as Indiabulls Real Estate Limited, for defaulting on Rs 372.35 crore for loans extended to Sinnar Thermal Power Limited for its coal-based thermal power project in Maharashtra.

The tribunal rejected the company's claim that the case could not proceed because the alleged default took place during the Covid-19 suspension period under the insolvency law.

That suspension, introduced through Section 10A of the Insolvency and Bankruptcy Code in 2020, temporarily stopped creditors from filing insolvency petitions for any default that happened between 25 March 2020 and 24 March 2021. The tribunal clarified that this protection applies only when the default itself first occurred within that window.

A bench of Judicial Member Manni Sankariah Shanmuga Sundaram and Technical Member Atul Chaturvedi held on 9 December that Equinox's default began much earlier.

The tribunal said that “intention of the legislature is to completely bar the institution of any application ever for initiation of CIRP for the default having occurred during the perio 25.03.2020 till 24.03.2021. Where the default is shown to have arisen on 28.09.2017, Section 10A cannot be invoked to shield a pre-existing default.”

The dispute emerged from loans worth Rs 144.40 crore given by a consortium of banks to Sinnar Thermal Power Limited for a coal-based power project in Maharashtra. Equinox had agreed to act as a corporate guarantor for these loans.

When Sinnar Thermal's account was classified as a non-performing asset on September 28, 2017 and remained unpaid despite recall notices and recovery action under the SARFAESI Act, Canara Bank invoked the guarantees based on documents signed in 2010 and 2016.

Equinox argued that the default should be treated as having occurred on 4 October 2020. This date would have placed the default within the Covid-19 suspension period, which would have prevented the bank from approaching the NCLT.

The company also claimed that its guarantee obligations had been wiped out under a 2011 restructuring scheme approved by the Delhi High Court and that a 2012 guarantee made other companies responsible instead.

The tribunal rejected both arguments. It held that steps taken under the SARFAESI Act are “consequences of default and do not postpone or shift the date of default.” It also noted that the 2012 Deed of Guarantee “clearly mentions that Respondent (IBREL) to continue to be responsible for fulfilling obligations in event of default by substituted guarantors.”

The tribunal added that Equinox had provided no document showing that Canara Bank released it from the guarantee. The tribunal admitted Canara Bank's application, appointed Prabhat Ranjan Singh as Interim Resolution Professional, and imposed a moratorium on its assets. 

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