# In the matter of McLeod Russel India Limited CP (IB) No. 1986-KB-2019

> NCLT judgment dated 2023-02-10. Citation: TCN-2023-NCLT-04640. IL & FS Infrastructure Debt Fund filed a petition under Section 7 of the Insolvency and…

- **Court:** NCLT
- **Order date:** 10 Feb 2023
- **Citation:** TCN-2023-NCLT-04640
- **Category:** IBC
- **Source page:** https://caseease.in/cases/ibc/nclt-division-bench-court-i-chenn/mcleod-russel-india-limited-cp-ib-no-1986-kb-2019-02d74e4d

## Summary

### Background

IL & FS Infrastructure Debt Fund filed a petition under Section 7 of the Insolvency and Bankruptcy Code, 2016, to initiate Corporate Insolvency Resolution Process (CIRP) against McLeod Russel India Limited due to a default of Rs. 347,47,18,043 as of November 12, 2019. The default stemmed from the Corporate Debtor's failure to meet obligations related to debentures of two group companies, Babcock Borsig Limited and Williamson Magor & Company Limited, for which the Corporate Debtor had provided a shortfall undertaking. The Financial Creditor claimed that the Corporate Debtor's shortfall undertaking constituted a guarantee and indemnity, making the owed sums a financial debt under the Code. The Corporate Debtor argued that the shortfall undertaking was not a

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## Facts

IL & FS Infrastructure Debt Fund (Financial Creditor) filed a petition to initiate CIRP against McLeod Russel India Limited (Corporate Debtor) under Section 7 of the Insolvency and Bankruptcy Code, 2016. The claim was based on a default of Rs. 347,47,18,043 as of November 12, 2019. The Corporate Debtor had provided a shortfall undertaking in favor of the Financial Creditor concerning debentures issued by Babcock Borsig Limited (BBL) and Williamson Magor & Company Limited (WMCL). The Financial Creditor argued that the shortfall undertaking constituted a guarantee and indemnity, making the owed sums a financial debt. The Corporate Debtor had issued post-dated cheques to the Financial Creditor. The Financial Creditor had issued default notices to the borrowers on

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## Issues and analysis

### Issue 1: Whether the shortfall undertaking provided by the Corporate Debtor constitutes a guarantee under …

**Ratio:** A contract of guarantee is a contract to perform the promise, or discharge the liability,

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**Reasoning:** The NCLT considered that the Corporate Debtor, by entering into the Shortfall

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**Interpretation:** The tribunal interpreted the Shortfall Undertaking in light of Section 126 of

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**Application:** The NCLT applied the principle to the facts of the case, noting that the

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## Parties

- **Judges:** RohitKa…; Balraj…
- **Appellants:** IL & FS Infrastruc…
- **Respondents:** McLeod Russel…
- **Advocates:** Ratnanko B…; Rishad M…; +10 more

## Timeline

- **2019-05-06 — Default No…**: Financial Creditor issued a…
- **2019-05-24 — Default No…**: Financial Creditor issued a second…

## Legal provisions

- [Insolvency and Bankruptcy Code, 2016, Section 7 — Initiation of corporate insolvency resolution…](https://caseease.in/legal-provisions/insolvency-and-bankruptcy-code-2016/section-7)

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