A corporate guarantee which only obligates the guarantor to infuse equity/share capital or meet project cost overruns, without undertaking repayment of the loan liability of the principal borrower, does not create a “financial debt” within the meaning of Section 5(8) of the Insolvency and Bankruptcy Code, 2016 and cannot form basis for initiation of CIRP under Section 7. Further, default of a corporate guarantor arises only upon invocation of guarantee and failure to honour the demand; therefore, where guarantee was invoked during the Section 10A suspension period, the Section 7 application is barred.

 

IBC — Section 7 application — Corporate guarantee confined to equity infusion — No financial debt for repayment of loan — CIRP not maintainable (Paras 9–21, 29, 36)

Issue: Whether corporate guarantee dated 30.06.2010 executed by Corporate Debtor created liability to repay loan of principal borrower so as to constitute “financial debt” under Section 5(8) of the Insolvency and Bankruptcy Code, 2016.
Facts: Canara Bank sanctioned term loans aggregating ₹144.40 crores to principal borrower for thermal power project; Corporate Debtor/Indiabulls Real Estate Ltd. executed guarantee dated 30.06.2010 undertaking timely infusion of equity and meeting cost overruns. Bank later invoked guarantee by recall notice dated 30.09.2020 demanding repayment of entire outstanding dues of ₹202.03 crores and filed Section 7 application alleging default by Corporate Debtor.
Held: Guarantee deed dated 30.06.2010 only obligated Corporate Debtor to infuse equity/share capital and meet cost overruns, and did not undertake repayment of financial debt of principal borrower. Invocation demanding repayment of entire loan amount was contrary to guarantee terms; consequently, no “financial debt” or default was established against Corporate Debtor and Section 7 application was not maintainable. (Paras 9–21, 29, 36)

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Corporate guarantee — Subsequent substitution deed — Discharge of earlier guarantor — Suppression of material document by Financial Creditor (Paras 14–20, 35)

Issue: Effect of subsequent guarantee deed dated 11.01.2012 substituting guarantors and discharging Corporate Debtor.
Facts: After scheme of arrangement approved by Delhi High Court, power business and obligations of Corporate Debtor stood transferred to new entities; subsequent guarantee deed dated 11.01.2012 expressly recorded release of Corporate Debtor from earlier guarantee obligations except limited contingent obligations if substituted guarantors failed. Financial Creditor omitted reference to subsequent deed in Section 7 application.
Held: Subsequent guarantee deed clearly discharged Corporate Debtor from original guarantee obligations except limited contingent obligations; suppression of this material document and filing Section 7 proceedings without proper examination of contractual documents reflected casual and improper approach by Financial Creditor. (Paras 14–20, 35)

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IBC — Section 10A — Corporate guarantor default arises only upon invocation of guarantee — Application barred (Paras 30–32)

Issue: Whether Section 7 application against Corporate Debtor was barred by Section 10A IBC.
Facts: Principal borrower account was classified NPA on 28.09.2017, but guarantee against Corporate Debtor was invoked only through recall notice dated 30.09.2020 granting three days’ time for payment. NCLT treated NPA date as date of default and rejected Section 10A objection.
Held: Default of corporate guarantor arises only upon invocation of guarantee and failure to pay within stipulated period; therefore, default occurred on 04.10.2020, falling within Section 10A suspension period. NCLT erred in treating NPA date of principal borrower as default date of guarantor; Section 7 application was barred by Section 10A. (Paras 30–32)

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Adjudicating Authority — Contradictory orders by same Bench on same date — Non-application of mind (Paras 33–34)

Issue: Whether NCLT could admit Section 7 application against one corporate guarantor after rejecting identical application against another guarantor on same facts and same recall notice.
Facts: On same date, same NCLT Bench dismissed Section 7 application against another corporate guarantor (RattanIndia Enterprises Ltd.) holding that no financial debt existed, but admitted present Section 7 application arising out of same debt, same recall notice and identical contractual framework.
Held: Passing contradictory orders on same date by same Bench on identical facts demonstrated clear non-application of mind and rendered impugned admission order unsustainable. (Paras 33–34) 

ADVOCATEMMMOHAN: Lok Adalat Award — Partition suit — Non-impleadmen...

ADVOCATEMMMOHAN: Lok Adalat Award — Partition suit — Non-impleadmen...: advocatemmmohan AP HIGH COURT HELD THAT  Lok Adalat Award — Partition suit — Non-impleadment of necessary sharers — Allegation of fraud — Pr...

Lok Adalat Award — Partition suit — Non-impleadment of necessary sharers — Allegation of fraud — Prima facie case made out (Interim Order)

Issue: Whether Lok Adalat award in partition suit is liable to be questioned for non-impleadment of necessary legal heirs.
Facts: Suit for partition relating to property of a female who died intestate was referred to Lok Adalat and award dated 29.06.2024 was passed in O.S.No.92 of 2023; petitioner contended that he, being son of deceased female, and her husband were legal heirs entitled to shares under Section 15 of the Hindu Succession Act, 1956, but were deliberately not impleaded and award was obtained behind their back by fraud.
Held: Since all co-sharers are necessary parties in a partition suit and omission to implead persons entitled to share is fatal, petitioner established a prima facie case warranting examination of validity of Lok Adalat award on allegations of fraud.

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Legal Services Authorities Act — Challenge to Lok Adalat award — Civil suit barred — Writ petition maintainable on allegation of fraud (Interim Order)

Issue: Whether separate civil suit is maintainable to challenge Lok Adalat award obtained by fraud.
Facts: Petitioner challenged Lok Adalat award contending that award was obtained by suppressing existence of necessary sharers and without impleading them in partition proceedings.
Held: Since challenge to Lok Adalat award by separate civil suit is barred under the Legal Services Authorities Act, 1987, writ petition is maintainable to question validity of award, particularly on ground of fraud.

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Partition suit — Necessary parties — Failure to implead co-sharers — Effect (Interim Order)

Issue: Effect of non-impleadment of persons entitled to share in partition property.
Facts: Petitioner alleged that despite entitlement under Section 15 Hindu Succession Act, neither he nor husband of deceased female owner was impleaded in suit culminating in Lok Adalat award.
Held: It is settled law that every person entitled to share in partition property is a necessary party, and failure to implead such co-sharers is fatal to maintainability and validity of partition proceedings. Consequently, interim stay of execution of Lok Adalat award was granted.

Police inaction — Alleged trespass into property — Dispute found civil in nature (Paras 3–4) Issue: Whether police were bound to take criminal action on petitioner’s complaints alleging trespass into house plot. Facts: Petitioner, a physically differently-abled person, complained that certain persons trespassed into his house plot at Panchalingala Village during night hours, erected stones and attempted further construction; representations dated 31.03.2026, 06.04.2026 and 13.04.2026 were submitted to police and district authorities. Police conducted preliminary enquiry and opined that dispute was civil in nature and petitioner had not approached competent civil Court. Held: In view of preliminary enquiry indicating existence of civil dispute relating to property possession, police did not proceed with criminal action. (Paras 3–4)

 AP HIGH COURT HELD THAT 

Police inaction — Alleged trespass into property — Dispute found civil in nature (Paras 3–4)

Issue: Whether police were bound to take criminal action on petitioner’s complaints alleging trespass into house plot.
Facts: Petitioner, a physically differently-abled person, complained that certain persons trespassed into his house plot at Panchalingala Village during night hours, erected stones and attempted further construction; representations dated 31.03.2026, 06.04.2026 and 13.04.2026 were submitted to police and district authorities. Police conducted preliminary enquiry and opined that dispute was civil in nature and petitioner had not approached competent civil Court.
Held: In view of preliminary enquiry indicating existence of civil dispute relating to property possession, police did not proceed with criminal action. (Paras 3–4)

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Criminal procedure — Police inaction on complaint — Remedy of private complaint before Magistrate (Paras 5–7)

Issue: Remedy available when police fail to act on complaint.
Facts: Petitioner sought writ direction compelling police authorities to act upon his complaints regarding alleged trespass.
Held: When police do not act on complaint, complainant has efficacious alternative remedy of filing private complaint before jurisdictional Magistrate under Section 190 r/w 200 Cr.P.C./Section 210 r/w 223 BNSS; petitioner was granted liberty accordingly. (Paras 5–7)

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Jurisdictional Magistrate — Duty upon presentation of private complaint (Para 7)

Issue: Obligation of Magistrate upon receipt of private complaint.
Facts: High Court granted liberty to petitioner to institute private complaint before jurisdictional Magistrate regarding alleged trespass and illegal construction.
Held: Upon filing of private complaint, jurisdictional Magistrate shall bestow attention to complaint and deal with same strictly in accordance with law. (Para 7)

SARFAESI proceedings — Non-service of notices — Questions to be agitated before DRT (Paras 2(iv), 3) Issue: Whether alleged defects in service of demand and possession notices justify writ interference. Facts: Petitioners alleged that demand notice dated 22.05.2023 under Section 13(2) SARFAESI Act and subsequent possession proceedings were not served in prescribed manner and auction proceedings were initiated illegally. Held: Such disputes relating to service, procedure and validity of SARFAESI measures are matters falling within jurisdiction of DRT and not for adjudication in writ proceedings at first instance. (Paras 2(iv), 3)

 

SARFAESI Act — Challenge to e-auction notice — Alternative remedy before DRT — Writ petition not maintainable (Paras 2(v), 3–4)

Issue: Whether High Court should entertain writ petition challenging e-auction sale notice issued under SARFAESI proceedings.
Facts: Petitioners challenged e-auction notice dated 06.01.2026 issued by Central Bank of India in respect of mortgaged residential flat, contending that demand notice under Section 13(2) of the SARFAESI Act, 2002 and possession proceedings were not properly served; petitioners had already filed S.A.No.121 of 2026 before DRT and earlier obtained interim protection.
Held: Since statutory remedy under Section 17 SARFAESI Act was already invoked before DRT, all grievances relating to auction notice and recovery measures ought to be pursued before DRT; no ground for interference under Article 226 was made out. (Paras 2(v), 3–4)

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SARFAESI proceedings — Non-service of notices — Questions to be agitated before DRT (Paras 2(iv), 3)

Issue: Whether alleged defects in service of demand and possession notices justify writ interference.
Facts: Petitioners alleged that demand notice dated 22.05.2023 under Section 13(2) SARFAESI Act and subsequent possession proceedings were not served in prescribed manner and auction proceedings were initiated illegally.
Held: Such disputes relating to service, procedure and validity of SARFAESI measures are matters falling within jurisdiction of DRT and not for adjudication in writ proceedings at first instance. (Paras 2(iv), 3)

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Writ jurisdiction — SARFAESI recovery proceedings — Liberty to pursue statutory remedies (Para 4)

Issue: Whether dismissal of writ petition bars borrower from pursuing statutory remedies.
Facts: Petitioners sought protection against dispossession and auction of secured asset despite pendency of securitisation application before DRT.
Held: While dismissing writ petition at admission stage, Court reserved liberty to petitioners to pursue remedies available in law before DRT. (Para 4) 

Negotiable Instruments Act — Section 138 — Compounding at revisional stage — Permissibility (Paras 3–7) Issue: Whether offence under Section 138 of the Negotiable Instruments Act, 1881 can be compounded during pendency of criminal revision against conviction. Facts: Petitioner convicted in C.C.No.254 of 2004 for offence under Section 138 N.I. Act, with conviction confirmed in appeal, filed applications during pendency of Criminal Revision Case seeking permission to compound offence on basis of settlement reached with complainant-finance company. Held: Since offence under Section 138 N.I. Act is compoundable in nature and parties voluntarily entered into compromise after settlement of dues, compounding was permitted even at revisional stage. (Paras 3–7)

 AP HIGH COURT HELD THAT 

Negotiable Instruments Act — Section 138 — Compounding at revisional stage — Permissibility (Paras 3–7)

Issue: Whether offence under Section 138 of the Negotiable Instruments Act, 1881 can be compounded during pendency of criminal revision against conviction.
Facts: Petitioner convicted in C.C.No.254 of 2004 for offence under Section 138 N.I. Act, with conviction confirmed in appeal, filed applications during pendency of Criminal Revision Case seeking permission to compound offence on basis of settlement reached with complainant-finance company.
Held: Since offence under Section 138 N.I. Act is compoundable in nature and parties voluntarily entered into compromise after settlement of dues, compounding was permitted even at revisional stage. (Paras 3–7)

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Compromise — Voluntariness — Satisfaction of complainant — Effect (Para 4)

Issue: Whether compromise between parties was genuine and voluntary.
Facts: Managing Partner of complainant-financier personally appeared before Court and stated that entire amount was received, compromise application was signed voluntarily without coercion, and he had no objection for release of accused.
Held: Upon satisfaction regarding genuineness and voluntariness of compromise, Court accepted settlement between parties. (Para 4)

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Compounding of offence — Effect on conviction and sentence — Acquittal of accused (Paras 6–7)

Issue: Consequence of compounding offence under Section 138 N.I. Act after confirmation of conviction in appeal.
Facts: Conviction and sentence imposed by Trial Court and confirmed in Criminal Appeal were sought to be nullified on basis of compromise.
Held: Once offence was compounded, conviction and sentence recorded by Trial Court and confirmed by Appellate Court stood set aside, accused was acquitted, and sureties were discharged. (Paras 6–7)