In Brief
Electrosteel Castings Limited (ECL), a promoter company, executed a Deed of Undertaking in 2011 promising to arrange funds for its subsidiary Electrosteel Steels Limited (ESL) to meet financial covenants. When ESL defaulted, the debt was assigned to UV Asset Reconstruction Company. UV ARC sued to initiate insolvency proceedings against ECL, treating the undertaking as a guarantee. The Supreme Court held that a mere promise to arrange funds does not constitute a contract of guarantee under the Indian Contract Act. A guarantee requires a direct promise to discharge the debtor's liability upon default. The Court affirmed that ECL owed no financial liability, dismissing the petition.
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