Promise To Arrange Funds In Case of Default Does Not Make Promoter A Guarantor: Supreme Court
Case Title: UV Asset Reconstruction Company Limited v. Electrosteel Castings Limited
Citation: 2026 LLBiz SC 3
Case Number: Civil Appeal No. 9701 of 2024
The Supreme Court of India has held that a promoter’s promise to arrange funds to help a borrower meet financial covenants does not amount to a contract of guarantee under the Indian Contract Act and cannot be used to fasten insolvency liability on the promoter. A bench of Justice Sanjay Kumar and Justice Alok Aradhe said that for an obligation to qualify as a guarantee under Section 126 of the Act, there must be a clear and unambiguous promise by the surety to repay the borrower’s debt if the…