Mere Shareholder Status Bars Appeal u/s 61: NCLAT Upholds NCLT Admission of CIRP on Corporate Guarantees [Read Order]
The tribunal held that mere shareholder status does not confer locus standi as a “person aggrieved” under Section 61. Upholding the NCLT Mumbai’s order admitting Corporate Insolvency Resolution Process (CIRP) against CD based on corporate guarantees, NCLAT reinforced that shareholder interests are derivative and cannot override creditor rights.
The National Company Law Appellate Tribunal (NCLAT), Principal Bench, has dismissed the appeal filed by the appellant under Section 61 of the Insolvency and BankruptcyCode, 2016 (IBC), holding that mere shareholder status does not confer locus standi as a “person aggrieved” under Section 61.
This appeal arises from the order passed by the NCLT, whereby the petition under Section 7 of the Insolvency and Bankruptcy Code (IBC) filed by JM Financial Credit Solutions Ltd. (Respondent and Financial Creditor) against Hem Infrastructure and Property Developers Pvt. Ltd. (the corporate debtor) was admitted.
The dispute originated in six financial facilities sanctioned by JM Financial between 2017 and 2022, aggregating to ₹288.20 crore. These loans were extended not to the corporate debtor directly, but to an unincorporated Association of Persons (AOP) named M/s Hem Bhattad, constituted in 2006 for real estate development in Mumbai.
To secure these loans, Hem Infrastructure executed six corporate guarantees between December 2017 and December 2021. Defaults began in January 2023, when the AOP failed to meet repayment obligations and also defaulted on TDS dues. The borrower’s accounts were classified as NPAs in May 2023, prompting JM Financial to issue demand notices under SARFAESI and subsequently demand payment of ₹242.82 crore from the corporate debtor as guarantor. No payment was made.
JM Financial filed the Section 7 petition in 2024 seeking CIRP against Hem Infrastructure on the strength of the guarantees.The NCLT admitted the Section 7 petition, initiating CIRP against Hem Infrastructure solely on the basis of the guarantees. Aggrieved, Peninsula Holdings & Investments Pvt. Ltd. (appellant) being a shareholder of the Corporate Debtor,filed the present appeal before the NCLAT, seeking to quash the admission order.
The appellant, Peninsula Holdings, a 51% shareholder of Hem Infrastructure, argued that it was an “aggrieved person” entitled to maintain the appeal. It contended that Hem Infrastructure was a Special Purpose Vehicle (SPV) with no independent operations, assets, or employees, and had only participated in an Association of Persons (AOP) known as M/s Hem Bhattad.
The loans aggregating to ₹288.20 crore had been extended to the AOP, not to Hem Infrastructure directly. The corporate debtor had merely executed corporate guarantees between 2017 and 2021 to secure the facilities.
The appellant further claimed that its Redeemable Optionally Convertible Preference Shares (ROCPS) carrying a 20% internal rate of return gave it creditor‑like rights, thereby qualifying it as a financial creditor.
The financial creditor, JM Financial Credit Solutions Ltd., opposed the appeal, stressing that Peninsula Holdings had itself admitted in pleadings that it was a shareholder and passive investor.
Relying on the larger bench ruling in Park Energy Pvt. Ltd. v. State Bank of India (2025), the respondent argued that shareholders cannot be treated as “persons aggrieved” under Section 61.
Section 61, IBC provides that “any person aggrieved” by an order of the Adjudicating Authority (NCLT) may prefer an appeal to NCLAT.
The tribunal in Park Energy had categorically 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 Section61 cannot be expanded to include shareholders or investors.
Allowing shareholders to maintain appeals would cause multiplicity of proceedings and undermine the object of the Code.
NCLAT examined whether preference shares could alter the appellant’s status. It noted that while in Sanjay D. Kakade v. HDFC Ventures Trustee Co. Ltd. (2023), preference shares with assured returns were treated as financial debt due to their commercial effect of borrowing, the Supreme Court in EPC Constructions India Ltd. v. Matix Fertilizers and Chemicals Ltd. (2025) had clarified that redeemable preference shares are part of share capital, not debt.
Unless contractual terms impose binding repayment obligations akin to borrowing, preference shares remain equity‑like instruments. In the present case, Peninsula Holdings had not produced sufficient documentation to establish creditor status, and its appeal was premised on shareholding alone.
The two-member bench of Ashok Bhushan (Chairperson) and Indevar Pandey (Technical Member)concluded that Peninsula Holdings was a “mere shareholder” and therefore lacked locus standi under Section 61. It upheld the NCLT’s admission of CIRP against Hem Infrastructure, emphasising that corporate guarantees executed by the debtor created enforceable liability.
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