The Supreme Court of India ('Court') in UV Asset Reconstruction Company Limited v. Electrosteel Castings Limited, Civil Appeal No. 9701/2024, has delivered a critical judgment clarifying the legal boundaries between a Deed of Undertaking and a Contract of Guarantee under Section 126 of the Indian Contract Act, 1872 (‘Act’). The Court's decision underscores that mere commercial nomenclature and internal funding arrangements do not satisfy the rigorous legal requirements of a guarantee.
Factual Background
The Hon’ble Supreme Court, in its recent judgment, examined two (2) important issues under the Insolvency and Bankruptcy Code, 2016 (“IBC”). The first concerned the parameters governing the admission of a real estate project into the Corporate Insolvency Resolution Process (“CIRP”), while the second related to the locus standi of a homebuyers’ association or society seeking to intervene or participate in insolvency proceedings against the developer.
CASE BRIEF
Case Name: Sri Lakshmi Hotel Pvt. Limited & Anr vs Sriram City Union Finance Ltd & Anr.
Case No.: Civil Appeal No. 13785 of 2025
Citation: 2025 INSC 1327
Court: Hon’ble Supreme Court of India.
Coram: Hon’ble Mr. Justice J.B. Pardiwala and Hon’ble Mr. Justice, K.V. Viswanathan
Date: 18 November 2025
1. FACTUAL MATRIX
Background
Insolvency and Bankruptcy Board of India (IBBI) on 22nd December 2025, amended the IBBI (Insolvency Resolution Process for Corporate Persons) Regulations (CIRP Regulations) to introduce sub-regulation 3A to existing regulation 38 (Amendment).
Summary: In EPC Constructions India Ltd. v. Matix Fertilizers & Chemicals Ltd., the Supreme Court addressed whether holders of non-cumulative redeemable preference shares can initiate insolvency proceedings under Section 7 of the IBC, as financial creditors. The Court held that preference shareholders are not creditors and cannot trigger insolvency proceedings, as preference shares remain part of the share capital even upon maturity, and conversion of debt into preference shares permanently extinguishes the original creditor relationship.
The Insolvency and Bankruptcy Board of India (IBBI) has issued the Insolvency Professionals to act as IRPs, RPs, Liquidators and Bankruptcy Trustees (Recommendation) (Second) Guidelines, 2025, which will govern appointments for the period January 1, 2026 to June 30, 2026.
The insolvency framework governing real estate projects in India has undergone a significant transformation with the recognition of “Reverse CIRP”, a judicial innovation designed to protect homebuyers’ interests while ensuring completion of stalled real estate projects. This mechanism was recently endorsed by the National Company Law Appellate Tribunal (“NCLAT”) in the Satish Chander Verma v. Grand Reality Private Limited[1] ("Grand Reality Case").
The Supreme Court of India (“Supreme Court”), in Mansi Brar Fernandes vs. Shubha Sharma and Anr. inter alia held that ‘speculative investors’ cannot be permitted to initiate Corporate Insolvency Resolution Process (“CIRP”) under the Insolvency and Bankruptcy Code, 2016 (“IBC”) and has laid down certain key principles and criteria for determining who a ‘speculative investor’ would be.
Brief facts
INTRODUCTION