IBC Section 10A cited as NCLAT sets aside NCLT insolvency order against Embassy Development

The National Company Law Appellate Tribunal has overturned an NCLT order that let insolvency proceedings start against Embassy Development. The case began after Canara Bank moved the Delhi bench of the National Company Law Tribunal. The lender claimed Embassy Development owed money as a corporate guarantor for a loan given to Indiabulls Realtech, now Simar Thermal Power.

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The appellate challenge was filed by Rajesh Kaimal, a member of Embassy Development’s suspended board. The NCLAT set aside the December 2025 NCLT direction to admit the case. The NCLAT said the alleged default fell within the IBC Section 10A protected window. Section 10A blocks insolvency filings for certain COVID-period defaults.

Embassy Development insolvency case turned on IBC Section 10A

The tribunal explained that Section 10A bars a corporate insolvency resolution process for defaults arising on or after March 25, 2020. The bar applied for one year under the Code. The government added the provision after economic activity restarted post COVID-19 lockdowns. The NCLAT said this shield applied to the bank’s claim.

In its 43-page order, the NCLAT faulted the NCLT’s handling of the corporate debtor’s objections. It stated, "Adjudicating Authority NCLT committed error in not accepting the plea of the Corporate Debtor Embassy that application was barred by Section 7,\". The appellate body said the NCLT did not properly apply the legal bar raised by Embassy.

Embassy Development loan guarantee timeline cited by NCLAT

The dispute linked back to a term loan sanctioned in February 2010. Canara Bank approved Rs 100 crore for Indiabulls Realtech, now Simar Thermal Power. A corporate guarantee supported the borrowing. The guarantee was given by India Bulls Real Estate Equinox Development, which later became Embassy Development.

Canara Bank pointed to later stress in the borrower’s account. The principal borrower’s loan was marked as a non-performing asset on September 28, 2017. The bank issued a recall notice in September 2020. It also invoked the corporate guarantee on June 30, 2010, as recorded in the order.

In 2025, Canara Bank filed a Section 7 application against Embassy Development. The claim amount was Rs 202.03 crore. The earlier NCLT order admitted the plea and directed insolvency initiation. The appellate tribunal later held the filing could not proceed due to the Section 10A bar.

Embassy Development order criticised Canara Bank’s Section 7 filing

The NCLAT rejected the date used by the NCLT for testing Section 10A. It said, \"The date September 28, 2017, taken by the Adjudicating Authority for purposes of Section 10A is wholly erroneous,\". The tribunal clarified that the NPA date concerned the borrower. It did not establish default by the guarantor.

It added, \"The said date is the date for declaring the NPA account of the principal borrower, which has nothing to do with the default on the part of the corporate debtor.\" The order then stated, \"We, thus, hold that application was clearly barred by Section 10A,\". This finding led to the NCLT order being set aside.

The NCLAT also criticised the public sector lender’s approach to the petition. It said, \"The Financial Creditor rushed to file Section 7 application without even looking into Deed of Guarantee and other relevant documents and without adverting to all relevant facts,\". It further observed, \"We are constrained to observe that the Financial Creditor has proceeded to file Section 7 application in a casual and callous manner which is disapproved.\"

On the underlying documents, the tribunal said the record did not show a clear promise by Embassy Development to pay lenders. NCLAT said none of the Deed of Undertaking can be read as to mean any undertaking by Corporate Debtor to discharge the financial liability of the principal borrower to the lenders. The ruling ended the admitted insolvency case against Embassy Development on these grounds.

With inputs from PTI