Resolution plan of a holding company does not extinguish secured debts of its subsidiary companies.

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

HHPL obtained loans from a consortium of lenders for a highway project

EIEL provided a "Sponsor’s Shortfall Undertaking," while EIIL provided a Corporate Guarantee

On 08.05.2018, Corporate Insolvency Resolution Process (CIRP) commenced against the Appellant (EIEL), in which a resolution plan was approved on 11.06.2024

The lenders assigned their debt to the Respondent, NARCL, on 28.03.2024

NARCL subsequently filed Section 7 IBC applications against HHPL and EIIL

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

The Appellant challenged these orders, arguing that since the lenders’ claims were dealt with in its (EIEL’s) approved resolution plan, the debt against the subsidiaries stood extinguished

Whether the approval of a resolution plan for a holding company (Sponsor) eclipses or extinguishes the independent secured debt owed by its subsidiary (Principal Borrower) and the Corporate Guarantor?

Whether the Appellant, as a shareholder/holding company, has the locus standi to challenge the admission of CIRP against its subsidiaries?

The court applied Section 7 of the Insolvency and Bankruptcy Code, 2016 (IBC) regarding the initiation of CIRP by financial creditors

It relied on the definition of "Default" under Section 3(12) of the IBC

The court further applied the principle from *M. Suresh Kumar Reddy v. Canara Bank & Ors.* [(2023) 8 SCC 387], which mandates that once a debt and default are established, the NCLT has no discretion but to admit the Section 7 application

Additionally, the court examined the contractual distinctions between a "Sponsor’s Undertaking" and a "Principal Loan Agreement"

The court reasoned that the debt owed by the Appellant (EIEL) arose from a "Shortfall Undertaking," which was treated as an unsecured debt in its resolution plan

Conversely, the debt owed by the subsidiaries (HHPL/EIIL) arose from specific Term Loan Agreements and was secured

The court noted that the SRA’s "Clarification Affidavit" (forming part of the EIEL resolution plan) explicitly stated that unsecured creditors retained the right to realize debts from the principal debtor or other guarantors

Consequently, the satisfaction of the Appellant’s liability as a "Sponsor" did not result in a novation or waiver of the Principal Borrower’s secured debt

Regarding locus standi, the court held that while shareholders generally lack standing, the Appellant qualified as a "person aggrieved" under Section 61 IBC because it alleged that the new CIRP hindered the implementation of its own approved resolution plan

It held that the debt against the Principal Borrower and Corporate Guarantor was not eclipsed by the holding company's resolution plan

The court affirmed that once default is proved against the subsidiaries, Section 7 proceedings must follow, and the intervention petitions were rightly rejected as the Corporate Debtors were already heard

The Respondent (NARCL) is entitled to proceed with the CIRP against HHPL and EIIL