### Unilateral Variance in Terms of Underpinning Contract Discharges Underwriting Obligations Under Section 133, Indian Contract Act Case Brief: *Tommorrowland Limited v. HDFC Bank Ltd. & Connected Matters* Court: High Court of Delhi Bench: Hon’ble Mr. Justice Anil Kshetarpal & Hon’ble Mr. Justice Harish Vaidyanathan Shankar Judgment Date: February 20, 2026 --- ### 1. Legal Point at Issue Whether an underwriter, acting as a surety, stands discharged from liability under the Indian Contract Act, 1872, if the issuer (creditor) unilaterally alters the subscription framework after a public issue is successfully closed. ### 2. Potential Impact This judgment reinforces the status of an Underwriting Agreement as a contract of guarantee governed by Chapter VIII of the Indian Contract Act. It clarifies that regulatory-driven or unilateral changes to investor terms (like offering withdrawal options) without the underwriter's consent constitute a material variance, leading to an automatic and irreversible statutory discharge of the underwriter. ### 3. Fact Summary Tommorrowland Ltd. launched a public issue of Fully Convertible Debentures (FCDs), which was fully underwritten by various entities. The issue was closed on the "earliest closing date" after exceeding the 90% subscription threshold. Subsequently, SEBI directed the company to grant subscribers an option to withdraw due to anomalies in the prospectus. Upon withdrawal, subscription fell below 90%. Tommorrowland issued devolvement notices to underwriters and initiated arbitration when they refused to pay. The Arbitrator awarded damages against the underwriters, which the Single Judge affirmed with modifications. ### 4. Decisions * The Lead Appeals: The Division Bench allowed the Underwriters' appeals and dismissed Tommorrowland’s appeals. * On Guarantee Law: The Court held that an underwriter is a surety, the issuer is the creditor, and subscribers are principal debtors. * Statutory Discharge: Applying Section 133 of the Indian Contract Act, the Court ruled that Tommorrowland’s unilateral decision to allow withdrawals (even if SEBI-mandated) fundamentally altered the risk profile without the surety's consent. * Effect of Discharge: Once the surety stood discharged by operation of law, all contractual machinery for "devolvement notices" or "damages" under the Underwriting Agreement became non-est and unenforceable. * Powers under Order XLI Rule 33: The Court exercised its power to set aside the liability even for underwriters who had not filed appeals, ensuring legal consistency. --- ### 5. Key Takeaways for Legal Professionals * Strictissimi Juris: Underwriting liabilities are to be construed strictly; the "favoured debtor" principle applies to underwriters as sureties. * Section 133 Primacy: Any material variance in the underlying contract between the issuer and the public, made without the underwriter's consent, attracts an automatic discharge. * Arbitral Finality vs. Statutory Mandate: Arbitral awards that ignore mandatory statutory provisions (like Chapter VIII of the Contract Act) suffer from patent illegality and are liable to be set aside under Section 39 of the 1940 Act (or Section 34 of the 1996 Act). * Post-Facto Extension: Under Section 28 of the 1940 Act, courts have discretionary power to enlarge time for making an award even after the award is pronounced.

Tommorrowland Limited v. HDFC Bank Ltd. [FAO(OS) 38/2022 & connected matters]

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