Supreme Court: Corporate Guarantees Are Financial Debt Under IBC, SBI Consortium Restored as Financial Creditors

News Citation : 2026 LN (SC) 423

April 28, 2026 : In a significant ruling clarifying the scope of “financial debt” under the Insolvency and Bankruptcy Code, 2016 (IBC), the Supreme Court has held that liabilities arising from corporate guarantees fall squarely within Section 5(8) of the Code. The judgment came in State Bank of India & Ors. v. Doha Bank Q.P.S.C. & Anr. (2026 INSC 423), where the Court overturned concurrent findings of the National Company Law Tribunal (NCLT) and the National Company Law Appellate Tribunal (NCLAT), restoring the status of the SBI-led consortium as financial creditors.

The Bench of Justice Pamidighantam Sri Narasimha and Justice Alok Aradhe held that a liability arising from a corporate guarantee inherently carries the element of “time value of money,” thereby satisfying the essential ingredients of financial debt under Section 5(8). The Court reaffirmed the settled principle that a guarantor’s liability is coextensive with that of the principal borrower and remains enforceable in law.

The dispute arose from loans extended by an SBI consortium to Reliance Communications Ltd. (RCOM) and Reliance Telecom Ltd. (RTL), with Reliance Infratel Limited (RITL) acting as the corporate guarantor. During the Corporate Insolvency Resolution Process (CIRP), Doha Bank challenged the validity of these guarantees, alleging that they were fraudulent, insufficiently stamped, and executed when the borrower entities were already in default.

Both the NCLT and NCLAT had rejected the consortium’s claims, citing lack of proper verification, non-disclosure of guarantees in financial statements, and suspicious timing due to prior classification of accounts as non-performing assets (NPAs). They directed reconstitution of the Committee of Creditors (CoC) excluding the consortium.

However, the Supreme Court found these conclusions to be “perverse” and legally unsustainable. It noted that the execution of corporate guarantees was undisputed and supported by documentary material, including communications acknowledging their existence and disclosure in financial records. The Court clarified that mere non-reflection of guarantees in financial statements cannot extinguish a creditor’s claim, and at best may constitute a default by the corporate debtor.

On the issue of verification, the Court observed that the Resolution Professional had duly inspected and verified the guarantees at the Security Trustee’s office in New Delhi. It rejected the tribunals’ finding of non-verification as factually incorrect. Further, the Court held that documents relevant to adjudication can be produced even at the appellate stage, and their absence before the NCLT does not invalidate otherwise genuine claims.

Addressing the objection regarding insufficient stamping, the Court reiterated that stamp duty defects are curable and do not render an instrument void or unenforceable. It also clarified that the Maharashtra Stamp Act was inapplicable since the guarantees were executed and produced in New Delhi.

Significantly, the Court also rejected the argument that the guarantees were invalid due to execution after the borrower accounts had turned NPAs. It noted that restructuring arrangements and RBI guidelines permitted such transactions, and the guarantees were executed prior to the final NPA classification of the corporate debtor.

Concluding that the tribunals’ findings suffered from “glaring and manifest perversity,” the Supreme Court exercised its appellate jurisdiction to set aside their orders. It directed the Resolution Professional to recognise the SBI consortium as financial creditors and to reconstitute the Committee of Creditors accordingly. The CIRP is to proceed afresh from this stage in accordance with law.

This ruling reinforces creditor rights under the IBC framework, particularly in cases involving corporate guarantees, and clarifies that technical defects or accounting omissions cannot override substantive legal obligations.