Appellate tribunal NCLAT has set aside an NCLT order that allowed insolvency proceedings against realty firm Embassy Development.

The Delhi bench of the National Company Law Tribunal (NCLT), in December 2025, directed the initiation of insolvency proceedings against the realty firm over a plea filed by Canara Bank. The bank had alleged that Embassy Development owed ₹200 crore as a corporate guarantor to a loan given to Indiabulls Realtech (now Simar Thermal Power).

This NCLT order was challenged in the appellate tribunal by Rajesh Kaimal, who was part of the suspended board of Embassy Development.

The National Company Law Appellate Tribunal (NCLAT), while setting aside the order, said that the default alleged by Canara Bank was "within 10A period" of the Insolvency & Bankruptcy Code (IBC).

Section 10A bars a corporate insolvency resolution process for any default arising on or after March 25, 2020, for a period of one year. This provision was inserted in the IBC by the government to help companies following the resumption of economic activities after the Covid-19 lockdowns.

"Adjudicating Authority (NCLT) committed error in not accepting the plea of the Corporate Debtor (Embassy) that application was barred by Section 7," the appellate tribunal said in its 43-page order.

In February 2010, a term loan of ₹100 crore was sanctioned by the Canara Bank to the principal borrower, Indiabulls Realtech (now Simar Thermal Power). For this, a corporate guarantee was extended by India Bulls Real Estate (Equinox Development, now known as Embassy Development).

The loan account of the principal borrower was classified as a non-performing asset (NPA) on September 28, 2017.

In September 2020, Canara Bank issued a recall notice to the principal borrower and invoked the corporate guarantee on June 30, 2010.

In 2025, an application under Section 7 of the IBC was filed by Canara Bank against the corporate debtor, claiming ₹202.03 crore.

"The date September 28, 2017, taken by the Adjudicating Authority for purposes of Section 10A is wholly erroneous," the NCLAT said.

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.

"We, thus, hold that application was clearly barred by Section 10A," it said.

The NCLAT also slammed the public sector lender for rushing to file a petition even without looking at the Deed of Guarantee and other relevant documents.

"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," said the NCLAT, adding, "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." 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.

Published on May 5, 2026