Juris Corp successfully represented National Asset Reconstruction Company Limited (NARCL) before the National Company Law Tribunal, New Delhi Bench (NCLT) and the National Company Law Appellate Tribunal (NCLAT) leading to admission of Haridwar Highways Project Limited (Borrower) and Era Infrastructure (India) Limited (Guarantor) to insolvency.

Juris Corp secured admission of the insolvency applications against the Borrower and the Guarantor simultaneously under Section 7 of the Insolvency and Bankruptcy Code, 2016 (IBC) before the NCLT and further secured favourable outcome whereby the appeals filed by the parent company, Era Infra Engineering Limited, challenging the admission to insolvency were dismissed by the NCLAT.

Before the NCLT, the parent company, which had earlier been resolved under IBC, filed intervention applications claiming that there was no legally enforceable debt against the Borrower and the Guarantor since they stood resolved in the resolution plan approved for the parent company. The parent company claimed that the erstwhile lenders of the Borrower had filed their claims for the same amount in the insolvency of the parent company and post approval of the resolution plan, there was an agreement to share the arbitral proceeds relating to the subsidiaries with the lenders.

However, Juris Corp successfully defended the insolvency applications and basis clear evidence of existence of debt and default by both entities, the NCLT admitted both applications within a year. Notably, the NCLT also rejected the intervention applications filed by the parent company observing that these were filed with the sole intent to derail and frustrate the ongoing process and to defeat the very objective of IBC.

The parent company then filed appeals before the NCLAT contending that the admission orders would frustrate the implementation of the resolution plan of the parent company.

The key question which arose for consideration before the NCLAT was whether the claims of NARCL against the Borrower and the Guarantor stood extinguished with the approval of the resolution plan of the parent company in view of the claims admitted in the insolvency of the parent company and the agreement to share the arbitral proceeds relating to the subsidiaries.

Juris Corp successfully contested the appeals before the NCLAT wherein the NCLAT analysed the terms of the resolution plan read with the clarifications thereto, the nature of debt claimed and the sharing of arbitral proceeds agreement and held that the resolution plan does not extinguish the secured debt owed by the subsidiaries. The NCLAT held that the nature of debt claimed against the parent company and the Borrower were two different debts and the rights of NARCL to proceed against the Borrower and the Guarantor are separate and independent rights, which rights can be exercised without any kind of fetter from the approval of the resolution plan of the parent company.

This development once again supports NARCL’s broader goal of resolving bad loans and bringing financially stressed companies back on track through timely insolvency action whilst actively tackling the hurdles created by intervenors/parent company.

The Juris Corp team included Partner Saurabh Sharma and Senior Associate Aditi Sinha.