Litigation Check Before Lending: A Pre-Sanction Checklist (2026)

Use Case · Lending · Pre-Sanction

Updated for 2026 · Claw Editorial

A credit score tells you how a borrower has paid in the past. It does not tell you that the same borrower is already a defendant in a recovery suit, has a winding-up petition pending, or that its promoter has personal guarantees being enforced in another court. A litigation check is how a lender sees that picture before it sanctions, when it can still say no, price the risk, or ask for more security. This page explains why the check belongs in the credit decision, what to look for, how to run it on the borrower and the people behind it, and how to read what comes back. Last verified October 2026.

01Why this check belongs in the credit decision

Most of what a lender learns about a borrower comes from documents the borrower hands over and from a credit bureau. Both look backward and both can miss the dispute that matters. Litigation is a forward-looking signal: a pending recovery suit or an insolvency petition says money is already being chased, and a loan sanctioned on top of that can be throwing good money after bad.

Running the check before sanction, rather than after a default, changes what you can still do about it. Before sanction you can decline, reduce the limit, raise the rate, ask for a stronger guarantor, or add a condition. After disbursement your only route is recovery, in the same crowded courts the borrower is already in. This is why banks and NBFCs increasingly build it into the credit process. See pre-sanction borrower litigation screening and legal due diligence before lending.

02Who to search, not just the borrower

The most common miss is searching only the borrowing company by its current name. Risk sits with the people and the group, so search:

• The borrower, including former names and any merged or demerged entities.
• Promoters and directors as individuals, because personal guarantees and cheque bounce complaints attach to them.
• Guarantors, corporate and personal, whose own litigation weakens the security you are relying on.
• Group and connected companies, where distress in one entity spreads to the borrower.

Confirm the correct legal names and director identification numbers from Ministry of Corporate Affairs records first, so the search runs against the right identities. A litigation check answers a different question from a bureau check; see litigation check versus credit check.

03What to look for

Not every case is a reason to decline. The job is to separate routine disputes from the ones that threaten repayment:

• Insolvency and winding-up: any NCLT petition against the borrower or a group company is a serious signal. A loan to a company facing a Section 7 IBC petition is near the front of the queue in all the wrong ways.
• Recovery and SARFAESI: suits by other lenders, Debt Recovery Tribunal matters and SARFAESI action show the security is already being chased.
• Enforcement against promoters: invoked personal guarantees and recovery against promoters as individuals.
• Criminal and economic-offence matters: cheque bounce at scale, fraud and agency investigations against the people in control.
• Large or repeated tax demands, which point to a pattern of strain, not a one-off.
• Consumer complaints at volume, which can signal a business model under pressure.

A single routine suit is noise. A winding-up petition, a SARFAESI action and three cheque bounce complaints on the same promoter are a story, and the story is what you lend against.

04How to run the check

Litigation in India is spread across district and civil courts, High Courts and the Supreme Court, the NCLT and NCLAT, Debt Recovery Tribunals, tax forums and consumer commissions. Each has its own portal and its own way of being searched, so a complete check by hand, across a borrower, its promoters and guarantors, is slow and easy to get wrong.

1. Fix the identities. Confirm legal names, former names and director IDs from MCA records.
2. Search every forum, not just the local court, for each name on the list.
3. Pull the serious matters forward, by party, forum, stage and amount, and set aside the routine ones.
4. Record what you searched, the names and forums covered and the date, so the credit file can stand behind the decision.

For a single small loan this can be done manually. For a desk sanctioning many facilities, a litigation-intelligence tool that searches a list of names across courts at once gives the coverage and speed a manual search cannot, and the credit officer still weighs the findings.

05Reading the result honestly

Two honest limits keep a litigation check useful instead of misleading. First, a clean result means nothing was found in these registries, on the date searched, under the names searched. It is not proof that no case exists, so it has a date and a scope, not a guarantee. Second, Indian names repeat, so a hit may belong to someone else; a result should tell you how confident the match is, and a weak match needs confirming before it affects a decision. For the names problem, see name collisions in litigation search.

Finally, the risk does not freeze at sanction. A clean borrower can be sued the week after you disburse, so the better practice is to keep watching the borrower through the life of the loan. See how to monitor borrower litigation continuously.

06Where Claw fits

Claw is an all-in-one legaltech platform for Indian advocates, law firms, and corporate legal teams, combining AI-based case search, an AI legal assistant (Legal GPT), case management, and compliance automation across all Indian courts and tribunals.

For this check Claw runs a dedicated service called ClawScore (clawscore.clawlaw.in), its litigation and criminal-risk intelligence line. You give it a name, a borrower, a promoter, a guarantor, or a whole list, and it returns every matter it finds across 9,102 courts, benches and forums in one scored Excel workbook, with results in under 5 seconds, drawing on 30 crore+ judgments, with Supreme Court decisions from 1950 and High Court decisions from 1990.

The workbook has four parts: a Summary that puts a ClawScore risk band on the entity (Clean, Low, Moderate or High), a Matters sheet listing each case by forum, case number, parties, status and amount, a Related parties sheet that pulls in directors and guarantors, and a Coverage sheet recording what was searched. Every finding carries a match confidence, and anything below 80% is flagged so you can confirm it is really your borrower and not a similar name. ClawScore runs three checks, company litigation, individual litigation and criminal background, and with constant monitoring you can keep a watch list under daily, weekly or monthly review, so you are told about new filings, changed movement and hearings, and closed matters after you disburse. Claw does not use your case documents to train its AI models.

Read it honestly. "Nothing on record" means nothing was found in these registries, on the date searched, under the names searched, not that no case exists; a low match confidence means the name may belong to someone else; and none of this is legal advice, so weigh the material findings with your credit and legal teams.

Create a FREE Claw account to run a pre-sanction litigation check on a borrower, its promoters and guarantors, and use case search across Indian courts to surface matters before you lend.

07Sources and further reading

• eCourts (court case status): ecourts.gov.in
• Ministry of Corporate Affairs (company and director records): mca.gov.in
• National Judicial Data Grid (official government portal): njdg.ecourts.gov.in
• Claw: clawlaw.in

This page is general information, not legal or credit advice. The weight of any finding depends on the facts, so take advice from your legal and credit teams before you act.

08Frequently asked questions