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UV Asset Reconstruction Company Limited v. Electrosteel Castings Limited

Not available · 2026 INSC 14Decided 6 Jan 2026
Not available
Justice Alok Aradhe · Justice Sanjay Kumar

Background

A promoter company signed a "Deed of Undertaking" promising to arrange funds for its subsidiary if the subsidiary missed financial targets: no formal guarantee was ever required. After the subsidiary's insolvency, a creditor tried to recover money from the promoter, claiming it was a guarantor.

Decision Breakdown

The Supreme Court held the Deed was not a "contract of guarantee" under Section 126 of the Contract Act. It promised to help the borrower stay compliant, not to pay the lender directly if the borrower defaulted. Both the NCLT and NCLAT had reached the same conclusion.

Lesson Learnt

A promise to "help a borrower stay financially healthy" is legally different from a promise to "pay the lender if the borrower defaults", only the latter is an enforceable guarantee.

Official source (sci.gov.in)View Judgment (PDF)

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