Resolution plan approval for a holding company does not extinguish separate secured debts of its subsidiaries.

The Appellant, Era Infra Engineering Ltd. (EIEL), is the holding company of Haridwar Highways Project Ltd. (HHPL - Principal Borrower) and Era Infrastructure (India) Ltd. (EIIL - Corporate Guarantor).

HHPL obtained loans from a consortium of lenders (now assigned to NARCL) for a highway project.

EIEL provided a "sponsor’s shortfall undertaking".

EIIL provided a corporate guarantee.

CIRP was initiated against the Appellant (EIEL) in 2018, and a Resolution Plan was approved on 11.06.2024.

The lenders filed claims in EIEL’s CIRP based on the shortfall undertaking, which were treated as unsecured claims.

Subsequently, NARCL filed Section 7 IBC applications against the subsidiary (HHPL) and the guarantor (EIIL).

The Adjudicating Authority (NCLT) admitted these applications on 04.11.2025 and rejected the Appellant’s intervention petitions.

The Appellant challenged these orders, arguing that the debt was extinguished via its own approved Resolution Plan.

Whether the approval of a Resolution Plan for a holding company operates to extinguish the independent secured matching debt of its subsidiary (Principal Borrower) and the Corporate Guarantor.

Whether an agreement for sharing arbitral proceeds between a holding company and lenders prevents the initiation of CIRP against the subsidiary SPVs.

Whether a shareholder/holding company has the locus standi to challenge the admission of CIRP against its subsidiary.

The Court applied Section 7 of the Insolvency and Bankruptcy Code (IBC) regarding the initiation of CIRP by financial creditors.

It relied on the principle that a sponsor's shortfall undertaking is distinct from the primary liability of a borrower under a Term Loan Agreement.

The Court followed the precedent in *M. Suresh Kumar Reddy v. Canara Bank & Ors.* [(2023) 8 SCC 387], which mandates that once the NCLT is satisfied a debt and default exist, it has no discretion but to admit the Section 7 application.

It also applied Section 61 of the IBC regarding the standing of an "aggrieved person" to file an appeal.

The Court reasoned that the debt owed by the Appellant (EIEL) under the "shortfall undertaking" was an unsecured obligation, whereas the debt owed by the subsidiary (HHPL) was a secured obligation arising from separate Term Loan Agreements.

The Resolution Plan of the Appellant specifically included a clarification affidavit stating that the discharge of claims against the Appellant would not affect the lenders' rights to realize dues from the principal debtor or other guarantors.

Consequently, the debt was not "eclipsed" or extinguished by the Appellant's CIRP.

Regarding the Sharing of Arbitral Proceeds (SAP) Agreement, the Court held that a private inter-se arrangement for distribution of future proceeds does not waive the statutory right of a creditor to initiate CIRP upon default.

On the issue of locus, the Court found that although shareholders generally lack standing, the Appellant qualified as an "aggrieved person" because it alleged the subsidiary's CIRP would hinder its own approved Resolution Plan.

The NCLT correctly admitted the Section 7 applications as the debt and default were clearly established and acknowledged in the subsidiaries' balance sheets.

The rejection of the intervention petitions was upheld as the Corporate Debtors (HHPL and EIIL) had already been heard by the NCLT.

All appeals were dismissed.