India, April 29 -- In a significant verdict, the Supreme Court on Tuesday ruled that liabilities arising from corporate guarantees squarely constitute "financial debt" under the Insolvency and Bankruptcy Code (IBC).

A bench comprising justices PS Narasimha and Alok Aradhe upheld the validity and enforceability of corporate guarantees and recognised a consortium of banks led by State Bank of India (SBI) as financial creditors in the insolvency proceedings of Reliance Infratel Ltd (RITL).

The bench dealt with three key legal issues, including whether the corporate guarantees executed by the corporate Debtor constitute "financial debt" within the meaning of Section 5(8) of the IBC. The second issue was whether the claims of the SBI and ban...