Writs of Indian Constitution – Simplified with Practical Examples

 Writs of Indian Constitution – Simplified with Practical Examples ⚖️

🔹 Habeas Corpus – Protection against illegal detention

👉 “Produce the body”

🔹 Mandamus – Direction to perform public duty

👉 “Do your duty”

🔹 Prohibition – Prevents lower courts from exceeding jurisdiction

👉 “Stop proceedings”

🔹 Certiorari – Quashing of incorrect judicial orders

👉 “Order hatao”

🔹 Quo Warranto – Questions authority over a public office

👉 “Tum kaun ho?”

These writs play a crucial role in safeguarding Fundamental Rights and maintaining rule of law in India.

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Nagreeka Indcon Products Pvt. Ltd vs Cargocare Logistics (India) Pvt. Ltd. - The words chosen by the parties are the most reliable manifestation of the intent. The meaning of the words used in contract is not found in strict etymological propriety or popular usage of word(s) as in the subject, occasion or context in which they are used, within the contractual realm.

 SCI (2026.04.17) in Nagreeka Indcon Products Pvt. Ltd vs Cargocare Logistics (India) Pvt. Ltd.  [2026 INSC 384, Special Leave Petition (Civil) No.19026 of 2023)] held that;-

• In light of the above discussion, it is also to be noted that principles of contractual interpretation are now well settled. 

• The words chosen by the parties are the most reliable manifestation of the intent. The meaning of the words used in contract is not found in strict etymological propriety or popular usage of word(s) as in the subject, occasion or context in which they are used, within the contractual realm. 

• The latin maxim ‘Ex praecedentibus et consequentibus optima fit interpretatio’ signifies this statement. [See: Union of India v. Raman Iron Foundry; Provash Chandra Dalui v. Biswanath Banerjee] 

• The written word is, therefore, the foundation of legal obligation. To disregard or to impute an obligation or meaning which was not intended would compromise party autonomy.

Excerpts of the Order;

Leave Granted.

# 2. The short but significant question arising in this appeal is, when the arbitration clause in the contract uses the word ‘can’, does it necessitate the reference of all disputes to arbitration or is recourse to other dispute resolution mechanisms, including that of the Civil Court, open for the parties.

# 3. The facts of this case lie in a narrow compass. The appellant is a manufacturer of aluminium foil containers and kitchen rolls. In the course of business, it received a contract for purchase of corrugated boxes of aluminium foil from M/s. American Alupack Industries1. The eventual product was to be delivered to South Carolina, USA, and regarding such transport, the appellant contracted with the respondent for a total consideration of Rs.2,23,550/- which was inclusive of freight charges, ocean freight, ACD charges, container maintenance charges etc. The total consignment was of six containers, out of which four were delivered successfully prior to the dispute arising between the parties. When it came to the delivery of the fifth container, the dispute in question arose. Apparently, when the respondent delivered the fifth consignment to AAI, the latter failed to pay the requisite amount or, as per established practice, produced the original bill of lading at the time of delivery. Despite this the respondent handed over the goods to AAI on 21st October 2020 resulting into financial loss to the appellant as did not receive payment for supply of the goods to the tune of USD 28064.86. On 10th December 2020 the appellant raised this issue with the respondent, who asserted the factum of a differing past practice of handing over the goods without production of the original bill of lading and denied any liability.

It may be noted here that the bills of lading issued by the respondent contained as Clause 25, a dispute resolution mechanism captioned arbitration which reads as under:

• “25. Arbitration: The contract evaluated hereby or contained herein shall be governed by and construed according to Indian Laws. Any difference of opinion or dispute thereunder can be settled by arbitration in India or a place mutually agreed with each party appointing an arbitrator.” 

In view of the above dispute, by notice of invocation dated 10th March 2022 the appellant suggested the matter be referred to arbitration for a total amount of USD 13230.86. Apart from replying to the merits of the notice, the respondent also disputed the reference to arbitration suggesting that the clause reproduced supra is not a mandate but leaves open the option to the parties to take the matter to arbitration.

# 4. The appellant preferred Arbitration Application No.168 of 2022 before the High Court of Judicature at Bombay, seeking appointment of sole arbitrator, which was disposed of in terms of the impugned judgment dated 23rd February 2023 whereby the learned Single Judge held as follows:

• “…However, in the present case when it is manifestly and ex- facie certain that there is no agreement between the parties to mandatorily refer the disputes that have arisen between them for arbitration, I am unable to be persuade myself by the submission of the learned counsel for the Applicant that the  clause involved make arbitration as a compulsory choice for the parties for resolution of disputes.

• 18] In the wake of above discussion, since I am of the view that Arbitration clause, which had used the word ‘can’, do not make it imperative for the parties to be referred for arbitration and specifically when the Respondent has refused to be referred for arbitration, in the wake of the choice being available, in terms of the clause contained in the agreement. The Arbitration Application deserve to be dismissed, as it cannot be construed as amounting to ‘Arbitration’ as the mode of” resolving disputes, in absence of affirmation at the end of the opposing party.

• Hence, Arbitration Application No.168 of 2022 is dismissed.”

# 5. We have heard learned counsel for the parties.

5.1 The case set up by the appellant is that Section 7 of the Arbitration and Conciliation Act 19962 does not prescribe any form for an arbitration agreement. Apart from that, the intent of the parties to have arbitration be the chosen method of dispute resolution is evident from the bill containing a clause to that effect. The heading of the clause acquires importance in view of the judgment of this Court in Eastern Coalfields v. Sanjay Transport Agency and Another3, it has also been held in Babanrao Rajaram Pund v. M/s Samarth Builders And Developers4 and Enercon (India) Ltd. v. Enercon GmbH5 that a pragmatic A&C Act 2009 (7) SCC 345 2022 (9) SCC 691 2014 (5) SCC 1  approach should be taken to interpretation of arbitration clauses. The drafting of such a clause, in view of the intention demonstrated otherwise, cannot be taken advantage of by any party [See: Visa International Ltd. v. Continental Resources USA Limited6]. In reference to Vidya Drolia v. Durga Trading Corporation7, it is submitted that at the stage of Section 11 application only the existence of the clause is to be looked into, in other words a prima facie view is to be taken. Reliance is also placed on the observation that when there is a doubt, Courts should lean towards referring the matter to arbitration. Further, by relying on a judgment of a Delhi High Court in Panasonic India (P) Ltd. v. Shah Aircon8, it is submitted that ‘can’ does constitute a mandatory arbitration clause. Further, strength is drawn from appointment of an arbitrator by this Court in Zhejiang Bonly Elevator Guide Rail Manufacture Company Limited v. Jade Elevator Components9. When the dispute resolution clause stated “arbitration or the court”.

5.2 Per contra, inter alia the respondents submitted that clause 25 of Bill of lading does not constitute a valid 2009 (2) SCC 55 2021 (2) SCC 1 2022 SCCOnline Del 3288 2018 (9) SCC 774  arbitration clause as it does not convey definitive agreement between the parties to that end. With reference to K.K. Modi v. K.N. Modi10 and Bihar State Mineral Development Corporation v. Encon Builders (I) (P) Ltd.11 it is submitted that the necessary elements of a valid arbitration clause has been set out in these judgments and the same are not met in the present case. Further, relying on BGM and M-RPL-JMCT(JV) v. Eastern Coalfields Ltd12 and Jagdish Chander v. Ramesh Chander13 it is argued that words such as ‘can’ do not constitute a binding arbitration agreement. Further ground of attack on part of the respondent is that Clause 25 provided for each party appointing one arbitrator but does not contemplate the two arbitrators so appointed, collectively appointing the third, presiding arbitrator and this position is in derogation of Section 10 of the A&C Act.

5.3 In the light of the afore-stated submissions, we now proceed to consider the question formulated in paragraph 2.

# 6. As commercial transactions grow to involve more and more moving parts, naturally resulting in heightened complexity, 1998 (3) SCC 573 2003 (7) SCC 418 2025 SCCOnline SC 1471 2007 (5) SCC 719 time has become a prized commodity and possession. To that end, Alternate Dispute Resolution mechanisms, have deservedly become the preferred medium, overcoming the otherwise common factors of delay, cost and also its openness to public, which can have detrimental effect on the commercial value of the dispute. It has become a preferred medium while keeping its most essential factor at the forefront, that is, party autonomy, or its inherently voluntary characteristic. The concurring opinion of P.S. Narasimha, J., in Cox & Kings Ltd. v. SAP India (P) Ltd.14, succinctly captures the sine qua non for arbitral proceedings - “The parties must mutually intend to refer their differences to arbitration as consent is the source of the Arbitral Tribunal's jurisdiction over them.” In other words, Alternate Dispute Resolution mechanisms or more particularly, arbitration, which is relevant in this case, can only be the chosen method if both/all parties to the dispute can agree that it will be so. This freedom is not only in so far as choosing the medium, but it also encompasses choice of forum, applicable law and to some extent even procedural norms. This enables parties to have their dispute decided by keeping in view their own structures and realities.

# 7. Since the judgment impugned before us was an application for appointment of arbitrator, it is apposite to refer to the duty cast upon the Court in deciding such an application.

The main dispute before us swings on the interpretation of the word ‘can’. As ordinarily understood, it means capacity, capability or factual possibility. The Oxford Learner’s Dictionary discusses the word ‘can’ as a word that is “used to say that it is possible for someone or something to do something, or for something to happen”15. Similarly, Merriam Webstar says ‘can’ is a word that is “used to indicate possibility”16. Lastly, we may refer to the Britannica Dictionary, it defines the word as follows: “to be able to (do something)”; “to know how to (do something)”; “to have the power or skill to (do something)”17. Having understood the meaning of the word, it may be observed that its use in judicial interpretative context is limited. Most often the words ‘may’ or ‘shall’ are used. Normally, the former denotes discretion but not compulsion to act, but then it is all contextual. Put differently, the authority is permitted to do something but is not required to. If it is the requirement that is to be denoted, ‘shall’ is the most appropriate word which signals a mandate or obligation.

7.1 In SBI General Insurance Co. Ltd. v. Krish Spg., a bench of three judges held as under:

• “114. The use of the term “examination” under Section 11(6-A) as distinguished from the use of the term “rule” under Section 16 implies that the scope of enquiry under Section 11(6-A) is limited to a prima facie scrutiny of the existence of the arbitration agreement, and does not include a contested or laborious enquiry, which is left for the Arbitral Tribunal to “rule” under Section 16. The prima facie view on existence of the arbitration agreement taken by the Referral Court does not bind either the Arbitral Tribunal or the Court enforcing the arbitral award.

• …

• 117. In view of the observations made by this Court in Interplay Between Arbitration Agreements under the Arbitration Act, 1996 & the Stamp Act, 1899, In re [Interplay Between Arbitration Agreements under the Arbitration Act, 1996 & the Stamp Act, 1899, In re, (2024) 6 SCC 1 : 2023 INSC 1066] , it is clear that the scope of enquiry at the stage of appointment of arbitrator is limited to the scrutiny of prima facie existence of the arbitration agreement, and nothing else. For this reason, we find it difficult to hold that the observations made in Vidya Drolia [Vidya Drolia v. Durga Trading Corpn., (2021) 2 SCC 1 : (2021) 1 SCC (Civ) 549] and adopted in NTPC Ltd. v. SPML Infra Ltd. [NTPC Ltd. v. SPML Infra Ltd., (2023) 9 SCC 385 : (2023) 4 SCC (Civ) 342] that the jurisdiction of the Referral Court when dealing with the issue of “accord and satisfaction” under Section 11 extends to weeding out ex facie non-arbitrable and frivolous disputes would continue to apply despite the subsequent decision in Interplay Between Arbitration Agreements under the Arbitration Act, 1996 & the Stamp Act, 1899, In re [Interplay Between Arbitration Agreements under the Arbitration Act, 1996 & the Stamp Act, 1899, In re, (2024) 6 SCC 1 : 2023 INSC 1066] .

• …

• 127. Section 11 also envisages a time-bound and expeditious disposal of the application for appointment of arbitrator. One of the reasons for this is also the fact that unlike Section 8, once an application under Section 11 is filed, arbitration cannot commence until the Arbitral Tribunal is constituted by the Referral Court. This Court, on various occasions, has given directions to the High Courts for expeditious disposal of pending Section 11 applications. It has also directed the litigating parties to refrain from filing bulky pleadings in  matters pertaining to Section 11. Seen thus, if the Referral Courts go into the details of issues pertaining to “accord and satisfaction” and the like, then it would become rather difficult to achieve the objective of expediency and simplification of pleadings.” 

7.2 In Goqii Technologies (P) Ltd. v. Sokrati Technologies (P) Ltd.19, the Court held:

• “21. Before we conclude, we must clarify that the limited jurisdiction of the referral courts under Section 11 must not be misused by parties in order to force other parties to the arbitration agreement to participate in a time consuming and costly arbitration process. This is possible in instances, including but not limited to, where the claimant canvasses the adjudication of non-existent and mala fide claims through arbitration.”

# 8. Since the discussion made in the impugned judgment pertained only to whether Clause 25 did or did not constitute a binding arbitration agreement between the parties, it can be observed that the learned Single Judge kept to the jurisdictional confines as mandated by the A&C Act. Next, we consider the rival contentions of the parties.

# 9. The sum and substance of the appellant’s case is that Clause 25 reproduced (supra) constitutes a binding arbitration clause. In furtherance of this position reliance has been placed on various judgments of this Court and also of the High Court. Let us examine them.

9.1. In Eastern Coalfields (supra), it has been observed (2025) 2 SCC 192 that section, heading or a marginal note, can be relied on to clear any doubt or ambiguity. In that case, interpretation was regarding a mandatory arbitration clause but, the dispute was as to upon whom the said arbitration clause applies. Having regard to the heading of the section, it was held that the arbitration clause would apply only to disputes between public sector enterprises and government departments and would not apply to any dispute involving a private party. In the present case, there is no such distinction or dispute. The heading uses only one word arbitration but as opposed to the case referred to (supra), the modal here is ‘can’, indicating a choice available to the parties.

9.2 In Babanrao Rajaram Pund (supra) which has been relied upon by the appellant to submit that a pragmatic approach should be taken, observes that when an arbitration agreement, apart from using the word ‘arbitration’ or ‘arbitrators’ spells out its clear intention by the use of the word ‘shall’, its mandatory nature is clear. It has been also observed that deficiency of words and agreement which otherwise fortifies the intention cannot delegitimize the arbitration clause. As is obvious, the intention of the parties is anything but clear in the present case. This latter aspect will be elucidated with more clarity in the succeeding paragraphs of this judgement. 

9.3 In Visa International (supra) the dispute resolution clause provided that any disputes arising between the parties, if any, shall be settled in accordance with the provisions of the A&C Act; and did not specifically state as to whether the chosen method would be arbitration or conciliation. While holding that a binding arbitration clause did exist, the Court held that one or two words being absent is not the deciding factor and in fact, it is the whole clause providing for the settlement of disputes that are to be seen together to gather the intention of the parties. There can be no qualms with this position. Reading the arbitration clause in this case, it can in no way be said that the intent of the parties is clear. This is on two counts, one the use of the word ‘can’ and second, providing for the incomplete procedure regarding appointment of arbitrators if at all. 

9.4 In Enercon (India) (supra) the question involved amongst others, not relevant to the present dispute, was regarding an arbitration clause being rendered unworkable on account of the fact that it did not provide for the manner in which the 3rd arbitrator was to be appointed. It only provided that each party to the arbitration would appoint one arbitrator of their choice. This Court observed that the intent to appoint an arbitrator cannot be frustrated on account of the fact that the clause is unworkable. There was no dispute as to arbitration being the chosen mechanism to resolve conflict. In the facts and circumstances, it was read into the clause that the two arbitrators so appointed by each party would then appoint the third arbitrator. In doing so, it was observed that the approach taken to construe an arbitration clause should not be pedantic but pragmatic. The crucial distinction with the present facts is that the intent to arbitrate was clear. It is not the case before us as one party says that the arbitration clause is binding and the other does not even consider the clause to be an arbitration clause to begin with.

9.5 In Zhejiang Bonly (supra) the opposing contentions of the parties were that when the clause for dispute settlement says arbitration or the Court, which one would prevail. The Court here held that an option was available to the parties and the one who invoked the dispute settlement process chose to go for arbitration, as such, with that being an option available to him, no-fault could be found with that choice. The word used in the clause was ‘should’, which is consistent with the fact that an option had been provided to the parties. The facts of this case, as it appears to us, are in no way similar to the  present case and as such the same would not be of any aid to the appellant.

9.6 In Vidya Drolia (supra) the Court observed that when there is a doubt, the matter be referred to arbitration. It has also been observed that in matters of purely commercial nature, a liberal approach should be adopted as a one-stop dispute resolution process would be favourable. Once again, these observations are such that no question can be raised against them. The doubt referred to here arises in the construction of the arbitration clause when it is vaguely worded or the like. The question of construction, however, only arise when the parties are ad idem as to arbitration. Despite the dispute before us being purely of a commercial nature, it is the parties themselves that cannot agree on arbitration being the chosen medium. When that is the case, it is not for a Court to compulsorily send such parties before the jurisdiction that they have not chosen.

# 10. The appellant’s reliance on Panasonic India (P) Ltd. (supra) is misplaced for the learned Single Judge therein observed that the word ‘can’ featuring in the subject arbitration clause was not qua arbitration itself but was in reference to the ability resting with either party to invoke arbitration. Here, the situation is different.

# 11. In light of the above discussion, it is also to be noted that principles of contractual interpretation are now well settled. The words chosen by the parties are the most reliable manifestation of the intent. The meaning of the words used in contract is not found in strict etymological propriety or popular usage of word(s) as in the subject, occasion or context in which they are used, within the contractual realm. The latin maxim ‘Ex praecedentibus et consequentibus optima fit interpretatio’ signifies this statement. [See: Union of India v. Raman Iron Foundry20; Provash Chandra Dalui v. Biswanath Banerjee21] The written word is, therefore, the foundation of legal obligation. To disregard or to impute an obligation or meaning which was not intended would compromise party autonomy.

# 12. Having taken due note of the interpretation of the word ‘can’ as also well-established principles of contractual interpretation, we now move to consider whether Clause 25 actually constitutes an arbitration clause. Sujata Manohar J., in K.K. Modi (supra) spelt out the requirements of such a clause in the following terms:

•  “17. Among the attributes which must be present for an agreement to be considered as an arbitration agreement are:

• (1) The arbitration agreement must contemplate that the decision of the tribunal will be binding on the parties to the agreement,  

• (2) that the jurisdiction of the tribunal to decide the rights of parties must derive either from the consent of the parties or from an order of the court or from a statute, the terms of which make it clear that the process is to be an arbitration, 

• (3) the agreement must contemplate that substantive rights of parties will be determined by the agreed tribunal, 

• (4) that the tribunal will determine the rights of the parties in an impartial and judicial manner with the tribunal owing an equal obligation of fairness towards both sides, 

• (5) that the agreement of the parties to refer their disputes to the decision of the tribunal must be intended to be enforceable in law and lastly, 

• (6) the agreement must contemplate that the tribunal will make a decision upon a dispute which is already formulated at the time when a reference is made to the tribunal.” 

These requirements have been repeatedly restated. [See: Encon Builders (I) (P) Ltd (supra) ;Alchemist Hospitals Ltd. v. ICT Health Technology Services India (P) Ltd.22 and M.P. Rajya Tilhan Utpadak Sahakari Sangh Maryadit v. Modi Transport Service23]. In Jagdish Chander (supra), recently followed in BGM and M-RPL-JMCT(JV) (supra) the Court set out what constitutes an arbitration agreement. Raveendran J., writing for the Court, held that the words used in the agreement should disclose a determination and obligation to go for arbitration and not only provide for the possibility of going to arbitration. When the word provides only a possibility, the same does not constitute a valid arbitration agreement.

# 13. Turning to the words used in Clause 25, we find it to 2025 SCC OnLine SC 2354 (2022) 14 SCC 345 stipulate to the effect that if there is any dispute between the parties, they can settle the same by arbitration. In view of Jagdish Chander (supra) which holds as under:

• “(iv) But mere use of the word “arbitration” or “arbitrator” in a clause will not make it an arbitration agreement, if it requires or contemplates a further or fresh consent of the parties for reference to arbitration. For example, use of words such as “parties can, if they so desire, refer their disputes to arbitration” or “in the event of any dispute, the parties may also agree to refer the same to arbitration” or “if any disputes arise between the parties, they should consider settlement by arbitration” in a clause relating to settlement of disputes, indicate that the clause is not intended to be an arbitration agreement. Similarly, a clause which states that “if the parties so decide, the disputes shall be referred to arbitration” or “any disputes between parties, if they so agree, shall be referred to arbitration” is not an arbitration agreement. Such clauses merely indicate a desire or hope to have the disputes settled by arbitration, or a tentative arrangement to explore arbitration as a mode of settlement if and when a dispute arises. Such clauses require the parties to arrive at a further agreement to go to arbitration, as and when the disputes arise. Any agreement or clause in an agreement requiring or contemplating a further consent or consensus before a reference to arbitration, is not an arbitration agreement, but an agreement to enter into an arbitration agreement in future.” 

The clause subject matter of dispute in this appeal indicates merely the future possibility of referring disputes to arbitration and as such, it cannot be said to be a binding arbitration agreement. In other words, the possibility of arbitration being used to settle disputes is open however, for the disputes to be settled by arbitration, further agreement between the parties would be required and needless to add, such an agreement can only come into existence when both parties agree to the same. In that view of the matter, we are of the considered view that this appeal is bereft of merit. It is accordingly dismissed.

Pending application(s) if any stands disposed of.

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State Bank of India and Ors. Vs. Doha Bank Q.P.S.C. and Anr. - It is well-settled that an appeal is a continuation of original proceeding. The documents which are relevant to deciding the lis can be produced at the stage of appeal. The corporate guarantees were produced before the NCLAT. Therefore, merely because they were not produced before the NCLT, no adverse inference can be drawn with regard to the genuineness of the corporate guarantees.

 SCI (2026.04.28) in State Bank of India and Ors. Vs. Doha Bank Q.P.S.C. and Anr. [(2026) ibclaw.in 234 SC, Civil Appeal No. 8527 of 2022] held that;-

• Section 5(8) of the Code stipulates that the essential ingredient of a financial debt is disbursal against consideration for the time value of money5. A liability arising from the corporate guarantee squarely falls within the ambit of financial debt as defined under Section 5(8) of the Code.

• The amount of any liability in respect of any of the guarantees for money borrowed against the payment of interest is a “financial debt” within Section 5(8) of the Code6. It is well settled legal proposition that a guarantor incurs a coextensive liability with that of a principal borrower and such liability is enforceable in law.

• Thus, it is evident that the corporate guarantees were executed before declaration of account of the CD as NPA and, therefore, the timing and manner of the corporate guarantees could not be questioned on the ground that the CD and the holding company were already in default.

• It is well-settled that an appeal is a continuation of original proceeding. The documents which are relevant to deciding the lis can be produced at the stage of appeal. The corporate guarantees were produced before the NCLAT. Therefore, merely because they were not produced before the NCLT, no adverse inference can be drawn with regard to the genuineness of the corporate guarantees.

• In any case, the legal position governing the effect of insufficiently stamped document is no longer res integra and the same does not become void or unenforceable merely on that account7. The defect of insufficient stamping of the document is curable in nature and does not go to the root of validity of the instrument.

• A Constitution Bench of this Court9 has held that “Non stamping or improper stamping does not result in the instrument becoming invalid. The Stamp Act does not render such an instrument void. The non-payment of stamp duty is accurately characterized as a curable defect.”

• It is well-settled legal proposition that this Court would not choose to re-appreciate a matter on facts when jurisdictional NCLT and in appeal NCLAT have recorded concurrent findings of fact. The exception to this self-imposed rule is where findings of fact are shown to be perverse10

Excerpts of the Order;

# 1. This appeal under Section 62 of the Insolvency and Bankruptcy Code, 2016 (Code) has been preferred by SBI Consortium comprising State Bank of India, Bank of India, UCO Bank, Syndicate Bank, Oriental Bank of Commerce and Indian Overseas Bank. The appeal arises from the order dated 14.10.2022 passed by the National Company Law Appellate Tribunal (NCLAT), whereby the order dated 02.03.2021 passed by National Company Law Tribunal (NCLT) was affirmed and the appeal was dismissed.

# 2. This appeal raises important question regarding validity and enforceability of corporate guarantees within the framework of the Code. The challenge mounted by respondents to the validity of the said corporate guarantees has been made on several grounds, namely, the timing and circumstances of the execution of guarantee, the alleged absence of proper disclosure in financial statements, the manner of their verification, the corporate insolvency resolution process and to their alleged insufficiency of stamping. These objections call for careful scrutiny to determine whether such grounds can legitimately defeat the recognition of a “financial debt” and status of a “financial creditor” under the Code.

FACTUAL BACKGROUND

# 3. The material facts giving rise to filing of this appeal, are as follows:

On 19.03.2010, a Facility Agreement was executed between Respondent No. 1, Doha Bank and Reliance Infratel Limited (RITL), namely Corporate Debtor (CD), whereby a foreign currency loan of USD 250 million was extended. Thereafter, on 04.03.2011, a Security Trustee Agreement was executed between the Consortium Lenders and Axis Trustee Services Ltd., appointing it as Security Trustee in respect of loan to Reliance Communications Ltd., (RCOM) and Reliance Telecom Ltd., (RTL).

# 4. The appellants, as members of a consortium of Banks, extended the rupee loan facilities of ₹6,015 crores to Reliance Communications Limited (RCOM) and ₹735 crores to Reliance Telecom Limited (RTL). On 20.02.2015, a deed of hypothecation was executed by the CD, in the favour of Security Trustee to secure the consortium lending pursuant to which a charge was created and duly registered.

# 5. On 26.08.2016, the accounts of RCOM, RTL and CD were classified as Non-Performing Assets (NPA) indicating default in repayment obligations. Subsequently, on 05.09.2016 and 04.12.2016, Reinstatement Agreements were executed between Doha Bank and the CD, restructuring the repayment obligations and extending repayment schedule ultimately up to 05.06.2017.

# 6. On 03.03.2017, the CD executed Corporate guarantees in favour of consortium lenders to secure loans extended to its group entities, namely RCOM & RTL. On 22.12.2017, the account of RITL was declared as NPA with retrospective effect from 26.08.2016.

INSOLVENCY PROCEEDINGS

# 7. On 15.05.2018, NCLT Mumbai initiated Corporate Insolvency Resolution Process (CIRP) against the CD. An Interim Resolution Professional (IRP) was appointed on 18.05.2018 to take over the management and invite claims from creditors. A public announcement was issued on 21.05.2018. The Security Trustee invoked the Corporate Guarantee executed by CD.

# 8. On 28.02.2019, Doha Bank disputed existence of such guarantees and called upon Security Trustee to withdraw the invocation. By communications dated 06.03.2019 and 18.03.2019, the Security Trustee asserted the existence and validity of the guarantees and declined interference by External Commercial Borrowings (ECB) lenders.

# 9. The Security Trustee, by a communication dated 18.03.2019, informed the ECB lenders that they should pursue their grievance with the borrowers and had no right to question rights of SBI consortium. The Advocates for the RITL advised the counsel of Doha Bank admitting the execution of the guarantees and stating that the existence of such guarantees had been disclosed by RCOM in their financial statements/annual reports.

# 10. On 30.04.2019, the NCLAT allowed the withdrawal of the appeal and directed NCLT to proceed with CIRP. On 07.05.2019, the IRP issued fresh public announcement inviting claims.

CLAIMS AND PROCEEDINGS BEFORE NCLT

# 11. On 17.05.2019, the appellant submitted a claim to IRP in Form ‘C’ for ₹3,628.67 crores. On 24.05.2019, the IRP issued notices to financial creditors and members of the suspended Board of Directors of CD to attend the first meeting of Committee of Creditors (CoC) scheduled on 30.05.2019.

# 12. By a communication dated 28.05.2019, Doha Bank sought a declaration from IRP that the corporate guarantees were preferential, undervalued and fraudulent as contemplated under Sections 43, 45 and 66 of the Code and requested derecognition of consortium as financial creditors. On 29.05.2019, the IRP rejected the objections, stating that claims have been verified based on legally valid documents.

# 13. Doha Bank filed an interlocutory application before NCLT seeking similar declarations. The appellants filed a reply on 10.06.2019 relying on the letter dated 19.03.2019 of the Advocates from CD admitting execution of corporate guarantees. On 12.08.2020, an additional affidavit was filed stating that the CD’s account has been classified as NPA on 22.12.2017 with effect from 26.08.2016, as per the RBI circular and that the corporate guarantees are kept in safe custody of security trustee who has certified the same.

# 14. By an order dated 02.03.2021, the NCLT inter alia held that (i) there was no material to show submission of proof of claims with corporate guarantees (ii) verification by Resolution Professional at New Delhi did not satisfy the statutory requirements (iii) that claims were admitted without proper documentation and (iv) consortium lenders were not financial creditors. Consequently, the Committee of Creditors was directed to be reconstituted.

PROCEEDINGS BEFORE NCLAT

# 15. The appellants preferred an appeal before the NCLAT. By an order dated 14.10.2022, NCLAT held as follows: (i) the corporate guarantees were executed when CD was in default of his obligation and was suffering from severe financial constraints; (ii) there is no documentary evidence to show that there was disclosure regarding the guarantees by the beneficiary lenders of the related party of the CD during restructuring of the debt of corporate debtor; (iii) the guarantees were not reflected in the financial statements of CD for financial year 2016-17 and 2017-18 or were produced before the NCLT; (iv) there is no pleading on record to establish that the guarantees were verified at New Delhi by the IRP/RP apart from brief reply affidavit of the RP; (v) the CD was declared NPA on 22.12.2017 w.e.f. from 26.08.2016 indicating that CD was in default for at least 90 days prior to 26.08.2016; (vi) it was obligatory under the law to produce a document duly stamped in accordance with provisions of Maharashtra Stamp Act, 1958; (vii) the timing and manner of the corporate guarantees were questionable as corporate debtor and holding companies were already in default. Accordingly, the appeal was dismissed. In the aforesaid factual background, this appeal arises for our consideration.

SUBMISSIONS

# 16. Learned senior counsel for the appellant submitted that the appellants are financial creditors of the CD on the basis of Corporate Guarantees and a Deed of Hypothecation. It is contended that liabilities arising from the guarantees constitute financial debt under Section 5(8) of the IBC and the claims of the appellant were verified by the Financial Creditors leading to formation of Committee of Creditors (CoC). It is pointed out that counsel for CD has admitted execution of the Corporate Guarantee and that disclosures have been made by them in their financial statements on an ongoing basis. It is contended that the present corporate guarantee is not covered under Section 85 of the Companies Act.

# 17. It is pointed out that as per RBI Circular dated 01.07.2015, relating to asset classification and provisioning pertains to advances, in case of restructuring, the asset classification will be reckoned from the date, it became NPA on the first occasion. It is submitted that the Corporate Guarantees were executed in the New Delhi office of the Security Trustee and stamp duty at applicable rates in New Delhi has duly been paid. It is submitted that the concurrent finding of the tribunals are perverse and the issue involved in the appeal is no longer res integra and is covered by the decision of this Court1. In support of the aforesaid submissions, reliance has been placed on the decisions of this Court2.

# 18. On the other hand, learned senior counsel for the respondents submitted that the alleged corporate guarantees are non-existent, invalid and unenforceable in law. It is submitted that the corporate guarantees executed on 02.03.2017 are highly suspicious, due to their timing and manner of execution, as the corporate debtor and its group companies were already classified as NPA on 26.08.2016.

# 19. It is contented that the corporate guarantees were not disclosed in the financial statements for financial year 2016-17 and 2017-18 and were deliberately withheld before the NCLT and introduced only at the appellate stage which is impermissible in law. It is contended that the corporate guarantees are insufficiently stamped and are inadmissible. It is argued that the alleged corporate guarantees were created in breach of the facility agreement and Section 186 of the Companies Act, 2013 as no special resolution was passed despite the large value of guarantee. It is contended that the concurrent findings of facts have been recorded by the Tribunals which do not call for any interference in this appeal. In support of the aforesaid submissions reliance has been placed on the decisions of Rajasthan High Court and the decision of NCLAT3.

ISSUES

# 20. We have considered the rival submissions made on both sides and have perused the record.

# 21. The following issues arise for consideration:

• (i) whether the Corporate Guarantees executed by the Corporate Debtor constitute “financial debt” within the meaning of Section 5(8) of the Code.

• (ii) Whether the claims of the appellants were liable to be rejected for non-submission or improper verification of documents.

• (iii) Whether the findings recorded by the tribunals warrant interference under Section 62 of the Code.

ANALYSIS

# 22. At the outset, it is apposite to note that for a debt to become “financial debt” for the purpose of Part II of the Code, the essential elements of disbursal, and that too against the consideration for time value of money, needs to be found in the genesis of any debt before it may be treated as “financial debt” within the meaning of Section 5(8) of the Code. This debt may be of any nature but a part of it is always required to be carried, or corresponding to, or at least having some traces of disbursal against consideration for the time value of money4. Under Section 5(7) of the Code, a person can be categorized as a financial creditor if a financial debt is owed to it. Section 5(8) of the Code stipulates that the essential ingredient of a financial debt is disbursal against consideration for the time value of money5. A liability arising from the corporate guarantee squarely falls within the ambit of financial debt as defined under Section 5(8) of the Code. The amount of any liability in respect of any of the guarantees for money borrowed against the payment of interest is a “financial debt” within Section 5(8) of the Code6. It is well settled legal proposition that a guarantor incurs a coextensive liability with that of a principal borrower and such liability is enforceable in law.

# 23. In the present case, the execution of the corporate guarantee executed by CD in favour of Security Trustee for and on behalf of the appellants has not been disputed by the CD which is evident from the communication dated 19.03.2019 sent by the counsel of the CD. Paras 2 and 4 of the said communication are extracted below for the facility of reference:

• “2. At the outset our clients deny all allegations made by you in the letter with respect to the alleged conspiracy and defrauding of Emirates NBD Bank PJSC, Industrial and Commercial Bank of China Limited, Doha Bank Q.P.S.C. and VTB Capital Plc (collectively, the “ECB Lenders”). The information regarding the Guarantees (as defined in the Letter) has always been available to the public including the ECB Lenders and adequate disclosures have been made on an ongoing basis under the financial statements and annual reports of the borrower group.

• 4. As the Information of the Guarantees have always been publicly available, the ECB Lenders had full access to such information and the allegations are therefore false and denied. In light of the above submission and classification, we request you to look into the supporting documents provided under Annexure A and withdrew your allegations made under the Letter.”

Thus, the execution of the guarantees is beyond any pale of doubt.

# 24. So far as timing of execution of the corporate guarantee is concerned, the account of the CD was first declared NPA on 22.08.2016. However, the same was subsequently restructured by the consortium of banks, in lieu thereof, the CD executed the corporate guarantee on 03.03.2017. However, despite such restructuring, the account once again became NPA on 20.12.2017. The Reserve Bank of India has issued a master circular dated 01.07.2015, which provides for prudential norms on income recognition or NPA Classification, and provisioning pertaining to advances. Clause 17.2.6 of the said circular reads as under:

• “17.2.6 If a restructured asset, which is a standard asset on restructuring in terms of para 20.2, is subjected to restructuring on a subsequent occasion, it should be classified as substandard. If the restructured asset is a sub-standard or a doubtful asset and is subjected to restructuring, on a subsequent occasion, its asset classification will be reckoned from the date when it became NPA on the first occasion. However, such advances restructured on second or more occasion may be allowed to be upgraded to standard category after the specified period (Annexure-5) in terms of the current restructuring package, subject to satisfactory performance.”

The said master circular mandates that in case of restructured assets, its asset classification will be reckoned from the date it became NPA on the first occasion. The appellants, therefore, declared the account of the CD as NPA w.e.f. 26.08.2016. Thus, it is evident that the corporate guarantees were executed before declaration of account of the CD as NPA and, therefore, the timing and manner of the corporate guarantees could not be questioned on the ground that the CD and the holding company were already in default.

# 25. It is pertinent to note that in the communication dated 19.03.2019 sent by the counsel of the CD, it is stated that disclosures about the corporate guarantees have been made by the CD in their financial statements on an ongoing basis. In any case, mere non-disclosure of corporate guarantee in the financial statements of CD for financial years 2016-17 and 2017-18, cannot deprive the appellants from making a claim on the basis of the said guarantees. At best, it could be treated as default committed by the CD.

# 26. In exercise of the powers conferred under the Code, the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 have been framed. Regulation 10 of the Regulations deals with substantiation of claims, whereas Regulation 13 provides for verification of the claims. Regulation 10 of the said Regulations provides that IRP or RP may call for such other evidence or clarification as he deems fit from a creditor for substantiating the whole or part of its claim. The corporate debtor has admitted execution of the corporate guarantee. The appellant had produced a letter dated 06.03.2019 before the NCLT issued by the security trustee wherein the said trustee confirmed that the executed and stamped version of corporate guarantees is in their custody in New Delhi. The RP inspected the aforesaid guarantees and verified the same by visiting the office of Security Trustee in New Delhi. Therefore, the finding recorded by the NCLAT that there is no pleading on record to establish that guarantees were verified by IRP/RP is perverse.

# 27. It is well-settled that an appeal is a continuation of original proceeding. The documents which are relevant to deciding the lis can be produced at the stage of appeal. The corporate guarantees were produced before the NCLAT. Therefore, merely because they were not produced before the NCLT, no adverse inference can be drawn with regard to the genuineness of the corporate guarantees.

# 28. The corporate guarantees were executed in the New Delhi office of Security Trustee and the Stamp Duty as per applicable rates in New Delhi has been paid. The same were produced before the NCLAT, Principal Bench at New Delhi. The production of corporate guarantees in a proceeding in New Delhi, does not attract the provisions of Maharashtra Stamp Duty Act, 1958. In any case, the legal position governing the effect of insufficiently stamped document is no longer res integra and the same does not become void or unenforceable merely on that account7. The defect of insufficient stamping of the document is curable in nature and does not go to the root of validity of the instrument. Even otherwise, the Stamp Act is a fiscal measure enacted to secure revenue for the State on certain classes of instrument. It is not intended to be used as a weapon by a litigant to defeat the cause of the opponent8. A Constitution Bench of this Court9 has held that “Non stamping or improper stamping does not result in the instrument becoming invalid. The Stamp Act does not render such an instrument void. The non-payment of stamp duty is accurately characterized as a curable defect.” Therefore, the contention that the corporate guarantees were not duly stamped as Stamp Duty under the Maharashtra Stamp Duty Act, 1958 was not paid is sans substance.

# 29. For the aforementioned reasons, issue no.(i) is answered in the affirmative where as issue no (ii) is answered in the negative.

# 30. It is well-settled legal proposition that this Court would not choose to re-appreciate a matter on facts when jurisdictional NCLT and in appeal NCLAT have recorded concurrent findings of fact. The exception to this self-imposed rule is where findings of fact are shown to be perverse10. It is pertinent to note that NCLT had rejected the plea of respondents with regard to preferential transactions and fraud under Sections 43 and 66 of the Code respectively. Merely because the corporate guarantees were not filed along with Form-C, the claim of the appellants could not have been negated. The tribunals at the instance of a lender grossly erred in rejecting the claim raised by the consortium of lenders. For the reasons already assigned by us, in our considered opinion, the perversity of the findings of the tribunals are glaring and manifest, beseeching interference by this Court in second appellate jurisdiction. Accordingly, issue no. (iii) is answered in the affirmative.

CONCLUSION

# 31. For the reasons aforesaid, it is held that :-

• (i) the corporate guarantees executed by the corporate debtor constitute “financial debt” within the meaning of Section 5(8) of the Code. The appellants are entitled to be recognized as financial creditors.

• (ii) The rejection of claims of the appellants, by the NCLT and NCLAT are legally unsustainable.

• (iii) The impugned orders suffer from perversity and warrant interference by this Court.

OPERATIVE DIRECTIONS

# 32. The judgments dated 14.10.2022 and 02.03.2021 passed by NCLAT and NCLT are quashed and set aside. All consequential actions taken in pursuance of impugned orders are set aside. The appellants are recognised as “financial creditors” of the Corporate Debtor. The Resolution Professional is directed to reconstitute the committee of creditors by including the appellants and to proceed with the corporate insolvency resolution process in accordance with law.

# 33. In the result, the appeal is allowed. However, there shall be no order as to costs.

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References:

1. China Development Bank v. Doha Bank Q.P.S.C. & Ors., [(2024) ibclaw.in 340 SC] : (2025) 7 SCC 729. 

2. Interplay Between Arbitration Agreements under Arbitration & Conciliation Act, 1996 and Stamp Act, 1899, IN RE, [(2023) ibclaw.in 153 SC] : (2024) 6 SCC 1; Union of India v. M/s. Chaturbhai M. Patel & Co., (1976) 1 SCC 747; Dhirajlal Girdharlal v. Commissioner of Income Tax, Bombay, (1954) 2 SCC 557; Omar Salay Mohamed Sait v. Commissioner of Income Tax, Madras, (1959) SCC OnLine SC 71; Avantha Holdings Ltd. & Anr. v. Abhilash Lal, Resolution Professional for Jhabua Power Ltd. & Ors.; [(2022) ibclaw.in 476 NCLAT] : 2022 SCC OnLine NCLAT 4352; UOI v. M/s Chaturbhai M. Patel & Co. (1976) 1 SCC 747; Interplay between Arbitration Agreements under Arbitration and Conciliation Act, 1996 and Stamp Act, 1899 in Re, [(2023) ibclaw.in 153 SC] : (2024) 6 SCC 1; Hindustan Steel Ltd. v. Dilip Construction Company, (1969) 1 SCC 597; Dena Bank v. C. Shivakumar Reddy & Anr. [(2021) ibclaw.in 69 SC] : (2021) 10 SCC 330; Axis Bank Ltd. v. Naren Shet & Anr., [(2023) ibclaw.in 103 SC] : (2024) 1 SCC 679

3. Ram Narain v. Lt. Col. Hari Singh; 1963 SCC OnLine Raj 55 and Dr. Anupam Jain v. CS Chhaya Gupta and Another; [(2025) ibclaw.in 827 NCLAT] : 2025 SCC OnLine NCLAT 1629

4. Anuj Jain, Interim Resolution Professional for Jaypee Infratech Ltd. v. Axis Bank Ltd. & Ors.; [(2020) ibclaw.in 06 SC] : (2020) 8 SCC 401

5. Phoenix ARC (P) Ltd. v. Spade Financial Services Ltd. & Ors.; [(2021) ibclaw.in 03 SC] : (2021) 3 SCC 475

6. China Development Bank (supra)

7. Hindustan Steel Ltd. (supra)

8. NN Global Mercantile (P) Ltd. v. Indo Unique Flame Ltd. & Ors.; [(2023) ibclaw.in 56 SC] : (2023) 7 SCC 1

9. Interplay Between Arbitration Agreements under Arbitration & Conciliation Act, 1996 and Stamp Act, 1899 (supra)

10. Catalyst Trysteeship Ltd. v. Ecstasy Realt (P) Ltd.; [(2026) ibclaw.in 104 SC] : (2026) SCC OnLine SC 300 and SBI & Ors. v. The Consortium of Mr. Murari Lal Jalan and Mr. Florian Fritsch & Anr.; [(2024) ibclaw.in 290 SC] : 2024 INSC 852

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