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2026 Supreme(Online)(NCLAT) 261

NATIONAL COMPANY LAW APPELLATE TRIBUNAL
NARESH SALECHA, Technical Member
Vistra ITCL (India) Limited – Appellant
Versus
Vithal Madhukar Dahake – Respondent
Comp. App. (AT) (Ins) No. 1110 of 2024 & I.A. No. 3998, 3999, 5646 of 2024|I.A. 2680 of 2023|C.P. (IB) No. 380 Of 2021

For the Appellants/Petitioners:Mr. Sunil Fernandes Sr. Adv. with Mr. Dharav Shah, Mr. Suyash Goverdhan, Mr. Pranaya Goyal, Ms. Nanki Geewal, Ms. Manasi Joguekar & Ms. Srishti Agarwal, Advocates
For the Respondents:Mr. Amit Arsiwala, Mr. Yash Jariwala & Ms. Neha Arya, Advocates for R-1, Mr. Rhtythm Buaria & Mr. Kinnar Shah, for R-2, Mr. Krishnendu Datta, Sr. Adv. with Mr. Varun Kalra, Mr. Pranav Khanna, Mr. Shahan Vlla & Mr. Harsh Gurbaaz, Advocates for R-3

Mortgage covenant to pay secured obligations for third-party debentures constitutes guarantee under Section 126, qualifying as financial debt despite no direct disbursement to corporate debtor; claimant is secured financial creditor.

Headnote:(A) Insolvency and Bankruptcy Code, 2016 - Sections 3(6), 3(11), 5(7), 5(8), 60(5), 61 - Indian Contract Act, 1872 - Section 126 - Transfer of Property Act, 1882 - Section 68(1)(a) - Mortgage deeds containing covenant to pay secured obligations under debenture trust deed, executed by corporate debtor to secure third-party debentures, constitute contract of guarantee - Corporate debtor becomes jointly and severally liable as co-obligor despite no direct disbursement - Direct disbursement to corporate debtor not sine qua non for financial debt under Section 5(8) - Covenant to pay creates personal liability beyond mortgage enforcement, qualifying claimant as secured financial creditor, not other secured creditor - Reading covenant clauses 2.1 and 2.2 conjointly binds corporate debtor to discharge entire secured obligations including principal, not limited to default interest or mortgaged property value. (Paras 43-98)

(B) Financial Debt - Scope - Expansive definition under Section 5(8) includes guarantee-like covenants in security documents securing third-party debt - No requirement for invocation of guarantee during CIRP; existence of debt sufficient - Resolution professional's role limited to verification, not adjudication. (Paras 53-57, 96)

Facts of the case:
Debenture trustee filed claim as secured financial creditor based on mortgage deeds with covenant to pay, securing debentures issued by third-party borrower. No funds disbursed to corporate debtor. Resolution professional rejected as other secured creditor; upheld by Adjudicating Authority.

Findings of Court:
Impugned order set aside; claim admitted as secured financial debt. Case remanded for decision per law.

Issues: (I) Whether direct disbursement prerequisite for financial debt? (II) Whether claimant qualifies as financial creditor with secured financial debt? (III) Whether covenant to pay creates enforceable guarantee? (IV) Whether covenant for third-party debt amounts to guarantee under Section 126? (V) Whether liability limited to mortgage extent? (Para 43)

Ratio Decidendi: Direct disbursement not mandatory; explicit covenant to pay in mortgage deeds, read with debenture trust deed, transforms security provider into financial creditor via guarantee-like obligation co-extensive with principal debtor's liability, unbound by property value.

Result: Appeal allowed.

Table of Content
1. appeal background and parties impleadment. (Para 1 , 2)
2. appellant's claim submission and rp rejection. (Para 3 , 4 , 5 , 6 , 7 , 8 , 9 , 10)
3. covenant to pay constitutes financial debt. (Para 11 , 12 , 13 , 14 , 15 , 16 , 17 , 18 , 19 , 20)
4. no disbursement to cd, not financial debt. (Para 23 , 24 , 25 , 26 , 27 , 28 , 29)
5. anuj jain: mortgage without disbursement not financial debt. (Para 30 , 31 , 32 , 33)
6. appellant is other secured creditor. (Para 38 , 39 , 40)
7. framing issues and relevant statutory provisions. (Para 43 , 44)
8. factual matrix of debentures and mortgages. (Para 45 , 46 , 47 , 48 , 49 , 50)
9. direct disbursement not sine qua non. (Para 53 , 54 , 55 , 56 , 57)
10. dtd definitions: obligors and security providers. (Para 59 , 60 , 61 , 62 , 63 , 64 , 65 , 66)
11. mortgage indentures create covenant to pay. (Para 67 , 68 , 69 , 70 , 71 , 72 , 73)
12. clause 2 covenant binds cd as guarantor. (Para 74 , 75 , 76 , 77 , 78)
13. covenant to pay akin to guarantee under contract act. (Para 79 , 80 , 81 , 82)
14. covenant elevates to secured financial debt. (Para 83 , 84 , 85 , 86 , 87 , 88 , 89 , 90 , 91)
15. china development bank: covenant tantamount to guarantee. (Para 92 , 93 , 94 , 95 , 96 , 97)
16. appeal allowed, remanded to nclt. (Para 98)

JUDGEMENT

( 24.02.2026)

NARESH SALECHA, MEMBER (TECHNICAL)

1. The present Company Appeal (AT) (Ins) No. 1110 of 2024 has been filed by the Appellant i.e. Vistra ITCL (India) Ltd., under Section 61 of the Insolvency and Bankruptcy Code, 2016 (“Code”), challenging the Impugned Order dated 07.05.2024 passed by the National Company Law Tribunal, Mumbai Bench-IV (“Adjudicating Authority”) in I.A. 2680 of 2023 filed in C.P. (IB) No. 380 of 2021. Vithal Madhukar Dahake, Resolution Professional of the Corporate Debtor i.e. Radius Estate Projects Pvt. Ltd., is the Respondent No. 1, herein.

Avenue 54 Welfare Association is the Respondent No. 2 herein. The Avenue 54 Welfare Association (Homebuyers) filed an I.A. No. 5827 of 2024 seeking impleadment in the present appeal. The said I.A was allowed vide order dated 18.03.2025 and it was impleaded to the present appeal as Respondent No.2. Omkara Asset Reconstruction Pvt. Ltd., is the Respondent No. 3 herein.

The Omkara Asset Reconstruction Pvt. Ltd. filed an I.A. No. 6627 of 2024 seeking impleadment in the present appeal. The said I.A was partially allowed vide order dated 13.08.2025 and it was impleaded to the present appeal as Respondent No.3.

2.Two appeals namely, Company Appeal (AT) (Ins.) No. 1110 of 2024 & Company Appeal (AT) (Ins.) No. 1801 of 2024 were tagged together and heard together, since, few issues were common. However, Parties and facts of both the appeals are different, thus, for the sake of convenience and for better appreciation of facts and law, we are pronouncing separate judgements in both above appeals.

3.The Appellant contended that it acts as debenture trustee for debenture holders who subscribed to 3,95,00,000 secured optionally convertible debentures of face value Rs.100 each, aggregating to Rs.395 crores, issued by Aaditri Constructions Private Limited (“Company”/ “APCL”) under a Debenture Trust Deed dated 03.08.2018.

4. The Appellant contended that on 03.08.2018, it executed the Debenture Trust Deed (“DTD”) with the Company, Radius & Deserve Builders LLP (Developer of Project), Mr. Sanjay Chhabria and Mrs. Ritu Chhabria (collectively “Promotors”), pursuant to which the debenture holders subscribed to the debentures having a tenure of five years and disbursed Rs.340 crores. The Appellant was appointed as debenture trustee and the debentures were secured, inter-alia, by mortgage and guarantees in the nature of “covenant to pay”. The Company and the Promotors, defined as “Obligors”, were required to pay the entire secured obligations to the debenture holders.

5. The Appellant submitted that on 29.03.2019, a First Supplemental Indenture of Mortgage was executed between the Appellant, the Company and the Cor

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2026 Supreme(Online)(NCLAT) 261

NATIONAL COMPANY LAW APPELLATE TRIBUNALNARESH SALECHA, Technical MemberVistra ITCL (India) Limited – AppellantVersusVithal Madhukar Dahake – RespondentComp. App. (AT) (Ins) No. 1110 of 2024 & I.A. No. 3998, 3999, 5646 of 2024|I.A. 2680 of 2023|C.P. (IB) No. 380 Of 2021

Mortgage covenant to pay secured obligations for third-party debentures constitutes guarantee under Section 126, qualifying as financial debt despite no direct disbursement to corporate debtor; claimant is secured financial creditor.

Cases Referred (4)

NATIONAL COMPANY LAW APPELLATE TRIBUNAL
NARESH SALECHA, Technical Member
Vistra ITCL (India) Limited – Appellant
Versus
Vithal Madhukar Dahake – Respondent
Comp. App. (AT) (Ins) No. 1110 of 2024 & I.A. No. 3998, 3999, 5646 of 2024|I.A. 2680 of 2023|C.P. (IB) No. 380 Of 2021