Corporate guarantees giving rise to liability for repayment of money borrowed constitute ‘financial debt’ – Technical lapses are immaterial

The Supreme Court has recently held that the corporate guarantees which were executed before the Corporate Debtor was declared as a Non-Performing Asset, are to be constituted as ‘financial debt’ under Section 5(8) of the Insolvency and Bankruptcy Code, 2016 (‘IBC’). The appeal was preferred by the SBI Consortium (‘Appellant’) arising from the order passed by the National Company Law Appellate Tribunal (‘NCLAT’).

In the present case, Doha Bank had extended a USD 250 million foreign currency loan to Reliance Infratel Ltd., (‘Corporate Debtor’), while the Appellant had advanced substantial rupee loans to its group companies, Reliance Communications Ltd. and Reliance Telecom Ltd., which were secured by corporate guarantees executed by the Corporate Debtor on 03 March 2017. Following defaults and classification of the accounts as Non-Performing Asset, Corporate Insolvency Resolution Process against the Corporate Debtor commenced on 15 May 2018 and the Appellant filed claims as financial creditors on the strength of these guarantees, which were, however, challenged by Doha Bank on grounds including suspicious timing of execution post‑default, non‑disclosure in the financial statements, improper verification, insufficient stamping, and their alleged preferential and fraudulent nature.

The National Company Law Tribunal (‘NCLT’) held against the Appellant primarily on technical and procedural grounds, namely that the Appellant had failed to submit the corporate guarantees along with Form‑C, that the claims were admitted without proper documentary proof, that the guarantees were not duly verified by the Resolution Professional in accordance with the IBC Regulations, that the guarantees were not disclosed in the financial statements of the Corporate Debtor, and that they were insufficiently stamped, thereby concluding that the Appellants could not be treated as financial creditors and directing reconstitution of the Committee of Creditors. 

The NCLAT affirmed the NCLT’s view and went further to question the timing and manner of execution of the corporate guarantees, holding them to be suspicious as they were executed when the Corporate Debtor and its group companies were already in financial distress and allegedly in default. 

Consequently, what fell for consideration in State Bank of India & Ors. v. Doha Bank Q.P.S.C. & Anr. [2026 INSC 423] before the Supreme Court under Section 62 of the IBC was whether these concurrent findings were perverse in law. 

The Supreme Court held particularly on the validity of the corporate guarantee to constitute a ‘financial debt’ under Section 5(8) of the IBC, on the ground that even when executed during restructuring, not reflected in financial statements, or allegedly insufficiently stamped, since it is a disbursal against consideration for time value of money. It was noted that defects like insufficient stamping are curable and do not render the instrument void. 

Thus, the claims of financial creditors cannot be rejected on mere technical lapses.