Legal Updates (Jan 19 – Jan 24, 2026)
A contractual clause obligating a promoter to arrange infusion of funds into a borrower to meet financial covenants does not amount to a “contract of guarantee” under Section 126 of the Indian Contract Act, 1872
The Supreme Court in the case of UV Asset Reconstruction Company Limited vs Electrosteel Castings Limited [Civil Appeal No. 9701 of 2024] dated January 06, 2026, has held that a contractual clause obligating a promoter to arrange infusion of funds into a borrower to meet financial covenants does not amount to a “contract of guarantee” under Section 126 of the Indian Contract Act, 1872.
The Supreme Court interpreted Section 126 of the Indian Contract Act, to observe that for an obligation to be construed as a guarantee, there must be a direct and unambiguous obligation of the surety to discharge the obligation of the principal debtor to the creditor. It was explained that a “See to it” guarantee in English Common Law refers to an obligation upon the guarantor to ensure that principal debtor itself, performs its own obligation and the guarantor, therefore, is in breach as soon as principal debtor fails to perform. However, a “See to it” guarantee does not include an obligation to enable the principal debtor to perform its own obligation. Such an arrangement would not be a guarantee under Section 126 of the 1872 Act.
From the subject Clause in the Deed of Undertaking, the Supreme Court inferred that ECL was obligated to arrange for infusion of funds into ESL, so as to enable ESL to comply with the stipulated Financial Covenants. However, it was not obligated to “discharge” any debt owed by ESL. The Court observed that “The clause neither records an undertaking to discharge the debt owed to the creditor nor does it contemplate payment to the lender in the event of the default. The clause contains a promise, not to the creditor to pay the debt upon default, but to the borrower to facilitate compliance with Financial Covenants”.
The Supreme Court also observed that “An undertaking to infuse funds into a borrower, so that it may meet its obligations cannot, by itself be equated with the promise to discharge the borrower’s liability to the creditor. A mere Covenant to ensure financial discipline or infusion of funds does not satisfy the statutory requirements of Section 126 of the 1872 Act”. The Court referred to other documents as well, including the sanction letter, to note that there was no “guarantee” furnished by ECL. Ultimately, it concurred with the findings of NCLT and NCLAT that Clause 2.2 of the Deed of Undertaking did not constitute a contract of guarantee and that ECL could not be treated as guarantor for the financial facilities availed by ESL.
Click here to read/ download the original judgment
National Company Law Tribunal (NCLT) has no jurisdiction to adjudicate the title disputes to the trademark, if the issue lacked any direct and proximate nexus with the Corporate Insolvency Resolution Process (CIRP)
The Supreme Court in the case of Gloster Cables Ltd vs Fort Gloster India Ltd [Civil Appeal No. 2996 of 2024] dated January 22, 2026, has held that the National Company Law Tribunal (NCLT), while exercising jurisdiction under Section 60(5) of the Insolvency and Bankruptcy Code (IBC), cannot adjudicate disputed questions of title to intellectual property if such determination goes beyond the scope of the approved resolution plan. The Court observed that NCLT cannot decide title disputes over assets, including intellectual property rights such as trademarks unless the dispute has a direct and proximate nexus with the insolvency resolution process.
The Supreme Court observed that under 60(5)(c) the IBC, the Adjudicating Authority, i.e., the NCLT had jurisdiction to adjudicate disputes, which arise solely from or which relate to the insolvency of the Corporate Debtors. In doing so, the authorities under IBC should ensure that they do not usurp the legitimate jurisdiction of other Courts, Tribunals and fora when the dispute is one which does not arise solely from or relate to the insolvency of the Corporate Debtor.
The Court observed that any grant of further rights over and above what is recognized in the plan would amount to modification or alteration of the approved plan. It should be remembered that the plan as it exists is the one duly approved by the COC and while adjudicating an application of GCL, no directions could be made by the NCLT conferring better rights. In a case like the present where the SRA has perceived clouds hovering over its title, the Court held that it is for the SRA to resort to remedies and protect its rights. On the facts of the present case, while adjudicating an application under Section 60(5) of GCL, NCLT could not have passed the direction it ultimately passed.
Click here to read/ download the original judgment
Erstwhile directors of a corporate debtor cannot be held vicariously liable for an offence under Section 138 of the Negotiable Instruments Act, 1881, if, prior to the expiry of the 15-day statutory notice period for payment, a CIRP has been initiated against the corporate debtor
The Delhi High Court in the case of Ravindra Dhariwal vs Kotak Mahindra Bank [CRL.M.C. 8417/2023] dated January 15, 2026, has ruled that erstwhile directors of a corporate debtor cannot be held vicariously liable for an offence under Section 138 of the Negotiable Instruments Act, 1881 (NI Act), if, prior to the expiry of the 15-day statutory notice period for payment, a CIRP has been initiated against the corporate debtor and an IRP has been appointed.
The Court clarified that the appointment of the IRP suspends the powers of the Board of Directors and vests control over the company’s affairs and bank accounts in the IRP, making it impossible for the directors to ensure the honouring of the dishonoured cheques. The High Court, therefore, quashed the summoning order, as well as all proceedings emanating therefrom in respect of the petitioners.
The Court noted that the 15-day period for making payment, calculated from the earliest date of service expired on 07.08.2022. However, the CIRP had already commenced on 20.07.2022. Further, upon the appointment of the IRP on 20.07.2022, the powers of the company’s Board of Directors were suspended and vested in the IRP, as per Section 17 of the IBC. Therefore, during the 15-day notice period, the petitioners were not in charge of the company’s affairs and had no control over its bank accounts.
The Court also found the issue to be “no more res integra” and placed significant reliance on the Apex Court’s decision in the case of Vishnoo Mittal v. Shakti Trading Company [(2025) 9 SCC 417], where under identical circumstances, it was held that a director who was suspended due to the appointment of an IRP did not have the capacity to fulfil the demand raised in the notice and could not be held liable under Section 138 of the NI Act.
Click here to read/ download the original judgment
While determining the deceptive similarity with another Trade Mark, both the Marks have to be examined as a whole by applying ‘anti-dissection rule’ rather than breaking the Marks into their component parts for comparison
The Delhi High Court in the case of Mayank Jain, Proprietor of Mahaveer Udyog vs Atulya Discs Pvt Ltd [CS(COMM) 412/2025] dated January 09, 2026, has ruled that the registration of the Device Mark is to be considered as a whole and while determining the deceptive similarity with another Trade Mark, both the Marks have to be examined as a whole by applying ‘anti-dissection rule’ rather than breaking the Marks into their component parts for comparison. The court was concerned with two brands namely “Tiger Gold Brand” owned by Plaintiff and “Tiger Premium Brand” owned by defendant.
To determine whether there is any deceptive similarity between the above two Marks, it is imperative to decide if the similarity is likely to cause any confusion or deceive, added the Court, while holding that the Plaintiff has no exclusive right over the Marks ‘TIGER’ and ‘BRAND’ as the same are generic in nature and common to the trade.
The High Court observed that the words ‘TIGER’ and ‘BRAND’ are generic in nature, common to the trade, and incapable of being registered as a trademark on a standalone basis. Further, there is widespread use of the mark ‘TIGER’ for various goods and services across India, making it publici juris.
The Court found that the Plaintiff had not produced any material to demonstrate that the mark ‘TIGER’ had acquired a secondary meaning to be uniquely associated with the Plaintiff’s goods. The Court also observed that the Impugned Mark, when considered as a whole, is wholly dissimilar to the Plaintiff’s Mark, being visually different in its hexagonal frame, the depiction of the tiger device, and its colour scheme.
Even from the perspective of the relevant consumer segment, i.e., farmers, the marks are visually distinct and would not cause confusion, added the Court, while noting that the Plaintiff failed to establish the necessary elements for a case of passing off, as there was no proof of misrepresentation by the Defendant or damages incurred by the Plaintiff.
Hence, the Court concludes that the use of the Impugned Mark does not amount to infringement of Copyright in or passing off of the Plaintiff’s Mark, as there is no deceptive similarity between the Plaintiff’s Mark and the Impugned Mark. Accordingly, no case is made out for grant of interim injunction.
Click here to read/ download the original judgment
Merely describing a personal guarantor as a “Director” in a SARFAESI demand notice does not invalidate the invocation of the personal guarantee, as long as the notice clearly demands payment of the outstanding dues under the guarantee deed
The New Delhi bench of National Company Law Appellate Tribunal (NCLAT) in the case of Ujwal Gupta v Union Bank of India [Company Appeal (AT) (Ins) No. 2001 of 2024] dated January 07, 2026, has ruled that merely describing a personal guarantor as a “Director” in a SARFAESI demand notice does not invalidate the invocation of the personal guarantee, as long as the notice clearly demands payment of the outstanding dues under the guarantee deed. The Tribunal observed that the real test is not how the person is described, but what the notice actually asks for.
The NCLAT observed that whether a guarantee may be invoked by giving notice under Section 13(2) of the SARFAESI Act depends on the terms of the guarantee and the content of the notice. If the notice clearly demands payment from the personal guarantor in terms of the guarantee, it can be treated as an invocation of the guarantee. The facts and the wording of the notice are crucial in this determination.
The NCLAT noted that the notice clearly referred to the credit facilities extended to the company. It also recorded that repeated demands had gone unanswered. The notice specifically called upon the addressees to discharge the outstanding liability. The message was unambiguous, and the addressee was being asked to clear the dues arising from the loan. The Tribunal also examined the guarantee deed and found that the deed did not prescribe any special format or procedure for invocation. In such a case, a notice demanding payment within a fixed time is sufficient, as long as the liability is made clear.
The held that adding the word “Director” after the appellant’s name did not change his status as a personal guarantor. The personal guarantee, it said, had been validly invoked through the SARFAESI notice. Accordingly, the insolvency proceedings against the personal guarantor were allowed to continue.
The sine qua non for the application of Section 13(1) of the Maharashtra Money Lending (Regulation) Act, 2014, is the existence of a ‘loan’ as defined by the Act; Merely advancing money to people does not ipso facto make a party a money lender
The Bombay High Court in the case of Ashok Commercial Enterprises vs Hubtown Limited [Interim Application (L) No. 27175 of 2021] dated January 21, 2026, has ruled that the applicability of the bar on suits by unlicensed money-lenders under Section 13 of the Maharashtra Money Lending (Regulation) Act, 2014, cannot be determined at the preliminary stage of an Order VII Rule 11 CPC application.
In short, the Court clarified that whether a plaintiff is a “money lender” and whether the transaction constitutes a “loan” under the said 2014 Act are triable issues that require the examination of detailed evidence, especially when the suit is based on negotiable instruments like dishonoured cheques and promissory notes, which may fall under the exceptions to the definition of ‘loan’.
The Court held that the plaint could not be rejected at the threshold, and concluded that the question of whether the plaintiff is a money lender under the said 2014 Act, thereby attracting the bar under Section 13, cannot be decided at the stage of an Order VII Rule 11 application and warrants a trial.
The Court observed that the plaintiff’s suit is for the recovery of a liquidated sum of money, founded on dishonoured cheques and letters from the defendant that unconditionally admitted the acceptance of the loan and the liability to repay. The Court heavily relied on the decision of Deepak Raheja vs. Tikamdas & Associates [Commercial Appeal (L) No. 15455 of 2023 in COMSS No. 311 of 2020], and noted that an ‘advance’ of any sum exceeding Rs. 3 Lakhs made on the basis of a negotiable instrument (other than a promissory note) is excluded from the definition of ‘loan’ under Section 2(13)(j) of the said 2014 Act.
The sine qua non for the application of Section 13(1) is the existence of a ‘loan’ as defined by the Act. Without a ‘loan’, there is no bar on a court passing a decree, and the onus of establishing, even prima facie, that the plaintiff carries on the business of money-lending rests on the defendant. It was noted that merely advancing money to people does not ipso facto makes a party a money lender; they must fall within the specific parameters of the said Act.
At the same time, the Court explained that the allegation of engaging in the business of money-lending without a license is a question of fact that can only be dispelled by leading detailed evidence. Such an issue requires an examination of evidence and cannot be decided in a summary manner through an application under Order VII Rule 11 of the CPC.
Lastly, referring to the Supreme Court’s decision in Dahiben Vs Arvindbhai Bhanushali [(2020) 7 SCC 366], the Court emphasized that the power to reject a plaint under Order VII Rule 11 is a drastic measure that terminates a civil action at the threshold and must be exercised strictly in accordance with the enumerated conditions.
REGULATORY UPDATES
RBI notifies Foreign Exchange Management (Export and Import of Goods and Services) Regulations, 2026
The Reserve Bank of India (RBI) vide its Notification No. FEMA 23(R)/2026-RB, dated 13 January, 2026, has laid down norms relating to declaration of exports, the manner of receipt and payment, the time period for realization of exports, & set-off of export receivables against import payables. Further, it prescribes norms relating to the time period for making import payments, the import of gold and silver, & merchanting trade transactions. These regulations shall come into force with effect from October 1, 2026.
The key provisions of the regulations include the following:
A. Declaration of Exports
An exporter of goods must furnish to the specified authority a declaration in the Export Declaration Form (EDF), specifying the amount representing the full export value of the goods at the time of export. Where goods are exported through an Electronic Data Interchange (EDI) port, the Export Declaration Form (EDF) shall be deemed to have been submitted as part of the shipping bill. Further, a traveller carrying personal effects, whether accompanied or unaccompanied, from India shall not be treated as an exporter for the purposes of these Regulations.
B. Time Limit for furnishing of Export Declaration Form to the specified authority
An exporter of services must furnish to the specified authority a declaration in the Export Declaration Form (EDF), specifying the amount representing the full export value of services, within 30 days from the end of the month in which the invoice for services is raised, subject to the following conditions:
a. The exporter of services who has exported services to one or more recipients a month may submit a single EDF for all such exports.
b. The exporter of services other than software may submit an EDF on or before the date of receipt of payment;
c. The Authorised Dealer may, on a request from the exporter citing reasons for delay, extend the period for submission of EDF after satisfying itself about the reasonableness of the request.
d. In the case of a non-EDI port for export of goods, or where the specified authority for export of services is other than an Authorised Dealer, the duly authenticated EDF must be forwarded by the specified authority to the respective Authorised Dealer.
C. Manner of Receipt and Payment
The receipts and payments for export and import of goods and services must be in the manner specified in the Foreign Exchange Management (Manner of Receipt and Payment) Regulations, 2023, as amended from time to time. An authorised dealer must make a credit or debit to the account of an exporter or an importer for receipt of export proceeds or payments for import only after satisfying itself about genuineness of the transaction. Further, the AD must simultaneously close or update the relevant entry in the Export Data Processing and Monitoring System (EDPMS) or the Import Data Processing and Monitoring System (IDPMS).
D. Time Period for realisation of export proceeds
Under the extant norms, it is obligatory on the part of the exporter to realise and repatriate the full value of goods/software/services to India within 15 months from the date of export. Under these Regulations, the amount representing the full export value (or reduced export value) of goods and services must be realised and repatriated by the exporter within the period as specified below:
a. 15 months from the date of shipment in case of goods (other than goods exported to a warehouse outside India) and from the date of invoice in case of services;
b. 15 months from the date of sale of goods from the warehouse in case of goods exported to a warehouse outside India;
c. As per the payment terms of the contract, in case of project exports.
Click here to read/ download the Original Notification
SEBI introduces closing auction session in Equity Segment
The Securities and Exchange Board of India (SEBI) vide its Circular No. HO/47/11/11(3)2025-MRD-POD2/I/2765/2026, dated 16 January, 2026, has introduced a Closing Auction Session (CAS) in the equity cash segment to improve fairness, transparency, and efficiency in the discovery of closing prices in the securities market.
The CAS is aimed at ensuring a more robust and manipulation-resistant closing price discovery mechanism. By aggregating buy and sell orders at the close of trading, the session seeks to reflect true market demand and supply.
Under the new framework, the closing price for derivative-linked stocks will be determined through the Closing Auction Session. This marks a shift from the existing Volume Weighted Average Price (VWAP)-based methodology, aligning the closing price more closely with actual market consensus.
Alongside the introduction of CAS, SEBI has aligned and modified the framework governing the pre-open auction session. These changes aim to harmonise auction mechanisms at both the opening and closing of the trading day, enhancing overall market efficiency.
The introduction of the Closing Auction Session represents a significant reform in India’s equity market structure. To be implemented in a phased manner from August 3, 2026, the new framework is expected to strengthen price discovery, reduce volatility at market close, and enhance investor confidence.
Click here to read/ download the original circular
Trusted Foreign Investors get Single-Window access under New Market Framework (SWAGAT-FI)
The Securities and Exchange Board of India (SEBI) vide its Circular No. HO/19/34/14(5)2025-AFD-POD2/I/2703/2026, dated 16 January 2026, has introduced the Single Window Automatic and Generalised Access for Trusted Foreign Investors (SWAGAT-FI) framework, amending the FPI Master Circular in line with the SEBI (Foreign Portfolio Investors) (Second Amendment) Regulations, 2025.
The framework aims to simplify onboarding and ongoing compliance for low-risk, well-regulated foreign investors such as sovereign entities, regulated retail mutual funds, insurance companies, and pension funds from identified jurisdictions.
The key relaxations include a longer registration validity of 10 years (instead of three), whereas, the KYC review periodicity extended to 10 years, and streamlined renewal requirements. SWAGAT-FI investors are also granted unified accounting and investment access across FPI, FVCI, and other foreign investment routes.
Certain contribution restrictions are relaxed, subject to safeguards such as routing resident Indian investments through LRS and limiting India exposure. The framework becomes effective from 1 June 2026, with intermediaries directed to update systems accordingly.
Click here to read/ download the original circular
