Raziya Begum & Ors. Vs. Nafisa Begum Abdul Hamid & Ors. - The real test is the intention of the parties. In order to constitute a “sale”, the parties must intend to transfer the ownership of the property and they must also intend that the price would be paid either in praesenti or in future. The intention is to be gathered from the recital in the sale deed, the conduct of the parties and the evidence on record.

 SCI (2026.08.07) in Raziya Begum & Ors. Vs. Nafisa Begum Abdul Hamid & Ors.   [2026 INSC 814, Civil Appeal No. 7225 of 2011] held that; 

• The definition further says that the transfer of ownership has to be for a “price paid or promised or part-paid and part- promised”. Price thus constitutes an essential ingredient of the transaction of sale. The words “price paid or promised or part-paid and part-promised” indicate that actual payment of the whole of the price at the time of the execution of sale deed is not a sine qua non to the completion of the sale.

• The real test is the intention of the parties. In order to constitute a “sale”, the parties must intend to transfer the ownership of the property and they must also intend that  the price would be paid either in praesenti or in future. The intention is to be gathered from the recital in the sale deed, the conduct of the parties and the evidence on record.

• Dahiben (supra) also, while interpreting Section 54 of the Act, held that actual payment of entire sale price at the time of execution of sale deed is not an essential condition for completion of sale. When a sale deed is registered, even upon part payment of the sale price, title would pass to the transferee. The non- payment of remaining part of the sale price would not invalidate it and the remedy would be to recover the balance sale consideration, but not cancellation of sale deed for non-payment of balance sale consideration.

Excerpts of the order;

Concurrent findings of the Trial Court and the Appellate Court were reversed by the High Court in a second appeal. The legal heirs of the original sole defendant are before us, and the respondents are the legal heirs of the original plaintiffs, a son and his mother. The plaintiffs filed a suit for declaration of two sale deeds, both dated 10.03.1975, as void and inoperative, to cancel these deeds and declare the plaintiffs as the absolute owners of the properties covered by the sale deeds. They further prayed for a permanent injunction against the sole original defendant, restraining him from interfering with the ownership and possession of the plaintiffs.

# 2. The plaint averments were that the two sale deeds were executed in the wake of debts accrued in the name of the plaintiffs in various financial institutions and the government departments. The original defendant came with a helping hand and agreed to find a purchaser for the property. A purchaser was brought, who left at the last minute, when the original defendant agreed to purchase their lands. The entire consideration was not available with the defendant, in which circumstances, he persuaded the plaintiffs to execute the sale deeds with respect to both the properties, handing over only part of the consideration. The total consideration for each of the properties fixed was Rs.7,000/- (Rupees Seven thousand), out of which Rs.2,500/- (Rupees Two thousand and five hundred) was handed over, as evident from the sale deeds itself. As per the clear recitals in the sale deeds, the defendant had retained Rs.4,500/- (Rupees Four thousand and five hundred) each, so as to settle the dues remaining against the plaintiffs in the various institutions.

# 3. The defendant failed to satisfy the dues and hence when the plaintiffs repeatedly approached him, he executed an agreement with respect to one of the properties promising to handover the remaining Rs.4,500/- and with respect to the other property, another agreement was executed, taking upon himself the responsibility to repay all the loans. The sale deeds were produced as Exhibit Nos.66 and 67 and the agreements were produced as Exhibit Nos.60 and 63 before the Trial Court, and in this appeal as additional documents along with translations.

# 4. The Trial Court after evaluating the evidence, found that the agreements related to a concluded sale and, though, there was only part payment of the sale consideration, even as per the agreement, there is no condition incorporated in the sale deed that refusal to pay the balance sale consideration would result in the cancellation of the sale deed. The further agreements only reaffirmed the obligation of the defendant to pay the balance consideration as per the sale deed i.e. Rs.4,500/- each, totaling Rs.9,000/-. A further contention taken by the plaintiffs that the property had other co-owners, members of the plaintiffs’ family, was rejected finding that so long as the first plaintiff was alive, there was no question of any of his sons taking a share in his property.

# 5. On possession, it was found, based on the evidence led, that the proceedings under the Criminal Procedure Code, 1973 specifically under Section 145, resulted in the Sub Divisional Magistrate (SDM) taking over possession and later handing it over to the plaintiffs. The Trial Court found that the defendant has to pay the balance consideration with interest from 10.03.1975 to perfect his title. The plaintiffs’ suit was dismissed with the finding that the plaintiffs were not entitled to; cancellation of the sale deeds, declaration of ownership or the injunction as prayed for. Insofar as the possession, the Trial Court refused to interfere, since it found that there was no claim for specific performance or reconveyance. We would rather justify the refusal to interfere in the possession to be, by reason of a counter claim not having been raised. Be that as it may, the Trial Court dismissed the suit, and the First Appellate Court affirmed it.

# 6. In second appeal, two questions of law were framed by the High Court: whether the sale deeds executed, without the entire sale consideration being paid especially in the wake of the subsequent agreements as also the dues of the plaintiffs remaining unpaid, can be found valid and binding on the plaintiffs and the second question as to whether the plaintiffs were entitled to a declaration of ownership and an injunction to retain peaceful possession.

# 7. The High Court found that the clear recitals in the sale deeds indicated that the defendant was obliged to satisfy the dues existing in the name of the plaintiffs before the Government Departments, Co-Operative Banks and Co-Operative Societies. The finding of the Trial Court and the Appellate Court that there was no conditional reconveyance stipulated, on the balance consideration not being paid, was found to be wrong. It was found that there was no evidence produced by the defendant to indicate the balance sale consideration having been paid or the dues remaining unpaid against the plaintiffs, having been satisfied. The plaintiffs having agreed to repay the amount of Rs.5,000/- (Rupees Five thousand), it was directed that the same be paid with 9% simple interest from 10.03.1975 till 31.03.2010 and the suit was decreed declaring the plaintiffs to be the owner of the lands covered by the sale deeds vide Exhibit Nos.66 and 67, since the sale deeds were inoperative and the possession, if at all the plaintiffs were deprived of it, was directed to be handed over.

# 8. Before us, learned Counsel for the appellants/legal heirs of the defendant, specifically referred to two decisions of this Court in Vidhyadhar v. Manikrao & Anr. [(1999) 3 SCC 573] and Dahiben v. Arvindbhai Kalyanji Bhanusali (Gajra) Dead through Legal Representatives & Ors. [(2020) 7 SCC 366].

# 9. Learned Counsel for the respondent on the other hand emphasized that the view of the High Court flows from the findings of the Trial Court itself. No fact finding of the Trial Court was disturbed and it was merely on the aspect of law, the binding nature of the sale deeds, in the absence of full consideration being paid, the High Court reversed the Trial Court judgment and decreed the suit. The High Court acted within the contours of the jurisdiction conferred under Section 100 of the Civil Procedure Code, 1908. It never reappreciated the evidence led or substituted the findings of the Trial Court but merely gave legal effect to the findings already rendered.

# 10. In Vidhyadhar (supra), it was held so in Paragraph Nos.36, 37 and 38 with respect to Section 54 of the Transfer of Property Act, 18823:-

• “36. The definition indicates that in order to constitute a sale, there must be a transfer of ownership from one person to another, i.e., transfer of all rights and interests in the properties which are possessed by that person are transferred by him to another person. The transferor cannot retain any part of his interest or right in that property or else it would not be a sale. The definition further says that the transfer of ownership has to be for a “price paid or promised or part-paid and part- promised”. Price thus constitutes an essential ingredient of the transaction of sale. The words “price paid or promised or part-paid and part-promised” indicate that actual payment of the whole of the price at the time of the execution of sale deed is not a sine qua non to the completion of the sale. Even if the whole of the price is not paid but the document is executed and thereafter registered, if the property is of the value of more than Rs 100, the sale would be complete.

• 37. There is a catena of decisions of various High Courts in which it has been held that even if the whole of the price is not paid, the transaction of sale will take effect and the title would pass under that transaction. To cite only a few, in Gayatri Prasad v. Board of Revenue [1973 All LJ 412] it was held that non-payment of a portion of the sale price would not affect validity of sale. It was observed that part-payment of consideration by the vendee itself proved the intention to pay the remaining amount of the sale price. To the same effect is the decision of the Madhya Pradesh High Court in Sukaloo v. Punau [AIR 1961 MP 176 : ILR 1960 MP 614].

• 38. The real test is the intention of the parties. In order to constitute a “sale”, the parties must intend to transfer the ownership of the property and they must also intend that  the price would be paid either in praesenti or in future. The intention is to be gathered from the recital in the sale deed, the conduct of the parties and the evidence on record.”

# 11. Dahiben (supra) also, while interpreting Section 54 of the Act, held that actual payment of entire sale price at the time of execution of sale deed is not an essential condition for completion of sale. When a sale deed is registered, even upon part payment of the sale price, title would pass to the transferee. The non- payment of remaining part of the sale price would not invalidate it and the remedy would be to recover the balance sale consideration, but not cancellation of sale deed for non-payment of balance sale consideration.

# 12. Section 54 of the Act squarely applies to the above case. A reading of the translated sale deeds produced along with the appeal, clearly indicates that the defendant had retained Rs.4,500/- for clearing the dues of the plaintiffs. Obviously, the same was not paid and later, by two agreements, the defendant agreed to pay the full consideration and to repay all the government loans.

# 13. The agreements were executed in the years 1975 and 1976. The suit was filed in 1984, in which case, the question of limitation also arises. The plaintiffs, without filing a suit for recovery of money; i.e., for balance sale consideration, attempted cancellation of the sale deeds, after executing it on receipt of part consideration, agreeing for the retention of balance consideration with the defendant to satisfy the dues of the plaintiffs. The sale, hence, has become final.

# 14. Even if we understand the High Court having not entered into a reappreciation of facts, it is clear that the conclusion on the available facts was wrong. The sale deed executed with full knowledge of the part consideration alone having been passed, cannot be rendered void or inoperative merely because the balance consideration promised to be paid, which promise was incorporated in the sale deed, had not been complied with. The right of the plaintiffs was to file for recovery of balance sale consideration and not to seek declaration that the sale deeds were null and void; which they are not.

# 15. As has been noticed by the Trial Court, the appellants herein would have to pay the balance sale consideration with interest from 10.03.1975 at the rate of interest charged on the plaintiffs, by their creditors and seek possession of the property, if at all they so desire.

# 16. The Trial Court and the First Appellate Court refused to interfere with the possession of the plaintiffs, which we also are not inclined to.

# 17. The Appeal stands allowed, reversing the judgment of the High Court and restoring that of the Trial Court as affirmed by the First Appellate Court.

# 18. Pending application(s), if any, shall stand disposed of. 

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If nomination is substitute to testamentary succession

 If nomination is a substitute to testamentary succession

Recently,  amendments were made in the banking laws about nomination facility for bank accounts & lockers facility, making provisions of multiple nominations, share of various nominees either successively or simultaneously.

Banking Laws (Amendment) Act, 2025.

(Appointed date 01.11.2025, Gazette Notification dated 22.10.2025)

# 10. In the Banking Regulation Act of 1949, in section 45ZA, - 

(a) in sub-section (1), for the words “one person”, the words “one or more persons not exceeding four, either successively or simultaneously” shall be substituted;

(b) after sub-section (1), the following sub-sections shall be inserted, namely: - 

• “(1A) Where the nomination is made successively in favour of more than one person under sub-section (1), the nomination shall be effective only in favour of one person in the order of priority specified in section 45ZG.

• (1B) Where the nomination is made simultaneously in favour of more than one person under sub-section (1), the nomination shall be effective in favour of all such persons in proportion to which it is declared, and the following terms and conditions shall apply, namely: - 

• (a) the nomination shall not be made in favour of more than four persons;

• (b) the nomination shall explicitly state the proportion of amount of deposit in percentage in favour of each nominee;

• (c) the nomination shall be made in respect of the whole amount of deposit;

• (d) if any nominee dies before receiving deposit from the banking company, the nomination in respect of such nominee alone shall become ineffective and the amount of deposit purported to be nominated in favour of deceased nominee shall be treated as if nomination had not been made in respect of that portion of deposit,

and any nomination which does not comply with any of the terms and conditions specified in clauses (a) to (c), shall be invalid, as if nomination had not been made by the depositor or all the depositors together, as the case may be.”.

# 11. In the Banking Regulation Act of 1949, in section 45ZC, in sub-section (1), for the words “one person”, the words “one or more persons not exceeding four, successively,” shall be substituted.

# 12. In the Banking Regulation Act of 1949, in section 45ZE, for sub-section (1), the following sub-section shall be substituted, namely: - 

• “(1) Where one or more individuals hire a locker from a banking company, whether such locker is located in the safe deposit vault of such banking company or elsewhere, the individual or, as the case may be, all the individuals together, may nominate one or more persons not exceeding four, successively, to whom, in the event of the death of the sole hirer or the death of all the hirers, the banking company may give access to the locker and liberty to remove the contents of the locker.”.

# 13. In the Banking Regulation Act of 1949, after section 45ZF, the following section shall be inserted, namely: - 

• “45ZG. (1) Where the nomination is made in favour of more than one person successively under sub-section (1) of section 45ZA or sub-section (1) of section 45ZC or sub-section (1) of section 45ZE, the nomination shall be effective only in favour of one person in the following order of priority, namely: - 

• (a) nomination of the first nominee shall be effective if that nominee survives the person or persons who made the nomination; 

• (b) nomination of the second nominee shall become effective only after the death of the first nominee;

• (c) nomination of any nominee lower in the order of nomination shall become effective only after the death of all the nominees whose names are higher in the order of nomination.

• (2) Where the order of nomination is not mentioned, persons shall be deemed to have been nominated in the order in which their names appear in the nomination.

• (3) The provisions of this section shall not apply to the nominations made simultaneously in favour of more than one person under sub-section (1) of section 45ZA.”.

For a common citizen, the nomination facility in the banking accounts & lockers facility in the banks, with the above amendments gives an impression that nomination is sufficient to define & settle the succession of one’s financial assets (bank deposits & valuables kept in lockers). However the Hon'ble Supreme Court in Shakti Yezdani vs Jayanand Jayant Salgaonkar had ruled that nomination does not confer succession ownership rights on the nominee.

Thus to provide for clarity & to avoid unnecessary litigation amongst legal heirs of the depositor, the Indian Succession Act, 1925, needs to be amended to treat the nominations, registered under the provisions of various statutes, as deemed will unless contrary is mentioned in the subsequent will of the depositor/testator.

Case Law;

Hon'ble Supreme Court (2023.12.14) in Shakti Yezdani vs Jayanand Jayant Salgaonkar  [2023 INSC 1076, Civil Appeal  No. 7107 Of 2017] held that.

“# 25. In an illuminating list of precedents, this Court as well as several High Courts have dealt with the concept of ‘nomination’ under legislations like the Government Savings Certificate Act 1959, the Banking Regulation Act, 1949, the Life Insurance Act, 1939 and the Employees Provident Fund and Miscellaneous Provisions Act,  1952. It would be apposite to refer to what the Court said on nomination, in reference to these legislations:

Case Law/Precedent	Held
Sarbati Devi & Anr. v. Usha Devi [(1984) 1 SCC 424]	Nomination under S. 39 of the Insurance Act 1938 is subject to the claim of heirs of the assured under the law of succession.
Nozer Gustad Commissariat v. Central Bank of India [(1993) 1 Mah LJ 228]	Nomination under S. 10(2) of the EPF & Misc.  provisions Act 1952 cannot be made in favour of a non-family person. Relied upon Sarbati Devi (supra) to state that the principles therein were applicable to the Employees Provident Funds Act as well and not merely restricted to the Insurance Act.
Vishin N. Khanchandani & Anr. v. Vidya L. Khanchandani [(2000) 6 SCC 724]	Nominee entitled to receive the sum due on the savings certificate under S. 6(1) of the Govt. Savings Certificate Act 1959, but cannot utilise it. In fact, the nominee may retain the same for those entitled to it under the relevant law of succession.
Ram Chander Talwar & Anr. v. Devender Kumar Talwar & Ors. [(2010) 10 SCC 671]	Nomination made under provisions of S. 45ZA of the Banking Regulation Act 1949 entitled the nominee to receive the deposit amount on the death of the depositor.

# 26. A consistent view appears to have been taken by the courts, while interpreting the related provisions of nomination under different statutes. It is clear from the referred judgments that the nomination so made would not lead to the nominee attaining absolute title over the subject property for which such nomination was made. In other words, the usual mode of succession is not to be impacted by such nomination. The legal heirs therefore have not been excluded by virtue of nomination.

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# 39. The appellants also contend that a nomination validly made under S. 109A of the Companies Act, 1956 and Bye-law 9.11 of the Depositories Act, 1996 constitutes a ‘statutory testament’ that overrides testamentary/intestate succession. It is worth noting that the argument of nomination as a ‘statutory testament’ in respect of instruments such as life insurance policies, government savings certificates, provident fund etc. were considered and emphatically rejected by this Court in multiple rulings.

# 40. In Sarbati Devi (supra) this Court held that nomination under S. 39 of the Life Insurance Act, 1938 does not contemplate a third line of succession styled as a ‘statutory testament’ and any amount paid to a nominee on the policy holder’s death forms a part of the estate of the deceased policy holder and devolves upon his/her heirs, as per testamentary or intestate succession. Further, in Ram Chander Talwar (supra), while discussing the rights of a nominee of a deceased depositor (S. 45-ZA(2) Banking Regulation Act, 1949), this court concluded that the right to receive the money lying in the depositor’s account was to be conferred on the nominee but the nominee would not become the owner of such deposits. The said deposit is a part of the deceased depositor’s estate and is subject to the laws of succession, that governs the depositor.”

Disclaimer: The sole purpose of this blog is to create awareness on the subject and must not be used as a guide for taking or recommending any action or decision, commercial or otherwise. One must do his own research and seek professional advice if he intends to take any action or decision in the matters covered in this blog.

State Bank of India and Ors. Vs. Doha Bank Q.P.S.C. and Anr. - 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.”

  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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