Peninsula Holdings And Investments ... vs Jm Financial Credit Solutions Limited

(Arising against the Impugned order dated 14.07.2025, passed by the Hon'ble National Company Law Tribunal, Mumbai Bench-V in Company Petition (IB) No. 90 of 2024)

IN THE MATTER OF:

Peninsula Holdings and Investments Pvt. Ltd.

Through its Authorised Representative Add:- 1401, 14th Floor, Tower-B, Peninsula ...Appellant Business Park, Ganpatrao Kadam Marg, Lower Parel, Mumbai, Maharashtra-400013.

Versus

JM Financial Credit Solutions Limited Through its Authorised Representative Add:- 7th Floor, Cnergy Appasaheb, ...Respondent No. 1 1 Marathe Marg Prabhadevi, Mumbai 400025.

Mr. Rajesh Jhunjhunwala, Interim Resolution Professional (IRP)

Add:- A51, Ashit Apartment, HB Gawde Marg, Juhi Koliwada, Mumbai-400049. ...Respondent No. 2 Email: Jhunjhunwala.rajesh@gmail.com

Present: For Appellant: Ms. Prachi Johri, Advocate. For Respondents: Mr. Shyam Kapadia, Mr. Aseem Chaturvedi, Mr. Ravitej, Mr. Arpit Kumar Singh, Ms. Mihika Jalan, Ms. Afreen Noor, Ms. Muskan Arora, Advocates.

Cont'd..../ -2-

JUDGMENT

(29th October, 2025)

INDEVAR PANDEY, MEMBER (T)

This appeal has been preferred by Peninsula Holdings and Investments

Pvt. Ltd. under Section 61 of the Insolvency and Bankruptcy Code, 2016,

(hereinafter referred to as 'Code') challenging the Order dated 14.07.2025

passed by the National Company Law Tribunal, Mumbai Bench-V

(Adjudicating Authority), in Company Petition (IB) No. 90 of 2024. By the said

order, the Adjudicating Authority admitted the application filed under

Section 7 of the Code by JM Financial Credit Solutions Limited (Financial

Creditor) and Respondent No.1 herein, against Hem Infrastructure and

Property Developers Pvt. Ltd.,(Corporate Debtor) thereby initiating the

Corporate Insolvency Resolution Process (CIRP) and appointing Mr. Rajesh

Jhunjhunwala as the Interim Resolution Professional (IRP). The Appellant,

being a shareholder of the Corporate Debtor, has approached this Appellate

Tribunal on the grounds that the order of admission suffers from grave

factual and procedural errors; that no legally enforceable financial debt or

valid guarantee existed; and the Adjudicating Authority failed to consider

the commercial futility of initiating CIRP against a non-operational Special

Purpose Vehicle (SPV) incapable of resolution under the Code. Mr. Rajesh

Jhunjhunwala, IRP is the Respondent No.2 in this appeal.

Company Appeal (AT) (Ins.) No. 1393 of 2025 -3-

2. The brief facts of the case are given below:

(i) This appeal arises out of the order dated 14.07.2025 passed by the

NCLT, Mumbai Bench-V, in C.P. (IB) No. 90 of 2024, whereby the

petition under Section 7 of the Code filed by JM Financial Credit

Solutions Ltd. (Respondent No.1) against Hem Infrastructure and

Property Developers Pvt. Ltd. (the Corporate Debtor) was admitted by

the Adjudicating Authority initiating CIRP. The Adjudicating Authority

appointed Mr. Rajesh Jhunjhunwala as the Interim Resolution

Professional (IRP).

(ii) The origin of the dispute lies in a series of six financial facilities

sanctioned by Respondent No.1 between 2017 and 2022, aggregating

to Rs. 288.20 crore, which were extended not to the Corporate Debtor,

but to an unincorporated Association of Persons (AOP) known as M/s.

Hem Bhattad. This AOP was constituted under an agreement dated

06.09.2006 for the development of five real estate parcels located at

Tokersey Jivraj Road, Parel-Sewree, Mumbai.

(iii) The AOP comprised four members, namely (a) M.B. Development

Corporation (MBDC), (b) M.B. Construction (MBC), (c) R.M. Bhuther & Co.

Ltd. (RMB), and (d) Hem Infrastructure and Property Developers Pvt.

Ltd., (Corporate Debtor). The Corporate Debtor held a 35.5% share in

Company Appeal (AT) (Ins.) No. 1393 of 2025 -4-

the distributable income of the AOP and had been nominated by

IL&FS Investment Managers Ltd. (IIML) to participate in the said AOP.

(iv) In furtherance of the above loan facilities, the Corporate Debtor

executed six separate deeds of corporate guarantee between

14.12.2017 and 27.12.2021 to secure the said loans.

(v) The borrower AOP, M/s. Hem Bhattad, began defaulting in repayment

obligations from January 2023, failing to pay instalments of principal

and interest as per repayment schedules. The borrower also defaulted

in remittance of TDS dues between August 2022 and March 2023.

(vi) Owing to these defaults, the accounts of the borrower were classified

as Non-Performing Assets (NPA) on 01.05.2023, and Respondent No.1

issued demand notices dated 24.05.2023 under Section 13(2) of the

SARFAESI Act, 2002, recalling the entire outstanding amounts from

the borrower and other obligators, including the Corporate Debtor as

guarantor of the facilities.

(vii) Respondent No.1 on 10.08.2023, addressed six notices of demand to

the Corporate Debtor, seeking payment of the outstanding sum of INR

242.82 crore. However, no payment was made by the Corporate

Debtor/Guarantor.

Company Appeal (AT) (Ins.) No. 1393 of 2025 -5-

(viii) Thereafter, Respondent No.1 filed Company Petition (IB) No. 90 of

2024 before the Adjudicating Authority under Section 7 of the Code,

seeking initiation of CIRP against the Corporate Debtor, on the basis

of the guarantees executed by the CD.

(ix) The Corporate Debtor filed Interlocutory Application (IA) No. 2071 of

2024 dated 29.04.2024 before the Adjudicating Authority, objecting to

the maintainability of the petition on the ground that it was

incomplete and defective for want of foundational documents, and

prayed for dismissal of the petition. Corporate Debtor also filed reply

to the company petition on 30.04.2024, denying the existence of any

financial debt, disputing the validity of the alleged guarantees, and

highlighting the absence of commercial purpose behind initiating CIRP

against a dormant SPV.

(x) The Adjudicating Authority, by order dated 06.06.2024, dismissed the

aforesaid IA, but allowed liberty to the Corporate Debtor to raise all its

objections during final arguments.

(xi) Respondent No.1 subsequently filed an Additional Affidavit dated

18.11.2024 before the NCLT, complete set of copies of the loan and

guarantee documents. The Corporate Debtor objected to this belated

filing through a Reply dated 19.04.2025, asserting that the documents

Company Appeal (AT) (Ins.) No. 1393 of 2025 -6-

were inadmissible, unreliable, and could not cure the original

incompleteness of the petition.

(xii) During the intervening period, the parties also explored the possibility

of settlement, which led to adjournments being sought on 13.01.2025

and 20.02.2025. However, the negotiations did not lead to any

settlement.

(xiii) The matter was heard finally on 06.06.2025, following which both

parties filed written submissions. The Corporate Debtor's Written

Submissions dated 23.06.2025 reiterated that no financial debt

existed, no valid guarantee had been executed, and that the Corporate

Debtor was an inactive SPV, incapable of undergoing a viable

resolution process.

(xiv) The Adjudicating Authority passed the Impugned Order dated

14.07.2025, admitting the Section 7 petition and initiating CIRP

against the Corporate Debtor solely on the basis of the guarantees.

(xv) Aggrieved by the said order of admission, the Appellant has preferred

the present appeal before this Appellate Tribunal, seeking that the

Impugned Order dated 14.07.2025 be quashed and set aside as being

legally unsustainable, procedurally flawed, and contrary to the

objectives of the Insolvency and Bankruptcy Code.

Company Appeal (AT) (Ins.) No. 1393 of 2025 -7-

Submissions of the Appellant

3. Ld. Counsel for the Appellant submits that the present Appeal has

been filed under Section 61 of the Code challenging the Order dated

14.07.2025 passed by the Adjudicating Authority allowing the Section 7

petition and admitting the Corporate Debtor in CIRP. The Appellant submits

that the impugned order is fundamentally flawed, as it proceeds on an

incorrect appreciation of the relationship between the financial creditor, the

borrower, and the CD, thereby necessitating interference by this Appellate

Tribunal.

4. Ld. Counsel contends that the Corporate Debtor is a Special Purpose

Vehicle (SPV) with no independent assets, income, operations, or employees,

and was incorporated merely to hold a minority stake in the AOP. He further

submits that the initiation of CIRP against such a non-operational entity

serves no resolution objective and constitutes an abuse of the insolvency

process, particularly when Respondent No.1 is already pursuing recovery

measures under the SARFAESI Act, 2002 against the principal borrower.

5. Ld. Counsel submits that the borrower in relation to the financial

creditor is not the Corporate Debtor, but rather an Association of Persons

("AOP") viz. M/s Hem Bhattad, which was constituted under an Agreement

dated 06.09.2006. This AOP was formed by four entities, including the

Corporate Debtor, which holds a 35.5% share in the distributable income of

Company Appeal (AT) (Ins.) No. 1393 of 2025 -8-

the AOP. The Corporate Debtor served only as a guarantor to the facilities

availed by the AOP. It is, therefore, incorrect to treat the CD as the principal

borrower for the purpose of Section 7 proceedings under the IBC.

6. Ld. Counsel further submitted that the Respondent has objected to

the maintainability of the Appeal on the ground that the Appellant is only a

"shareholder." However, the Appellant has filed the present submissions to

clarify that its status, rights, and control over the CD are such that it

qualifies as an aggrieved person entitled to maintain the present Appeal.

7. It is the submission of the Appellant that the reliance placed by the

Respondent on the judgment of this Appellate Tribunal in 'Park Energy Pvt.

Ltd. v. State Bank of India, Company Appeal (AT) (Insolvency) No. 62 of 2023',

is wholly misconceived and inapplicable to the present case. In the Park

Energy case this Tribunal barred a "mere shareholder" i.e., a person who

only participates in the profits of a company, without any control or

operational involvement, from filing an appeal. The Appellant herein is

distinctly situated and cannot be treated as a "mere shareholder."

8. Ld. Counsel submits that the Appellant is the 51% equity shareholder

of the Corporate Debtor and holds administrative control over its affairs. The

Corporate Debtor, in turn, has declared in its Guarantee Deed that it

exercises, both direct and indirect control over the borrower AOP, M/s Hem

Bhattad. Therefore, the Appellant, by virtue of its controlling stake and

Company Appeal (AT) (Ins.) No. 1393 of 2025 -9-

governance powers over the CD, effectively exercises indirect control over the

borrower AOP.

9. Ld. counsel further submits that in paragraph 18 of Park Energy

(supra), this Tribunal has clarified that an "aggrieved person" is the one who

is affected by an order and has no alternative forum to seek redress. The

Appellant submits that its rights, as a controlling shareholder and

preference shareholder of the CD, and as an indirect controller of the

borrower AOP, stand directly affected by the admission of the CD into CIRP.

These rights, involving administrative control, management, and

participation in a valuable property-holding AOP, cannot be safeguarded

elsewhere. Thus, the Appellant squarely falls within the ambit of an

aggrieved person under Section 61 of the IBC.

10. Ld. Counsel submits that it is an undisputed fact that the Appellant

holds both equity shares and redeemable optionally convertible preference

shares in the Corporate Debtor, carrying an internal rate of return ("IRR") of

20%. It is correct that the Appeal, at paragraph 1.4 of the pleadings,

discloses that it has been filed in the capacity of a shareholder. However, it

is crucial to note that nowhere does the Appellant assert that its grievance

arises only from its position as an equity shareholder. Paragraph 1.4, which

sets out the nature of the grievance, does not restrict the basis of the Appeal

to equity shareholding alone. Hence, at the highest, there has been an

Company Appeal (AT) (Ins.) No. 1393 of 2025 -10-

inadvertent omission in explicitly stating that the Appellant holds both

equity and preference shares. Such an omission is purely a matter of form

and hyper-technicality, not affecting the substance of the right to appeal.

11. The Appellant further submits that the Respondent cannot be

permitted to artificially restrict or reinterpret the Appellant's shareholding

status by inserting words not found in the pleadings. The deponent on

behalf of the Appellant is also a Director of the Corporate Debtor, and thus,

in the alternative, could have maintained this Appeal in that capacity as

well, should this Appellant Tribunal so permit.

12. The Appellant States that under settled jurisprudence, a preference

shareholder, whose investment carries the commercial effect of borrowing

qualifies as a financial creditor within the meaning of Section 5(8) of the

IBC. This Tribunal has held in 'Sanjay D. Kakade v. HDFC Ventures Trustee

Company Ltd., Company Appeal (AT) (Insolvency) No. 481 of 2023' that

preference shares, under certain contractual terms, have the nature of a

financial debt. In that case, this Tribunal examined the Amended and

Restated Share Subscription-cum-Shareholders Agreement dated

14.05.2008 and held that such instruments, requiring the company and

promoters to repurchase the shares at a price ensuring an internal rate of

return (IRR) of 15% per annum compounded annually or fair market value,

whichever is higher, have the commercial effect of borrowing.

Company Appeal (AT) (Ins.) No. 1393 of 2025 -11-

13. Ld. Counsel states that applying the ratio of Sanjay Kakde (supra), the

Appellant's Redeemable Optionally Convertible Preference Shares in the

present case, carrying a fixed IRR of 20%, also have the commercial effect of

borrowing. Hence, the Appellant qualifies as a financial creditor of the

Corporate Debtor. If such an instrument can confer the status of a financial

creditor for initiating Section 7 proceedings, it must necessarily confer the

same status for determining who can be an aggrieved person entitled to file

an appeal under Section 61 of the IBC.

14. Ld. Counsel further submitted that even in Park Energy Pvt. Ltd.

(supra) itself (para 14 and 18), reference is made to the judgment of the

Hon'ble Supreme Court in 'Glas Trust Company LLP v. Byju Raveendran,

[Civil Appeal No. 21023 of 2024]', wherein the Hon'ble Court held that

creditors are "aggrieved persons" and therefore have locus to challenge

adverse orders. Accordingly, the Appellant, being a creditor of the Corporate

Debtor, falls squarely within the definition of an aggrieved person.

15. Without prejudice to the above submissions, Ld. Counsel submits that

even assuming, arguendo, that the Respondent's objection regarding

absence of supporting documentation for the preference share subscription

is accepted, the same would constitute at best, a curable defect. The

Appellant undertakes to immediately cure the said defect by placing the

relevant documents on record if this Tribunal, so directs.

Company Appeal (AT) (Ins.) No. 1393 of 2025 -12-

16. Finally, Ld. Counsel submits that the nature of the Appellant's

grievance is not limited to its rights as an equity shareholder. It arises from

its position as a financial creditor having issued preference shares with

commercial effect of borrowing, and as a controlling shareholder with

administrative control over both the Corporate Debtor and the borrower

AOP. Hence, the Appellant's grievance is financial and managerial in nature,

and the Appeal has been correctly filed as that of an aggrieved person under

Section 61 of the IBC.

Submissions of Respondent No.1

17. Ld. Counsel for Respondent No.1/JM Financial Credit Solutions

Limited/Financial Creditor stated that his submissions are confined to the

issue of maintainability of the present appeal filed by the Appellant,

Peninsula Holdings and Investments Pvt. Ltd., who has admittedly

approached this Hon'ble Tribunal only in its capacity as a shareholder of the

Corporate Debtor, HEM Infrastructure and Property Developers Pvt. Ltd. The

impugned order under challenge is the admission Order dated 14 July 2025,

passed by the NCLT, Mumbai Bench, in CP No. 90 of 2024, whereby the

Company Petition filed by the Financial Creditor was admitted under

Section 7 of the Code, initiating the CIRP against the said Corporate Debtor.

18. Ld. Counsel submits that the Appellant itself has unequivocally

admitted throughout its pleadings that it has filed the appeal "being a

Company Appeal (AT) (Ins.) No. 1393 of 2025 -13-

shareholder of the Corporate Debtor." References to this effect appear in

paragraphs 1.1, 1.4, and F(iv) of the Appeal Memo (pages 34, 35, and 63).

Furthermore, in paragraph 2A of the Stay I.A. (page 27), the Appellant has

stated on oath that it "has no independent business, revenue, employees, or

assets and functions solely as a passive investor." The Appellant also

repeatedly describes the Corporate Debtor as a passive conduit for AOP

participation [para-E(i) and E(i)(c), pages 59-60 of the Appeal]. Therefore,

two undisputed facts emerge, firstly the Appellant has approached this

Tribunal purely in its capacity as a shareholder of the Corporate Debtor;

and secondly, that it plays no role whatsoever in the management or affairs

of the Corporate Debtor.

19. Ld. Counsel on behalf of the Financial Creditor, submits that the

present appeal is not maintainable in law. Section 61 of the IBC restricts the

right of appeal to a "person aggrieved" by an order of the Adjudicating

Authority. A shareholder, whose only interest is reflective or derivative in

nature, cannot be treated as a "person aggrieved" under this provision. This

principle stands conclusively settled by the Three-Member Bench of this

Hon'ble Tribunal in 'Park Energy Pvt. Ltd. v. State Bank of India, 2025 SCC

OnLine NCLAT 1289, which held that proceedings or appeals at the behest

of shareholders are not maintainable. The relevant observation, forming the

ratio, reads as follows:

Company Appeal (AT) (Ins.) No. 1393 of 2025 -14-

"The sustainability of proceedings at the behest of the shareholder would not be a reasonable proposition... permitting shareholders to pursue such proceedings would run contrary to the object of the Code, besides leading to multiplicity of proceedings. When the interest of shareholders stands protected through the agents appointed by the Tribunal, and when shareholders have profit interest only in the company and no administrative control, proceedings at their behest will not be maintainable."

In view of this categorical pronouncement by a larger Bench, any

appeal filed purely in the capacity of a shareholder, as in the present case, is

legally untenable.

20. Ld. Counsel submits that the Appellant has itself characterised its

role in the Corporate Debtor as "a passive investor" and further described

the Corporate Debtor's 35.5% interest in the Borrower (the AOP known as

M/s Hem Bhattad) as a passive participation [para 7.13, page 46 of the

Appeal]. Such admissions demonstrate that the Appellant's interest is

neither direct nor legally prejudiced by the impugned admission order. The

law laid down in Park Energy (supra) squarely applies to such cases, where

an appeal is premised solely on shareholding, without proof of direct legal

injury. Consequently, the appeal deserves to be dismissed as non-

maintainable.

21. Ld. Counsel submits that it was argued on behalf of the Appellant

that, unlike in Park Energy (supra), the Appellant is not merely an equity

Company Appeal (AT) (Ins.) No. 1393 of 2025 -15-

shareholder, but also a preference shareholder, which allegedly makes it a

"creditor" of the Corporate Debtor. The Appellant has relied upon the

decision of this appellate Tribunal in 'Sanjay D. Kakade v. HDFC Ventures

Trustee Company Ltd., Company Appeal (AT)(Insolvency) No. 481 of 2023',

which held that shareholders holding convertible preference shares with

assured returns could, in limited circumstances, be treated as financial

creditors. The Counsel submitted that such reliance is wholly misconceived

for the following reasons:

(i) The Appellant's entire appeal is premised upon its shareholding

status. Nowhere in the pleadings is it stated that it is a creditorof

the Corporate Debtor. A party cannot alter its foundational case or

capacity at the stage of oral submissions. Having consciously

approached this Tribunal as a shareholder, the Appellant cannot

now introduce a new case of being a financial creditor.

(ii) The judgment in Sanjay D. Kakade (supra) concerned a Section 7

application by preference shareholders against the company itself,

based on specific contractual guarantees and assured returns

under a Share Subscription-cum-Shareholders Agreement (SSSHA).

The present matter concerns the maintainability of an appeal under

Section 61, not initiation under Section 7. Hence, the factual and

Company Appeal (AT) (Ins.) No. 1393 of 2025 -16-

legal contexts are entirely different. Moreover, Park Energy (supra),

being a larger bench decision, governs the present issue.

(iii) In 'EPC Constructions India Ltd. (Company Appeal (AT)(Ins.) No. 1424

of 2023)', this Appellate Tribunal clarified that Sanjay D. Kakade

(Supra) was not a case of simple preference shares, but one

involving specific financial arrangements and indemnities that

amounted to financial debt under Section 5(8) of the Code. The

Tribunal expressly held that "preference shares being part of the

company's share capital do not constitute financial debt." Hence, the

Appellant's case, based merely on shareholding, cannot fall within

the scope of financial debt.

22. The Respondent further relies on judgements in "Asit v. Golden Line

Studio Pvt. Ltd., 2018 SCC OnLine ITAT 23108" (paras 2 & 9), and

"Commissioner of Gift Tax v. Raghu Hari Dalmia & Ors., 2021 SCC OnLine Del

1406" (para 14), which unequivocally hold that preference shareholders do

not possess voting rights on ordinary business matters and cannot claim

managerial participation. Their rights are limited to priority in dividends.

Hence, even lesser rights than equity shareholders cannot bestow upon

them any locus to challenge insolvency admission orders.

23. Ld. Counsel states that the Appellant has failed to provide particulars

to demonstrate how it is aggrieved by the admission order. There is no

Company Appeal (AT) (Ins.) No. 1393 of 2025 -17-

pleading or proof that its preference shares represent a financial debt or

confer creditor status. It is settled law that preference shares form part of

the share capital and not the liability structure of a company. Hence,

holders of such shares cannot claim to be financial creditors under the

Code. The appeal, therefore, remains non-maintainable.

24. Ld. Counsel submits that during arguments, the Appellant also

sought to contend that since the Corporate Debtor holds 35.5% equity in the

Borrower (the AOP M/s Hem Bhattad), the Appellant indirectly challenges

the admission order "on behalf of the Borrower." This contention is entirely

beyond the pleadings and devoid of legal foundation. The Appeal nowhere

discloses any authorization, legal right, or contractual basis empowering the

Appellant to represent the Borrower. The Borrower itself is a separate legal

entity, and the Appellant, being a shareholder of one of its members, cannot

assume representational standing. Facts not pleaded cannot be relied upon,

as consistently held in 'Union of India v. Ibrahim Uddin [(2012) 8 SCC 148]'.

Hence, this argument is liable to be rejected outright.

25. Summing up, Ld. Counsel states that in the light of the above facts

and the settled position of law affirmed in Park Energy (Supra), the present

appeal, filed by a mere shareholder of the Corporate Debtor, having no

managerial role; no direct financial exposure; and no legally recognized

grievance under Section 61 of the IBC, is not maintainable. The attempt to

Company Appeal (AT) (Ins.) No. 1393 of 2025 -18-

alter capacity from shareholder to creditor, or to claim representational right

over the Borrower, is impermissible and contrary to the pleadings and

record. Accordingly, the Financial Creditor respectfully prays that the

Appeal be dismissed in limine, as not maintainable.

Analysis and Findings

26. We have heard learned counsels and perused the pleadings,

documents, and authorities relied upon and based on the same, we frame

the following two issues for determination:

(i) Whether the present Appeal filed under Section 61 of the Code by the

Appellant, who claims to be a shareholder and preference shareholder

of the Corporate Debtor, is maintainable in law?

(ii) Whether the order dated 14.07.2025 passed by the Adjudicating

Authority (NCLT, Mumbai) admitting the Corporate Debtor into CIRP

suffers from any legal infirmity?

27. The Appellant, Peninsula Holdings and Investments Pvt. Ltd., has

argued that this Appeal is maintainable under Section 61 of the Code as it is

an aggrieved person within the meaning of that provision. It is submitted

that the Appellant is not a mere investor or passive shareholder, but holds

51% of the equity shares in the Corporate Debtor, thereby exercising

effective control over its management and affairs. The Appellant contends

Company Appeal (AT) (Ins.) No. 1393 of 2025 -19-

that its rights as the controlling shareholder have been directly affected by

the impugned order of admission dated 14.07.2025, through which the

Corporate Debtor has been pushed into insolvency proceedings.

28. The Appellant further submits that it is also a holder of Redeemable

Optionally Convertible Preference Shares (ROCPS) in the Corporate Debtor,

which carry an Internal Rate of Return (IRR) of 20%. On that basis, it is

contended that the Appellant stands not only as an equity investor, but also

as a creditor having a financial interest in the Corporate Debtor. Relying on

the judgment of this Tribunal in 'Sanjay D. Kakade v. HDFC Ventures

Trustee Co. Ltd., [Company Appeal (AT) (Insolvency) No. 481 of 2023]', it is

argued that preference shareholders, whose shares carry return obligations

or buy-back rights, can qualify as financial creditors. Therefore, according to

the Appellant, it should be treated as a "person aggrieved" entitled to

challenge the order of admission.

29. It is further argued that the defect pointed out by the Respondent,

that the Appeal does not specifically attach the preference share

subscription documents is only a curable defect. The Appellant submits that

the nature of its shareholding and control, as well as its financial exposure,

give it a legitimate and direct interest in preventing an unnecessary or

erroneous insolvency admission, which could irreversibly affect the value of

its investment.

Company Appeal (AT) (Ins.) No. 1393 of 2025 -20-

30. Lastly, the Appellant contends that the decision of the larger Bench in

'Park Energy Pvt. Ltd. v. State Bank of India (2025 SCC OnLine NCLAT 1289)'

cannot be mechanically applied to its case. It is argued that Park Energy

(supra) dealt with a "mere shareholder" having no managerial control,

whereas the present Appellant has both control and financial exposure,

thereby standing on a different footing.

31. The Respondent, JM Financial Credit Solutions Ltd., has strongly

opposed the maintainability of this appeal. It submits that under Section

61(1) of the IBC, only a "person aggrieved" by an order of the Adjudicating

Authority may prefer an appeal before this Appellate Tribunal. A person

becomes "aggrieved" only when the impugned order causes a direct legal

injury to their rights, and not merely because it affects them financially or

commercially.

32. The Respondent points out that the Appellant's own pleadings and

affidavits in the Appeal describe it as a shareholder of the Corporate Debtor

and a passive investor with no independent business, assets, or employees.

The Appellant has clearly stated that it functions solely as an investment

vehicle. Thus, by its own admission, the Appellant has no managerial or

operational role in the Corporate Debtor's affairs.

33. Relying on the authoritative three-member Bench judgment of this

Tribunal in Park Energy Pvt. Ltd. v. State Bank of India (supra), the

Company Appeal (AT) (Ins.) No. 1393 of 2025 -21-

Respondent submits that shareholders, whether minority or majority,

cannot file or maintain an appeal under Section 61 against an order

admitting insolvency proceedings. The larger Bench in Park Energy (supra)

categorically held that shareholders are not "persons aggrieved" within the

meaning of Section 61, as their interest is merely reflective of the company's

interest, and they do not suffer any direct legal injury, when CIRP is

initiated.

34. The Respondent also submits that the Appellant's reliance on Sanjay

D. Kakade (supra) is misplaced. That case was decided in an entirely

different factual setting, whereinthe preference shareholders sought to

initiate insolvency proceedings against the company based on a specific

"Share Subscription-cum-Shareholders Agreement", which contained a

binding buy-back obligation and payment clause, creating a financial debt.

The present case, however, concerns an appeal under Section 61, and the

Appellant has neither pleaded nor produced any document showing that its

preference shares confer a similar debt-like right.

35. The Respondent further refers to several decisions of this appellate

tribunal subsequent to Sanjay D. Kakade (Supra), viz. EPC Constructions

India Ltd. v. Matrix Fertilisers & Chemicals Ltd. (2023); Clarion Health Foods

LLP v. Goli Vada Pav Pvt. Ltd. (NCLAT, 2024), and Nirej Vadakkedathu Paul

v. Sunstar Hotels and Estates Pvt. Ltd. (2023), all of which reaffirm that

Company Appeal (AT) (Ins.) No. 1393 of 2025 -22-

shareholders, whether ordinary or preference, have no locus to challenge the

admission of insolvency proceedings, as their remedy lies within the

corporate insolvency framework and not outside it. Accordingly, the

Respondent submits that the present appeal is a classic example of a

shareholder seeking to interfere with the CIRP to protect its investment,

which is not permissible in law.

36. The issue of whether a shareholder can maintain an appeal under

Section 61 of the IBC has been conclusively settled by a three-member

Bench of this Appellate Tribunal in 'Park Energy Pvt. Ltd. v. State Bank of

India (2025 SCC OnLine NCLAT 1289)'. The larger Bench examined

conflicting earlier judgments and laid down a uniform principle that the

proceedings at the behest of a shareholder, being merely an investor with

profit interest, but without administrative control or direct legal injury, are

not maintainable under the IBC. The term 'person aggrieved 'under Section

61 cannot be expanded to include shareholders or investors.

37. The Judgement in Park Energy (Supra) also clarified that allowing

shareholders to challenge insolvency orders would defeat the object of the

IBC, which emphasizes speedy resolution and finality of proceedings. If

shareholders were permitted to intervene or appeal, it would lead to multiple

litigations and delays, contrary to the Code's objectives.

Company Appeal (AT) (Ins.) No. 1393 of 2025 -23-

38. Once the Corporate Debtor is admitted into CIRP, Section 17 of the

IBC automatically transfers the management and control of the company to

the Interim Resolution Professional (IRP). The Board of Directors, and

consequently all shareholders, lose their authority over the affairs of the

company. The IRP/RP is the protector of the interests of the shareholders in

such a situation. Thus, even if the Appellant had prior administrative

control, that control ceased upon admission. The mere fact of holding 51%

shares or being a "majority owner" does not confer a separate or superior

locus under Section 61. The Appellant's attempt to distinguish Park Energy

(supra) on the basis of being a majority shareholder or holding preference

shares cannot succeed.

39. Regarding the control of Appellant on Corporate Debtor, the

submission of the appellant in the stay application I.A. No. 5448/2025 in

para 2A is relevant and the same is extracted below:

"2A. The Corporate Debtor is a non-operational Special Purpose Vehicle (SPV) holding a 35.5% interest in an unincorporated Association of Persons (AOP) known as M/s. Hem Bhattad, formed for real estate development. The Appellant has no independent business, revenue, employees, or assets and functions solely as a passive investor."

(emphasis supplied)

The claim of appellant that he exercised control over the Corporate Debtor

in view of his 51% holding and through CD on AOP, which was the principal

Company Appeal (AT) (Ins.) No. 1393 of 2025 -24-

borrower. How can a company without any employees or assets and which

functions solely as passive investor can exercise any control over another

entity is beyond comprehension. We ask ourselves, what is the instrument

of control in this case? its neither operational/ management nor financial as

it is clear from the submission of the appellant.

40. We now have a look at para 7.13 of the appeal which shows the

relationship between Corporate Debtor and AOP. Para 7.13 is extracted

below:

"7.13 That, the Corporate Debtor is a Special Purpose Vehicle (SPV) with no independent operations, income, employees or assets. It was incorporated solely to hold passive interest in the AOP and does not function as a going concern. As such, the Corporate Debtor is not capable of sustaining CIRP or generating resolution value."

It is clear from the above admissions by Appellant that both the Appellant

and Corporate Debtor are passive investors, incapable of exercising any

management or operational control over AOP, contrary to the claims of the

Appellant. This was one of the major arguments by appellant for

maintainability of their appeal.

41. We now have a look at relevance of preference shares in this case. The

kind of share capital and the difference between equity and preference share

capital has been given in section 43 of the Companies Act 2013. The same is

extracted below:

Company Appeal (AT) (Ins.) No. 1393 of 2025 -25-

"43. Kinds of share capital.

The share capital of a company limited by shares shall be of two kinds, namely: -

(a) equity share capital--

(i) with voting rights; or

(ii) with differential rights as to dividend, voting or otherwise in accordance with such rules as may be prescribed; and

(b) preference share capital:

Provided that nothing contained in this Act shall affect the rights of the preference shareholders who are entitled to participate in the proceeds of winding up before the commencement of this Act.

Explanation. - For the purposes of this section, -

(i) equity share capital, with reference to any company limited by shares, means all share capital which is not preference share capital;

(ii) preference share capital, with reference to any company limited by shares, means that part of the issued share capital of the company which carries or would carry a preferential right with respect to

(a) payment of dividend, either as a fixed amount or an amount calculated at a fixed rate, which may either be free of or subject to income-tax; and

(b) repayment, in the case of a winding up or repayment of capital, of the amount of the share capital paid-up or deemed to have been paid-up, whether or not, there is a preferential right to the payment of any fixed premium or premium on any fixed scale, specified in the memorandum or articles of the company;

Company Appeal (AT) (Ins.) No. 1393 of 2025 -26-

(iii) capital shall be deemed to be preference capital, notwithstanding that it is entitled to either or both of the following rights, namely:--

(a) that in respect of dividends, in addition to the preferential rights to the amounts specified in sub-clause (a) of clause (ii), it has a right to participate, whether fully or to a limited extent, with capital not entitled to the preferential right aforesaid;

(b) that in respect of capital, in addition to the preferential right to the repayment, on a winding up, of the amounts specified in sub-clause (b) of clause (ii), it has a right to participate, whether fully or to a limited extent, with capital not entitled to that preferential right in any surplus which may remain after the entire capital has been repaid."

42. We note from section 43 of the Companies Act 2013 that the

preference shares form part of the share capital of a company along with

equity shares. The key difference between Equity and Preference shares

being that the preference shareholders have preferential rights to dividends

and capital repayment upon winding up. The Companies Act does not treat

the preference shareholders as Creditors of the company. It is also clear that

preference shareholders do not enjoy creditor status, unless there is a

specific contractual clause converting their investment into a debt

obligation. No such clause or document has been produced in the present

case.

43. In 'EPC Constructions India Ltd. v. Matrix Fertilisers & Chemicals Ltd.

(2023)', this Tribunal expressly clarified that Sanjay D. Kakade (Supra) was

an exceptional case, based on a detailed contractual arrangement,

Company Appeal (AT) (Ins.) No. 1393 of 2025 -27-

containing buy-back and IRR obligations, and cannot be applied generally to

all preference shareholders. The judgment distinguished between capital

infusion and financial debt, emphasizing that unless a transaction embodies

a repayment obligation with interest or assured return, thus having the

"commercial effect of borrowing" under Section 5(8) of the IBC; it does not

constitute a financial debt. This precedent supports the Respondent's

submission that the Appellant, as a preference shareholder without a

repayment clause, lacks both creditor status and appellate locus.

44. We also find merit in the Respondent's submission that the Appellant

has not pleaded anywhere in its appeal that it is a creditor of the Corporate

Debtor. The entire appeal proceeds on the footing that the Appellant is a

shareholder seeking to protect its investment. A new case cannot be built at

the stage of arguments to change the capacity of the Appellant from a

shareholder to a creditor. Such an exercise would amount to altering the

very foundation of the appeal, which is impermissible in law.

45. Even otherwise, the right to appeal under Section 61 is a statutory

right, not an equitable one. It must be exercised strictly within the scope of

the statute. The IBC restricts appellate jurisdiction to those "persons

aggrieved" whose legal rights under the Code are directly affected by the

impugned order. A shareholder's financial loss or dilution of value does not

Company Appeal (AT) (Ins.) No. 1393 of 2025 -28-

constitute such a right; it is merely a consequence of the insolvency process,

which affects all investors uniformly.

46. Therefore, the Appellant, being a shareholder or a preference

shareholder without any contractual debt rights, does not fall within the

category of "person aggrieved" under Section 61. It's interests are adequately

represented through the Resolution Professional and the mechanisms

provided under the IBC. Allowing such appeals by shareholders would

undermine the purpose of the Code by introducing multiplicity and delay.

47. Based on the discussion above, we observe the following:

(i) The Appellant has filed the present appeal purely in its capacity as a

shareholder of the Corporate Debtor, as admitted in its pleadings. It is

also admitted in the pleadings that the Appellant as well as Corporate

Debtor were passive investors, without any assets or personnel. In such

a situation, it is not possible for such entities to exercise control over

the AOP as claimed;

(ii) The Appellant has not demonstrated any direct legal injury caused by

the admission order, apart from a reflective or derivative loss to its

investment;

(iii) Preference shareholding, without an explicit debt-creating agreement,

does not confer the status of a financial creditor or aggrieved person;

Company Appeal (AT) (Ins.) No. 1393 of 2025 -29-

(iv) The decision of the 3-member Bench of this Tribunal in 'Park Energy

Pvt. Ltd. v. State Bank of India (2025 SCC OnLine NCLAT 1289)' and

EPC Constructions (2023) squarely applies to the present case.

48. Accordingly, we hold that the present appeal is not maintainable, as

the Appellant is not a "person aggrieved" under Section 61 of the code. The

Appellant's shareholder status, whether equity or preference, does not

confer any locus to challenge the admission of the Corporate Debtor's

insolvency.

ISSUE 2: Whether the impugned order dated 14.07.2025 admitting the

Corporate Debtor into CIRP suffers from any legal infirmity?

49. The Appellant has also assailed the order dated 14.07.2025 passed by

the Adjudicating Authority (NCLT, Mumbai) primarily on the ground that the

admission of insolvency proceedings against the Corporate Debtor, 'Hem

Infrastructure and Property Developers Pvt. Ltd.', was erroneous both in fact

and law. It is argued that the Adjudicating Authority failed to appreciate the

true nature of the transaction and the role of the Corporate Debtor therein.

It is submitted that the principal borrower of Respondent 1/Financial

Creditor was an Association of Persons (AOP) named M/s Hem Bhattad,

formed under an Agreement dated 06.09.2006. The Corporate Debtor,

according to the Appellant, was one of the participants in that AOP, holding

a 35.5% share in the distributable income and acting as a passive conduit or

Company Appeal (AT) (Ins.) No. 1393 of 2025 -30-

financial participant. The Appellant contends that the Adjudicating Authority

erroneously treated the Corporate Debtor as a direct obligator, whereas its

liability, if any, was derivative or contingent on the obligations of the AOP.

50. The Appellant further argues that the Corporate Debtor's involvement

was limited to providing a corporate guarantee for the credit facilities

extended to the AOP. It is submitted that such a guarantee, without an

independent disbursal of debt to the Corporate Debtor itself, cannot give rise

to a financial debt within the meaning of Section 5(8) of the IBC. Therefore,

initiation of CIRP against the Corporate Debtor, when the primary default

was by the AOP, is claimed to be legally untenable.

51. Additionally, it is argued that the Adjudicating Authority failed to

appreciate that the AOP was a functioning entity having assets of its own,

and that the Financial Creditor could have proceeded against it directly.

According to the Appellant, the Financial Creditor's selective invocation of

guarantee and initiation of CIRP against the Corporate Debtor, without

exhausting remedies against the AOP, demonstrates mala fides and an

attempt to strategically gain control over valuable real estate held by the

Corporate Debtor.

52. The Appellant has also attempted to suggest that the NCLT failed to

consider whether there existed any pre-existing dispute regarding the

quantum of default or the enforceability of the guarantee, which would have

Company Appeal (AT) (Ins.) No. 1393 of 2025 -31-

warranted dismissal of the petition at the threshold. On these grounds, it is

contended that the order admitting the petition was mechanically passed

and deserves to be set aside.

53. Per contra, learned counsel for the Respondent-Financial Creditor has

submitted that the order of admission passed by the Adjudicating Authority

is perfectly valid, well-reasoned, and in consonance with the settled

principles under Section 7 of the IBC. He submitted that the Corporate

Debtor had executed an unequivocal corporate guarantee in favour of JM

Financial Credit Solutions Ltd. securing the credit facilities granted to the

AOP M/s Hem Bhattad. The default committed by the AOP constituted a

default under the guarantee as well, thereby triggering the Corporate

Debtor's co-extensive liability under Section 128 of the Indian Contract Act,

1872. The existence of debt and default, therefore, stood conclusively

established before the Adjudicating Authority.

54. It is further contended that under the scheme of Section 7 of the IBC,

a financial creditor is entitled to proceed either against the principal

borrower or against the corporate guarantor, or simultaneously against

both, since the liability of the guarantor is independent and coextensive. The

Adjudicating Authority was thus not required to await exhaustion of

remedies against the principal borrower/ AOP before initiating CIRP against

the Corporate Debtor.

Company Appeal (AT) (Ins.) No. 1393 of 2025 -32-

55. The Respondent points out that the Appellant has not disputed the

execution of the corporate guarantee or the occurrence of default. Once

these two conditions stood satisfied, the Adjudicating Authority was bound

to admit the application, as held by the Hon'ble Supreme Court in

'Innoventive Industries Ltd. v. ICICI Bank [(2018) 1 SCC 407]'. The IBC being

a summary and time-bound code, the Adjudicating Authority cannot enter

into collateral or extraneous questions concerning business structure,

internal participation, or equitable considerations.

56. Respondent also argued that the argument of the Corporate Debtor

being merely a "passive investor" is factually incorrect and legally irrelevant.

Once a guarantee is executed by a company, it assumes the character of a

financial obligation enforceable against the company as a "corporate person"

under the IBC. The Appellant, being merely a shareholder, has no right to

re-litigate the admission order by questioning the commercial wisdom of the

Financial Creditor's decision to proceed against the guarantor. The

Respondent therefore submits that the NCLT's order, being based on correct

appreciation of debt, default, and guarantee, calls for no interference by this

Tribunal.

57. We have carefully perused the impugned order dated 14.07.2025. The

scope of inquiry at the stage of admission under Section 7 of the IBC is

limited, the Adjudicating Authority is required to ascertain only (a) the

Company Appeal (AT) (Ins.) No. 1393 of 2025 -33-

existence of a financial debt, and (b) occurrence of a default. If both are

proved on record, admission is mandatory; no equitable discretion lies to

reject a petition on other grounds. This position has been repeatedly

emphasized by the Hon'ble Supreme Court in 'Innoventive Industries Ltd. v.

ICICI Bank [(2018) 1 SCC 407]' and 'E.S. Krishnamurthy v. Bharath Hi-Tech

Builders Pvt. Ltd. [(2022) 3 SCC 161]'.

58. In the present case, it is undisputed that JM Financial Credit

Solutions Ltd. extended certain financial facilities to M/s Hem Bhattad

(AOP), and that the Corporate Debtor stood as a corporate guarantor for

those facilities. The guarantee deed is not denied. Upon default by the AOP

in repayment, the liability of the guarantor immediately crystallized. Section

128 of the Indian Contract Act, 1872, makes the liability of a surety

coextensive with that of the principal debtor, unless the contract provides

otherwise. There is nothing on record to show that the guarantee was

conditional or limited.

59. The Appellant's plea that the Corporate Debtor was only a "passive

conduit" and not actively involved in the AOP's operations cannot dilute the

legal effect of the executed guarantee. Once a corporate entity voluntarily

binds itself as a guarantor, it becomes independently answerable for the

debt, and such liability constitutes a financial debt within the meaning of

Section 5(8)(i) of the Code, as recognized by the Hon'ble Supreme Court in

Company Appeal (AT) (Ins.) No. 1393 of 2025 -34-

'Laxmi Pat Surana v. Union Bank of India [(2021) 8 SCC 481]'. The

Adjudicating Authority, therefore, rightly admitted the Section 7 petition

upon satisfaction that (i) financial debt existed by virtue of the guarantee,

and (ii) default had occurred.

60. The contention that the Financial Creditor should have first proceeded

against the AOP has no legal foundation. The IBC does not impose such a

condition. On the contrary, the judgements of Hon'ble Supreme Court in

both 'Laxmi Pat Surana (supra) and in 'State Bank of India v. Athena Energy

Ventures Pvt. Ltd. [(2021) 11 SCC 309]' affirm that a creditor has the choice

to initiate proceedings either against the borrower or the guarantor. The

liability of both is concurrent, and the creditor's choice to proceed against

the guarantor cannot be questioned by the guarantor or its shareholders.

61. It is also relevant to observe that the Adjudicating Authority's order

discloses clear satisfaction regarding the existence of debt and default,

supported by documentary evidence. There is no material irregularity or

perversity in its reasoning. The arguments advanced by the Appellant are

essentially attempts to reopen factual findings or to question the commercial

rationale behind the creditor's choice of proceedings, both of which are

impermissible in appellate jurisdiction under Section 61.

62. Further, the claim that the Corporate Debtor's assets or its

participation in the AOP were not directly linked to the default is immaterial,

Company Appeal (AT) (Ins.) No. 1393 of 2025 -35-

for the purpose of admission. The law contemplates a summary adjudication

at that stage; detailed inter-se-disputes relating to claims or restructuring of

liabilities fall within the domain of the resolution process under the

supervision of the Resolution Professional and Committee of Creditors.

63. We also note that there is no allegation of fraud, collusion, or

procedural irregularity in the conduct of the proceedings before the NCLT.

The Appellant's grievance essentially arises from its desire to protect its

investment interest in the Corporate Debtor and the underlying AOP, which

does not amount to a legal injury under the IBC. Once insolvency is

admitted, the management of the Corporate Debtor vests in the IRP, and the

Code provides a structured process for all stakeholders, including

shareholders, to lodge their claims or participate through statutory

mechanisms. The Appellant cannot, therefore, substitute itself for the

Corporate Debtor or the IRP and contest the admission.

64. For the foregoing reasons, we hold that the impugned order dated

14.07.2025 admitting 'Hem Infrastructure and Property Developers Pvt. Ltd.'

into CIRP under Section 7 of the IBC was passed in conformity with

statutory requirements. The Adjudicating Authority correctly concluded that

(i) a financial debt existed by virtue of a valid corporate guarantee, and

(ii) default had occurred. The Appellant's arguments regarding the AOP's

role, alleged passive participation, or business equities are irrelevant in the

Company Appeal (AT) (Ins.) No. 1393 of 2025 -36-

context of Section 7 adjudication. Hence, the impugned order suffers from

no legal infirmity, procedural defect, or misapplication of law. The challenge

to the same is devoid of merit.

65. In view of the findings above, the appeal is dismissed. Pending IAs if

any are closed. No order as to costs.

[Justice Ashok Bhushan] Chairperson

[Mr. Indevar Pandey] Member (Technical)

SA/Pragya (LRA)

Company Appeal (AT) (Ins.) No. 1393 of 2025