Legal Updates (Sept 1 – 6, 2025)
Case Laws (Negotiable Instruments Act)
Once a complainant signs a compromise deed acknowledging receipt of the full settlement amount, the conviction u/s 138 of the NI Act cannot be sustained
The Supreme Court in the case of Gian Chand Garg vs Harpal Singh [Special Leave Petition (Criminal) No. 8050 of 2025] dated August 11, 2025, has ruled that once a complainant signs a compromise deed acknowledging receipt of the full settlement amount, the conviction under Section 138 of the Negotiable Instruments Act (NI Act) cannot be sustained. The Apex Court observed that although dishonour of a cheque entails criminal consequences, the legislature, by virtue of section 147 of the NI Act, has made it compoundable notwithstanding the provisions of the Code of Criminal Procedure, 1973, and the same can be compounded at any stage of the proceedings, especially when the parties have themselves arrived at a voluntary compromise.
The Apex Court further observed that since the complainant had arrived at a compromise with the appellant without any coercion and at his own will and voluntarily accepted the default sum in full and final settlement, then the proceedings under Section 138 NI Act would be of no use. Reference was made to the decision in the case of Gimpex Private Limited v. Manoj Goel [(2021) SCC OnLine SC 925], where it was held that “Once parties voluntarily entered into such an agreement and agree to abide by the consequence of non-compliance of the settlement agreement, they cannot be allowed to reverse the effects of the agreement by pursuing both the original complaint and the subsequent complaint arising from such non-compliance.”
Case Laws (Arbitration Act)
A contractual clause barring interest on delayed payments does not prevent an Arbitral Tribunal from awarding pendente lite interest
The Supreme Court in the case of ONGC vs G & T Beckfield Drilling Services [Civil Appeal No. 11324 of 2025] dated September 02, 2025, has held that a contractual clause barring interest on delayed payments does not prevent an Arbitral Tribunal from awarding pendente lite interest, i.e., the interest for the period during which the arbitration is pending. The Court observed that the agreement between the parties prohibiting the grant of ‘pendente lite interest’, when read as a whole, does not expressly or by necessary implication put an embargo on the grant of pendente lite interest by the Arbitral Tribunal.
The Apex Court clarified that clause 18.1 merely says that there would be no interest payable by the Corporation on any delayed payment / disputed claim; however, it did not bar the Arbitral Tribunal from awarding pendente lite interest, nor does it say that interest would not be payable in any respect.
Since post-award interest is in line with the statutory provision of clause (b) of subsection (7) of Section 31 of the Arbitration & Conciliation Act, 1996, as was in vogue then, the Apex Court observed that the clause merely barred ONGC from paying contractual interest on delayed invoices but did not expressly or by implication take away the Arbitral Tribunal’s statutory discretion under Section 31(7)(a) of the Arbitration Act to award pendente lite interest.
Case Laws (Companies Act, 2013)
NCLT has jurisdiction to examine allegations of fraud and the validity of documents in oppression and mismanagement cases
Finding that the Appellant was the victim of oppression and mismanagement since the circumstances surrounding the gift deed and the subsequent transfer of shares are seriously questionable, and the board meetings have been conducted in a mala fide manner and against both the statutory requirements of the Companies Act, 1956, and the internal regulations of the Company, the Supreme Court in the case of Shailja Krishna vs Satori Global Limited [Civil Appeal Nos. 6377-6378 of 2023] dated September 02, 2025, has held that the National Company Law Tribunal (NCLT) has jurisdiction to examine allegations of fraud and the validity of documents in oppression and mismanagement cases.
The Apex Court clarified that the NCLT possesses a wide jurisdiction to decide all such matters that are incidental and/or integral to the complaint alleging oppression and mismanagement. Such power is, however, subject to any other legislative enactment specifically debarring the NCLT from exercising its powers in this respect. Since the determination of whether the gift deed is valid or not is a pivotal issue, the Apex Court observed that the NCLT did have full jurisdiction to decide whether the gift deed is valid or not, or whether it is against the provisions of the 1956 Act and/or internal regulations of the Company, including but not limited to the Articles of Association (AOA) and the Memorandum of Association (MOA).
Since the Appellant, being an Executive Director and holding 98% of the shares in the company was ousted from the company based on fraudulent activities carried out by her husband and in-laws upon producing a gift deed allegedly transferring her shares to her mother-in-law, and the board resolutions approving her removal passed in meetings without proper notice to her or quorum, and records showing her resignation, the Apex Court observed that when a member who holds the majority of shares in a company is reduced to the position of minority shareholder in the company by an act of the company or by its Board of Directors in a mala fide manner, the said act must be considered as an act of oppression against the said member.
The Apex Court went on to observe that the gift deed is invalid first and foremost since it is against the AOA, specifically clause 16, which does not allow a transfer to the mother-in-law, and, therefore, the gift deed cannot be called in aid to defeat the claims of the Appellant in the Company. Further, the circumstances surrounding the gift deed are questionable since the deed specifically mentions it being purportedly executed by the Appellant to the fourth respondent out of “love and affection”. However, what paints a divergent image is that the fourth respondent had lodged an FIR alleging that the Appellant purportedly committed acts constituting breach of trust qua family jewellery on the very date when the Share Transfer Form was purportedly signed by the Appellant. Thus, any action taken that is not permitted by the AOA cannot be sustained.
Since all the actions of the Company in a serial fashion demonstrate clear oppression and mismanagement in its affairs, and the probity is lacking, which is prejudicial to the Appellant, the Apex Court restored the decision of the NCLT, whereby finding overwriting and manipulation in the share transfer form, and noting that it was executed after its validity had expired, the NCLT has directed the Company to reinstate the Appellant as a Director, and ordered the fourth respondent to return the share certificates.
Case Laws (Specific Relief Act)
A mere breach of an obligation or necessity to prevent the same alone is no basis to invoke mandatory injunction u/s 39 of the Specific Relief Act, unless the same is amenable to exercising discretion by the Court
The Supreme Court in the case of Estate Officer, Haryana Urban Development Authority vs Nirmala Devi [Civil Appeal No. 7707 of 2025] dated July 14, 2025, has ruled that a relief which is not amenable to exercising judicial discretion of the Court cannot be granted by way of a mandatory injunction under Section 39 of the Specific Relief Act, 1963. It should satisfy not only breach of an obligation and the necessity of its prevention, but also the availability of judicial discretion to be exercised. The ruling came while deciding on the suits instituted by the respondents (oustees) for mandatory injunction seeking allotment of plots under the scheme of 1992 floated by the State of Haryana, whereby the Haryana Urban Development Authority (HUDA) was offering a plot to the oustees whose land had been acquired.
The Apex Court explained that the specific relief is the remedy that aims at the exact fulfilment of the obligation. The term ‘obligation’ as used in the Specific Relief Act in its wider juristic sense covers duties arising either ex-construction or ex-delicto. Every duty enforceable at law is an obligation, and the definition clause of the Specific Relief Act does not allow a narrow interpretation of the word ‘obligation’ to restrict it to a contractual duty alone. At the same time, the Court observed that the acquisition of land does not violate any constitutional/ fundamental right of the displaced persons. However, the Court cautioned that the displaced persons are entitled to resettlement and rehabilitation as per the policy framed for the oustees of the project concerned.
The Supreme Court found that right from the inception, the appellant has argued that none of the oustees, or at least the respondents, had applied in the requisite format for allotment of plots with the deposit of the earnest money. If this part of the obligation would have been performed or discharged by the oustees in accordance with the scheme, then perhaps HUDA could have been called upon to perform its part of the obligation, and then only Section 39 of the Specific Relief Act, 1963, could have been invoked to compel HUDA. The Apex Court also questioned that even assuming for the moment that the advertisement was not in conformity with the Scheme of 1992, there is no explanation worth the name at the end of any of the oustees as to why the suits were instituted after a lapse of almost 14 to 20 years, more particularly, when the land of respective oustees came to be acquired in 1992.
The Supreme Court further observed that when the scheme in question specifically provides that an oustee shall apply in a specified format with the deposit of the requisite amount towards earnest money, then it is a part of the obligation on the part of the oustee to do so before he calls upon the State to allot the plot in terms of the scheme. However, the Apex Court concluded that the respondents are not entitled to claim as a matter of legal right that they should be allotted plots as oustees only at the price as determined in the 1992 policy; rather, the respondents are entitled to seek the benefit of the 2016 policy for allotment of plots as oustees. Since the respondents had no enforceable legal right, and therefore the Appellant had no corresponding legal obligation to allot the plots, the Supreme Court declined to grant a mandatory injunction. However, because a large number of oustees were left helpless due to their failure to comply with the procedural requirements to claim rehabilitation under HUDA’s 1992 policy, the Apex Court granted four weeks to all the respondents to prefer an appropriate online application with the deposit of the requisite amount in accordance with the policy of 2016, after which no application would be entertained.
Case Laws (Income Tax/ SEBI Act)
An Alternate Investment Fund is not taxable at the Maximum Marginal Rate in the hands of the “Representative Taxpayer” under Explanation 1 to Section 164 of the Income Tax Act, even if the original Trust Deed did not mention the name of the investor
The Delhi High Court in the case of Equity Intelligence AIF Trust vs CBDT [W.P.(C) 9972/2024] dated July 29, 2025, has ruled that once the benefits are to be shared in the proportion to the investments made, then the shares would be determinable, and once the shares were determinable, the Alternative Investment Fund (AIF) are not taxable at the Maximum Marginal Rate in the hands of the “Representative Taxpayer” under Explanation 1 to Section 164 of the Income Tax Act, for not mentioning the names of the investors or beneficiaries in the original Trust Deed.
The High Court clarified that the CBDT Circular no.13/2014 which provides that Category III AIF would be taxable at the Maximum Marginal Rate at the hands of the “Representative Assessee” under the provisions of Explanation 1 to Section 164 of the Income Tax Act, if the original Trust Deed did not mention the name of the investors or the beneficial interest of the investors, is in contravention to the Regulations 3(1), 4(c) & 6(3) of the SEBI Regulations read with Section 12 of the SEBI Act, which prohibits from mentioning the names of the investors or beneficiaries in the original Trust Deed unless they are registered.
The High Court questioned as to how and in what manner a Category III AIF entity like the petitioner would specify or mention the names of the investors or beneficiaries in the original Trust Deed at the time of registration, when the SEBI has mandated that no AIF can accept any commitment or investment from any investor or beneficiary unless and until it is first registered in terms of Regulation 4(c) of the SEBI Regulations under the provisions of Registration Act, 1908 and thereafter be granted certificate of registration under Regulation 6 of the SEBI Regulations, claiming this procedure to be contrary to the doctrine of impossibility. The court referred to the CBDT Circular No.281/1980 dated Sep 22, 1980, and the Explanation appended to amended Section 164 inserted by the Finance (No. 2) Act, 1980, to observe that the new provisions would apply in respect of all discretionary Trusts whether created before or on, or after April 01, 1980.
Thus, referring to the provisions of Regulation 3(1) & 6(3) of the SEBI Regulations read with Section 12 of the SEBI Act, the High Court observed that unless and until a Trust registers the original Trust Deed, firstly under the provisions of Registration Act, 1908 and secondly, obtains the certificate of registration under the provisions of SEBI Act and Regulations, it cannot accept any funds or investment from a beneficiary. Therefore, emphasizing that the SEBI Regulations are in contravention of the CBDT Circular, the Court allowed the petition in favour of the taxpayer.
