Edelweiss wrecks Ecstasy by changing its mind

Sometimes going via the middleman is the right thing to do

Mar 24, 2026

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Modern finance has done a decent job of ensuring that the incentives of a borrower and a lender are aligned. The lender wants a reliable borrower who pays their dues on time (well, obviously). If you’re a borrower, you want to be reliable, or at least perceived to be reliable, because if you default, lenders won’t lend to you anymore, investors won’t invest in you, vendors won’t sell to you (on credit, that is), and people online will write annoying blog posts about you. It’s a downward spiral.

So what do you do if you can’t repay on time? The lender isn’t going to like it, but hey, shit happens, and you might generally be a good borrower who can’t meet an upcoming payment for an honest reason.

So you ask the lender for more time, even offer to pay more to cover the late payment. You assure them that future payments won’t be affected. Unless the lender thinks you’re intentionally stifling them, their incentive is to go with it. If they don’t, their loan to you will become a non-performing asset, which means that they will be able to lend less, and that’s something their investors won’t like. If they were to loosen their terms, give you a bit of wiggle room, you might come through and there’d be no harm done.

Your lender makes a huffed face but ultimately agrees to revise your payment terms, with a few conditions. The conditions are not trivial, but you’ve got no choice but to accept. You do what you need to do, and meet those conditions. But then your lender can just refuse to revise your payment terms? You’ve now paid the cost of meeting the lender’s initial conditions as well as defaulted on your loan. Worst possible outcome!

Ecstasy Realty is a Mumbai-based builder that issued bonds worth ₹600 crore ($63 million) to a bunch of lenders. It was unable to make a repayment, so it proposed restructuring the bonds. The lenders seemed to agree, they set out the conditions, Ecstasy met those conditions, but then the lenders disagreed. Two corporate courts—NCLT and NCLAT—sided with Ecstasy and felt Edelweiss couldn’t go back on its initial agreement. But last month, the Supreme Court reversed their judgements and said that hey Edelweiss very well could because it had never really agreed to the new terms in the first place.

Setting the conditions

Ecstasy borrowed this contentious ₹600 crore in March 2018. 85% of this amount came from three companies: ECL Finance, Edelweiss Investment Adviser, and Edelweiss Rural and Corporate Services. Essentially, from Edelweiss Group.

By March 2022, Ecstasy was good with its repayments and had repaid ₹508 crore. The interest rate on the ₹600 crore it had borrowed was 15% per annum, so this was still less than half the money it owed.1 Ecstasy had a ₹65 crore ($6.9 mn) repayment due by the end of the month, but it figured that it wouldn’t be able to make the payment. So it reached out to Edelweiss with a proposal.

Here’s a bit from Ecstasy’s email to Edelweiss, from NCLAT’s judgement:

We require the going forward terms confirmed in writing from edelweiss as under:
Interest and Principal moratorium of 18 months for the Balance NCD.
Bandra property unwound from security package.
Rs 25 crores to be released simultaneously.
Int rate on balance payments brought to 14.5% pa.
Rs 1 cr to be released from current escrow for stamp duty and other expenses.

Let’s make sense of what we’ve got:

Ecstasy wants to delay its repayments by 18 months without being branded as a defaulter during this period.
There’s a “Bandra property” that was collateral for the bonds which Ecstasy wants back so that it can sell some flats and earn some money.
Ecstasy wants another ₹25 crore from Edelweiss to meet its operational expenses? And it wants the interest rate for its bonds to be lowered.

All of this looks like Ecstasy just asking for things, a bit much for a borrower on the verge of defaulting. What is Edelweiss’s play here? Let’s look at its response:

As discussed we are agreeable to the following, subject to completion of the current Sapphire transaction and disbursement by 25th March latest:
Release of Bandra plot
Restructuring will be provided on the balance original NCDs - Moratorium for principal and interest of 18 months (Repayment will start Sept 2023 onwards)

Edelweiss had one condition—the completion of a certain Sapphire transaction. This transaction, as we learn from NCLAT’s order, is... more borrowings! This one from the India Credit Investment Fund-I (ICIF). ₹152 crore ($16 mn) at a 16.25% interest rate.

There’s more to it:

Upon receipt of the funds from ICIF, the Corporate Debtor transferred the entire amount of Rs 152 Cr. to the Edelweiss Group through the Appellant. On 28.03.2022, the Appellant also addressed a letter to the Corporate Debtor stating that subject to the receipt of Rs 152 cr of the Sapphire transaction, they would issue the release letter and No Dues Certificate.

Ecstasy did complete the transaction, and the money that Ecstasy borrowed from ICIF went directly to Edelweiss! This money was to be additional collateral for Edelweiss in return for agreeing to revising the repayment terms and not branding Ecstasy as a defaulter.

Minds change

So Ecstasy completed an expensive bond offering in a matter of days, and wrote to Edelweiss, asking them to inform everyone about the new terms please. Here’s what Edelweiss got back with:

With regards to restructuring, we have already communicated that we are ok to provide extension. However as communicated earlier, we will need to run the entire process internally based on the overall resolution plan. The final restructuring approval will be provided around the month of June.

Ecstasy’s repayment is due in March 2022, and this email lands on the second-last day of the month! Ecstasy is desperate, Edelweiss pretty nonchalant. After this, there is no coming back. By July, the bondholders do a formal vote and reject Ecstasy’s restructuring proposal, inform it that it has defaulted, and immediately demand that it pay back the entire principal with interest—₹1,203 crore.

Formal structures in an informal world

A few good things for us to know:

Ecstasy had issued non-convertible debentures, which are a type of bonds that can be traded on the stock exchange.
Because they can be traded, the “lenders” are not fixed. The ones that buy the bonds initially can sell them.
Which is why these bonds have a trustee. The one entity which represents the bondholders at all times. This is the borrower’s official point of contact with the lenders.

Ecstasy’s lenders were at least three Edelweiss companies: ECL, Edelweiss Investment Adviser, Edelweiss Rural and Corporate Services. In theory, these are three different companies which operate independently. In practice, they’re three companies who don’t even have their own websites, operate out of the same office, and are wholly owned subsidiaries of Edelweiss Financial Services.

When I wrote earlier that Ecstasy wrote to Edelweiss, whom do you think it wrote to? Your choices—

Someone at one of the three Edelweiss companies.
Someone at each of the three Edelweiss companies.
The bond trustee.

The right answer is—none of the three! From the Supreme Court’s order:

[…] correspondence by the respondent company with regard to restructuring of the loan facility under the debentures was with one Saahil Dugar, who was associated with Edelweiss Alternative Asset Advisors Limited, an Edelweiss group company. The case of the respondent company, as is evident from its counter affidavit filed before us, was that he was acting on behalf of the Edelweiss group/ECLF. No authorization in that regard was produced. Thus, the restructuring proposal was addressed by the respondent company to only one debenture holder, viz., ECLF. In the absence of express authorization of Saahil Dugar to act on behalf of the other debenture holders, which include a company, an LLP and individuals, his actions could not bind them

Ecstasy wrote to someone at Edelweiss Alternative Asset Advisors, yet another different Edelweiss company, which wasn’t involved in the situation at all. This may not have been the only one, but this was a core reason that the Court sided with Edelweiss. It said that the random guy Ecstasy was speaking to had no business agreeing to the proposal on the lenders’ behalf.

More weirdness, and a question

I can imagine Ecstasy’s predicament. It borrowed money from Edelweiss. It was communicating with Edelweiss! While there is no way for me to say for sure, I wouldn’t be surprised if the person they were talking to was also their point of contact when they initially borrowed the money. No reason to doubt him. And you wouldn’t want to write to a middleman if you thought you had one lender and could just write to them directly.

Things are already weird, but they get weirder. Edelweiss wanted Ecstasy to borrow from a fund called ICIF. And ICIF was an Edelweiss fund! Edelweiss lent money to Ecstasy so that Ecstasy could repay Edelweiss, just at a higher interest rate.

Did Edelweiss ever want to agree to revising the repayment terms? Why would it lend more money to someone already on the verge of default? Let’s consider the possibilities:

Edelweiss didn’t think Ecstasy was a bad borrower, Covid was in the air it was just bad circumstances. So it was fine lending more money—it would both avoid a bad loan, as well as make more money with the new loan. But then new information made it decide to do otherwise.
Edelweiss never wanted to revise the original repayment terms, and instead wanted to stiff Ecstasy and recover as much as it could from its original loan. It got ₹152 crore from its own fund, which would make its immediate financials look better, and eventually Edelweiss would anyway sue, sell collateral, seize assets, etc. to recover money at a higher interest rate.

Both (1) and (2) are theoretically possible. Yeah, (2) seems a bit twisted, but that’s what NCLT and NCLAT thought was happening.

If (1) were the case, what could’ve made Edelweiss change its mind?

Maybe Edelweiss figured that Ecstasy was actually a bad borrower that stole money. Last year, Edelweiss sued Ecstasy for “diverting funds to personal accounts, layering and siphoning funds using shell company accounts, and repaying undisclosed third party borrowings”, so it definitely thinks that now.2

Or, maybe Edelweiss figured that using its own ICIF to lend to Ecstasy to then repay a part of its own original loan would be very obvious evergreening. Then Edelweiss would itself be committing fraud. (In 2024, RBI pulled up Edelweiss for evergreening some of its loans very creatively in an unrelated context.)

Either way, Ecstasy wasn’t ecstatic.

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