📚 Legal Learning | Shri Ganpati Jurists
UV Asset Reconstruction Company Limited v. Electrosteel Castings Limited
🔑 Key Legal Takeaways
The Hon’ble Supreme Court has delivered an important clarification on the law of guarantee under the Indian Contract Act, 1872 and the effect of resolution plans under the Insolvency and Bankruptcy Code, 2016 (IBC).
⚖️ 1. What is NOT a Contract of Guarantee (Section 126, ICA)?
The Court held that:
A contractual clause requiring a promoter to arrange or infuse funds into a borrower company to meet financial covenants
❌ does NOT amount to a contract of guarantee under Section 126 of the Indian Contract Act.
⚖️ 2. “See To It” Clauses – Explained Simply
The Court clarified the distinction:
✔️ A “See to it” guarantee (under English Common Law) means
The guarantor ensures that the principal debtor itself performs, and is liable immediately upon failure.
❌ However, an obligation to arrange funds or enable performance
➝ is NOT a guarantee under Section 126, ICA
📌 Core Principle:
A guarantee is about discharging liability, not merely supporting performance.
⚖️ 3. Effect of IBC Resolution Plan on Third Parties
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