Pranav B Prem

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The National Company Law Tribunal (NCLT), New Delhi Bench (Court-IV) comprising Justice Manni Sankariah Shanmuga Sundaram (Judicial Member) and Atul Chaturvedi (Technical Member) has admitted an application filed under Section 7 of the Insolvency and Bankruptcy Code, 2016 by the National Asset Reconstruction Company Limited (NARCL) against Era Infrastructure (India) Ltd. (EIL), holding that the corporate guarantee executed by EIL in favour of Bank of India (BOI) was enforceable, and the application was filed within the prescribed limitation period.

 

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The case arose from a financial debt amounting to ₹385.38 crore, which included a principal amount of ₹143.75 crore and accrued interest of ₹241.62 crore. The debt originally belonged to BOI and was later assigned to NARCL through an Assignment Agreement dated 28.03.2024, thereby transferring all rights and interests. NARCL filed the insolvency petition through its attorney, India Debt Resolution Company Ltd. (IDRCL), acting as trustee for NARCL Trust-0010.

 

EIL had executed a Corporate Guarantee dated 29.06.2016 for ₹149.48 crore in favour of BOI, securing the term loans disbursed to Haridwar Highways Project Ltd. (HHPL), the principal borrower. Following defaults in repayment and classification of the account as a Non-Performing Asset (NPA) on 24.02.2017, BOI invoked the corporate guarantee on 03.04.2019.

 

The respondent, Era Infrastructure (India) Ltd., contended that the insolvency petition was barred by limitation and that the corporate guarantee could not be invoked since the period of default had expired. It was argued that NARCL, stepping into BOI’s shoes, could not file the application after the limitation period and that the date of default was ambiguous.

 

Rejecting these contentions, the Tribunal held that the date of default was clearly stated as 03.04.2019, being the date of invocation of the corporate guarantee. The Bench further observed that the borrower’s acknowledgment of debt through its balance sheets for 2019–2022 and its letter dated 23.09.2021 constituted valid acknowledgment under Section 18 of the Limitation Act, 1963, thereby extending the limitation period.

 

In its detailed reasoning, the Tribunal referred to the Supreme Court’s decisions in Laxmi Pat Surana v. Union Bank of India (Civil Appeal No. 2734 of 2020) and Dena Bank v. C. Shivakumar Reddy (2021) 10 SCC 330, holding that acknowledgment of debt by a principal borrower equally binds the corporate guarantor and renews the cause of action. The NCLT also relied on the NCLAT ruling in Sri Bijay Kumar Agarwal v. State Bank of India, reiterating that a corporate guarantor’s liability is co-extensive with that of the borrower and continues until the debt is fully discharged.

 

The Tribunal noted that the corporate guarantee was a continuing one and would remain in force until full repayment. The NCLT emphasized that once a default has been established, the Adjudicating Authority has no discretion to reject an application under Section 7 of the Code, citing M. Suresh Kumar Reddy v. Canara Bank (2023) 8 SCC 387, which reaffirmed that non-payment of any part of a due debt constitutes default.

 

After finding that all statutory requirements were met — existence of financial debt, occurrence of default, and compliance with procedural norms — the NCLT admitted the application and initiated the Corporate Insolvency Resolution Process (CIRP) against Era Infrastructure (India) Ltd. The Bench appointed Mr. Alok Kumar Agarwal as the Interim Resolution Professional (IRP) under Section 7(5)(a) of the IBC and declared a moratorium under Section 14 of the Code, prohibiting all suits, proceedings, and asset transfers against the corporate debtor.

 

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The decision reinforces that under the IBC, a corporate guarantor cannot escape liability merely on the ground that the borrower’s account has turned NPA or that limitation has expired. Acknowledgments made by the borrower in financial statements or letters automatically extend limitation for the guarantor as well. Thus, the NCLT’s order upholds the principle that the acknowledgment of debt by a principal borrower binds the corporate guarantor, ensuring that creditors’ rights under the IBC are not defeated by technical defences of limitation or procedural ambiguity.

 

Appearance

For Financial Creditor: Mr. P. Nagesh, Sr. Adv., Mr. Abhishek Anand, Ms. Kaveri Ravat, Mr. Shouryaditya, Ms. Aditi Sinha, Ms. Palak Kalra, Advocates.

For Corporate Debtor: Mr. Sunil Fernandes, Sr. Adv, Ms. Muskan Surana, Ms. Divya Verma, Ms. Manvi Jain, Advocates.

 

 

Cause Title: National Asset Reconstruction Company Ltd. (as Trustee of NARCL Trust – 0010) v. Era Infrastructure (India) Ltd.

Case No: C.P. NO. (IB) 172/2025

Coram: Justice Manni Sankariah Shanmuga Sundaram (Judicial Member), Atul Chaturvedi (Technical Member)