Archive · 28 Aug 2026
NCLT Orders Insolvency Process Against Essel Infraprojects Over ₹87-Crore Default
Jammu and Kashmir Bank gave a loan to one company in the Essel group.
Essel Infraprojects promised to repay the loan if that company could not.
The borrower later faced financial problems and entered insolvency proceedings.
The bank then asked Essel Infraprojects to honor its promise.
Essel argued that changes in ownership of mortgaged land and new guarantees had ended its responsibility.
The tribunal disagreed because the original guarantee said it would continue until the loan was paid.
It also said a bank can pursue the borrower and more than one guarantor.
The tribunal therefore started an insolvency process against Essel Infraprojects.
The NCLT Mumbai Bench initiated CIRP against Essel Infraprojects Limited over an alleged ₹87.43-crore default.
Jammu and Kashmir Bank claimed the amount under a corporate guarantee for a loan to Pan India Utilities Distribution Company Limited.
The tribunal held that Essel’s December 2013 guarantee remained binding until the underlying loan was fully discharged.
Essel argued that later mergers, demergers, and fresh security provided by another group company had replaced or discharged its obligations.
The tribunal rejected those arguments, found the debt and default established, and appointed Hemant J. Mehta as Interim Resolution Professional.
- Who
- Jammu and Kashmir Bank Limited brought the insolvency petition against Essel Infraprojects Limited; the NCLT Mumbai Bench issued the order.
- What
- The tribunal ordered initiation of a Corporate Insolvency Resolution Process over a claimed default of ₹87.43 crore.
- When
- The order was passed on August 24, 2026, and the report was dated August 28, 2026; the underlying default dated to October 2019.
- Where
- The case was decided by the NCLT Mumbai Bench.
- Why
- The tribunal held that Essel’s corporate guarantee remained effective and that the bank had established the debt and default.
Essel Infraprojects’ Position
Bank and Tribunal’s Position
Effect of later corporate restructuring
Essel Infraprojects’ Position
Essel argued that a demerger and subsequent merger transferred the mortgaged Gorai property to Pan India Infraprojects Private Limited, which then became the relevant mortgagor and guarantor.
Bank and Tribunal’s Position
The tribunal held that obtaining a fresh mortgage or guarantee from the new property owner did not release Essel from its separate, continuing guarantee.
Whether multiple parties could be pursued
Essel Infraprojects’ Position
Essel argued that the bank could not proceed against it after taking action against the borrower and another group company.
Bank and Tribunal’s Position
The tribunal said a creditor may proceed simultaneously against the principal borrower and multiple guarantors, with liability reduced only to the extent of actual recovery.
Continuing guarantee
Essel Infraprojects’ Position
Essel contended that later transactions had discharged its obligations under Section 133 of the Contract Act.
Bank and Tribunal’s Position
The tribunal found no evidence that the bank had released Essel and relied on the guarantee’s terms stating that it was irrevocable, unconditional, and continuing.
- Claimed default
- ₹87,43,17,925.37, including interest and legal charges
- Underlying loan facility
- A ₹200-crore line of credit sanctioned to Pan India Utilities Distribution Company Limited
- Disbursement
- ₹125 crore was disbursed on December 28, 2013, and ₹75 crore on December 30, 2013
- Outstanding principal
- ₹69.96 crore
- Security
- Essel Infraprojects furnished a corporate guarantee and mortgaged 196.16 acres at Gorai, Borivali
- Legal basis
- Jammu and Kashmir Bank filed under Section 7 of the Insolvency and Bankruptcy Code
- Resolution professional
- Hemant J. Mehta was appointed Interim Resolution Professional