UV ASSET RECONSTRUCTION COMPANY LIMITED versus ELECTROSTEEL CASTINGS LIMITED

Citation: [2026] 1 S.C.R. 130 · Decided: 06-01-2026 · Supreme Court of India · Bench: SANJAY KUMAR · Disposal: Dismissed

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Judgment (excerpt)

[2026] 1 S.C.R. 130 : 2026 INSC 14
UV Asset Reconstruction Company Limited 
v. 
Electrosteel Castings Limited 
(Civil Appeal No. 9701 of 2024)
06 January 2026
[Sanjay Kumar and Alok Aradhe,* JJ.]
Issue for Consideration
Issue pertains to the interpretation of Clause 2.2 of Deed of 
Undertaking executed between SREI-original creditor, which 
subsequently assigned all its rights and interests in favour of the 
appellant; ESL-borrower; and ECL-erstwhile promoter of ESL 
and obligor in the Deed of Undertaking; and whether Clause 2.2 
constitutes a contract of guarantee within the meaning of s.126 of 
the Contract Act, 1872 thereby rendering ECL as a guarantor to 
SREI in respect of financial facilities availed by ESL from SREI. 
Headnotes†
Insolvency and Bankruptcy Code, 2016 – Contract Act, 1872 – 
Contract of Guarantee – Infusion of funds – Clause 2.2 of 
Deed of Undertaking – Interpretation of – Financial facilities 
availed by ESL-borrower from SREI-original creditor – ECL 
being the promoter of ESL required to furnish an undertaking 
to arrange for the infusion of funds – ECL, one of the 
promotors of ESL, executed Deed of Undertaking, warranty, 
and indemnity (undertaking) whereby it undertook a limited 
obligation to arrange for infusion of funds into ESL – SREI 
subsequently assigned all its rights and interests in favour of 
UV Company-appellant – Clause 2.2, if constitutes a contract 
of guarantee within the meaning of s.126 thereby rendering 
ECL as a guarantor to SREI in respect of financial facilities 
availed by ESL from SREI: 
Held: Clause 2.2 of Deed of Undertaking obligates ECL to arrange 
for infusion of funds into ESL, so as to enable the borrower to 
comply with the stipulated Financial Covenants – For an obligation 
to be construed as a guarantee u/s.126, there must be a direct and 
unambiguous obligation of the surety to discharge the obligation 
* Author
[2026] 1 S.C.R. 
131
UV Asset Reconstruction Company Limited v.  
Electrosteel Castings Limited
of the principal debtor to the creditor – Clause neither records an 
undertaking to discharge the debt owed to the creditor nor does 
it contemplate payment to the lender in the event of the default – 
Clause contains a promise, not to the creditor to pay the debt upon 
default, but to the borrower to facilitate compliance with Financial 
Covenants – Undertaking to infuse funds into a borrower, so that 
it may meet its obligations cannot, by itself be equated with the 
promise to discharge the borrower’s liability to the creditor – Mere 
Covenant to ensure financial discipline or infusion of funds does 
not satisfy the statutory requirements of s.126 – Sanction letter 
does not contemplate any personal or corporate guarantee – It 
specifically identifies the securities for the facilities and does not 
require ECL to stand as surety – Fact that no guarantee was 
furnished by ECL also borne out from the documents – Thus, the 
parties never intended to create contract of guarantee – Payment 
of INR 38 crores by ECL to appellant not made on account of any 
contractual obligation – Said payment was made in its capacity 
as a promotor of ESL – Such payment by itself does not give 
rise to any contract of guarantee, particularly when there is no 
contractual obligation of guarantee in the Deed of Undertaking – 
Pleadings must be read as a whole and cannot be read selectively 
out of context or in isolation – Appellant had initiated an action to 
enforce the mortgage security created by ECL in favour of SREI – 
ECL in its pleadings stated that it has given a guarantee which 
is limited to the mortgaged property with no personal recourse 
to ECL – Concurrent findings of NCLT and NCLAT that Clause 
2.2 of the Deed of Undertaking does not constitute a contract of 
guarantee and that ECL cannot be treated as guarantor for the 
financial facilities availed by ESL concurred with – No infirmity in 
the impugned judgment warranting interference. [Paras 19-25]
Contract Act, 1872 – s.126 – ‘Contract of Guarantee’ – Essential 
ingredients of a guarantee – ‘See to it’ guarantee – Explained. 
[Paras 17, 18, 22]
Case Law Cited
Mumbai International Airport Pvt. Ltd. v. Golden Chariot Airport and 
Ors. [2010] 12 SCR 326 : (2010) 10 SCC 422; Nagindas Ramdas v. 
Dalpatram Ichharam and Ors. [1974] 2 SCR 544 : (1974) 1 SCC 
242; Kamla Devi v. Thakhratmal Land [1964] 2 SCR 152 : AIR 
1964 SC 859 – referred to.
132
[2026] 1 S.C.R.
Supreme Court Reports
Yes Bank Limited v. Zee Enter

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