Pranav B Prem

The National Company Law Tribunal (NCLT) at Delhi has dismissed Canara Bank’s insolvency petition against RattanIndia Enterprises Limited, holding that promoter undertakings relating to equity infusion, cost overrun support or retention of management control do not amount to a corporate guarantee and therefore cannot create a financial debt under the Insolvency and Bankruptcy Code, 2016. The order was delivered on December 9, 2025, by Judicial Member Manni Sankariah Shanmuga Sundaram and Technical Member Atul Chaturvedi while considering Canara Bank’s allegation that RattanIndia had undertaken financial responsibility for a loan of ₹144.40 crore granted to Sinnar Thermal Power Limited.

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Canara Bank argued that various documents executed during the sanction of the loan constituted a guarantee by RattanIndia. These included a Cost Overrun Undertaking, a Share Retention and Management Undertaking and several promoters’ undertakings, which the bank claimed created liability on the part of RattanIndia to step in and satisfy the borrower’s dues. The bank asserted that these undertakings demonstrated the company’s commitment to financial support and therefore brought the arrangement within the scope of a guarantee.

RattanIndia denied having executed any Deed of Guarantee in favour of the bank. It submitted that the undertakings relied upon by the bank were commercial promoter undertakings commonly executed in large infrastructure projects, dealing only with equity infusion or maintenance of control to ensure successful implementation of the project. The company argued that none of these undertakings contained any promise to repay the outstanding loan of Sinnar Thermal Power Limited, nor did they satisfy the requirements of a contract of guarantee under Section 126 of the Indian Contract Act. RattanIndia also pointed out that in the bank’s own proceedings before the Debt Recovery Tribunal concerning the same loan, the bank had never impleaded RattanIndia as a guarantor.

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The Tribunal accepted RattanIndia’s position and held that the documents relied on by the bank did not create any enforceable liability resembling a guarantee. It observed that the undertakings “merely oblige the Respondent to infuse equity, retain control, or manage project implementation,” and these commercial commitments “are 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 Tribunal emphasised that the absence of a tripartite agreement between the creditor, the principal debtor and the surety was fatal to the bank’s claim, as a contract of guarantee cannot be inferred or assumed in the absence of an express document.

The Tribunal noted that the Master Intercreditor Agreement and related financing documents required joint lender action, but added that it was unnecessary to examine these issues in detail because the primary requirement of a financial debt was not satisfied. It observed that for admission of a Section 7 petition, the existence of a financial debt and a default are mandatory. In the present case, it found that Canara Bank had failed to show the existence of any debt owed by RattanIndia, since no guarantee or other enforceable financial obligation had ever come into existence.

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Concluding that the basic ingredients of a Section 7 application were absent, the Tribunal held 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.” On this basis, the insolvency petition was dismissed.

Appearance

For Applicant: Advocate Hitesh Sachar

For Respondent: Senior Advocate Krishnendu Datta, Advocates Dipanshu Krishnan, Tanvi Sapra and Karan Batura.

Cause Title: Canara Bank v. RattanIndia Enterprises Limited

Case No: Company Petition IB 204 (ND) 2025

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