Undertakings To Infuse Equity Or Retain Control Not Guarantees; NCLT Delhi Dismisses CIRP Plea Against RattanIndia

The National Company Law Tribunal at Delhi has dismissed Canara Bank's insolvency petition against RattanIndia Enterprises Limited, holding that promoter undertakings relating to equity infusion and management control do not constitute a corporate guarantee or a financial debt under the Insolvency and Bankruptcy Code. A bench of Judicial Member Manni Sankariah Shanmuga Sundaram and Technical Member Atul Chaturvedi delivered the order on December 9 while considering the bank's attempt to initiate insolvency proceedings on the basis of alleged promoter guarantees extended for a Rs 144.40 crore loan to Sinnar Thermal Power Limited. The tribunal observed that “the documents relied upon by the Applicant namely the Cost Overrun Undertaking, Share Retention Undertaking, and Promoters' Undertakings merely oblige the Respondent to infuse equity, retain control, or manage project implementation. These are commercial undertakings, and not financial guarantees, and cannot be equated with a 'debt' as defined under Section 3(11) or a 'financial debt' under Section 5(8) of the Code.” The bench also noted that a contract of guarantee requires a tripartite agreement between the creditor, the principal debtor, and the surety, and said no such agreement had been produced. Canara Bank had filed a CIRP application claiming that RattanIndia Enterprises acted as corporate guarantor for loans amounting to Rs 144.40 crore sanctioned by a consortium of banks to Sinnar Thermal Power Limited for a coal-based thermal power project in Maharashtra. The borrower's account was classified as a non-performing asset on September 28, 2017. The bank relied on various undertakings executed along with the loan sanctions to assert that a guarantee relationship existed.RattanIndia denied executing any Deed of Guarantee in favour of the bank. It said the documents cited by the bank were typical promoter undertakings relating to cost overruns and were confined to infusing equity or retaining management control to support project implementation, not promises to repay the borrower's debt. The company also pointed out that the bank had not impleaded it in the Debt Recovery Tribunal proceedings arising from the same loan transactions, which it argued undermined the bank's claim that RattanIndia was a guarantor. The tribunal held that the undertakings relied on by the bank did not create any debt obligation enforceable under the Insolvency and Bankruptcy Code. It reiterated that “no financial debt is established as due from the Respondent to the Applicant, in absence of any Deed of Guarantee or other enforceable instrument creating a debt obligation.” Since the basic ingredients of a CIRP application under Section 7 namely the existence of a financial debt and a default, were not satisfied, the tribunal dismissed the application. Case Title: Canara Bank v. RattanIndia Enterprises Limited Case Number: Company Petition IB 204 (ND) 2025 For Applicant: Advocate Hitesh Sachar For Respondent: Senior Advocate Krishnendu Datta, Advocates Dipanshu Krishnan, Tanvi Sapra and Karan Batura.Click Here To Read/Download Order

Undertakings To Infuse Equity Or Retain Control Not Guarantees; NCLT Delhi Dismisses CIRP Plea Against RattanIndia

Shivangi Bhardwaj

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