Legal Updates (Oct 27 – Nov 01, 2025)
Case Updates:
Paid-up money on shares being ‘share capital’ does not constitute debt, and hence claim for redemption of preference shares cannot trigger insolvency proceedings under Section 7 of the IBC
While clarifying that holders of Cumulative Redeemable Preference Shares (CRPS) cannot be treated as financial creditors under the Insolvency and Bankruptcy Code, 2016 (IBC), the Supreme Court in the case of EPC Constructions India Limited v. Matix Fertilizers and Chemicals Limited [2025 INSC 1259] dated October 28, 2025, has held that preference shareholders are investors and not lenders, and their claims for redemption shall not constitute a ‘financial debt’ which is capable of triggering insolvency proceedings under Section 7 of the IBC.
The Court observed that there is a statutory distinction between share capital and debt, and hence, the provisions of the IBC cannot be invoked as a recovery mechanism for equity investments, even if the redemption period for preference shares has expired. Essentially, the preference share capital remains part of the company’s equity structure until duly redeemed in accordance with Section 55 of the Companies Act and cannot, by default, metamorphose into a debt obligation.
The Court also observed that a debt would be a financial debt if it is raised under any other transaction, including any forward sale or purchase agreement having the commercial effect of borrowing, and therefore, the paid-up amounts towards shares do not have the character of debt. Reference was made to Section 55 of the Companies Act, 2013, as per which the shares could be redeemed only out of the profits or with any amount kept apart for dividends.
The Court added that Accounting Standards (AS 32) prescribe that a preference share that provides for mandatory redemption by the issuer for a fixed or determinable amount at a fixed or determinable future date, or gives the holder the right to require the issuer to redeem the instrument at or after a particular date for a fixed or determinable amount, is a financial liability.
However, the Court concluded that the treatment in the accounts due to the prescription of accounting standards will not be determinative of the nature of the relationship between the parties as reflected in the documents executed by them. Further, the IBC has its own prerequisites that a party needs to fulfil, and unless those parameters are met, an application under Section 7 will not pass the initial threshold.
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Non-communication of rejection of policy within the period prescribed is not a mere irregularity, but a violation of statutory duty under IRDAI Guidelines, and an insurer cannot simply refund premiums after the death of the insured to deny the policy benefits once there is a clear indication of acceptance of the insurance proposal
The Kerala High Court in the case of HDFC Life Insurance Company vs Jyothi Madhavan U. [Writ Petition (C) No. 42110 of 2024] dated October 28, 2025, held that the very life insurance policy was taken to secure a housing loan in the event of unforeseen circumstances. Hence, the insurer, having taken the risk of violating the regulations and failing to inform the insured about the rejection of the proposal within the scheduled time, cannot claim that the insured did not honour the conditions of the policy.
Since the life insurance policy was a precondition for the housing loan, and the premium was collected and retained by the insurer through the bank, the Court cited the IRDAI Regulations, 2017, to hold that once there is a clear indication of acceptance of the insurance proposal, the subsequent refund of premium only after the death of the insured is unjustified.
The Court stated that the very object of IRDAI Regulations would be frustrated if an insurer were permitted to remain silent during the proposer’s lifetime and later defeat the claim by raising a contention of non-acceptance. Accordingly, the failure to communicate nonacceptance within the stipulated period fastens liability on the insurer, and the plea of non-acceptance raised only after the death of the proposer is unsustainable in law. If the insurer does not do that and retains the premium till the death of the sum assured, they must be estopped from contending that the policy had not come into existence or that the proposal was rejected, added the Court.
The Court also clarified that to permit an insurer to withhold communication during the proposer’s lifetime and thereafter defeat the claim by raising a plea of non-acceptance after his death would be wholly destructive of the object of the insurance and the regulatory mandate, and the insurer, having failed to act within the mandatory timeline and to discharge its duty of bona fide communication, must be held liable.
The Court reiterated that acceptance of the premium itself amounts to a waiver of preconditions such as medical examination and creates a presumption of a concluded contract, and that refund of the premium only after the death of the insured reveals mala fides and amounts to a deficiency of service. The Court found that an intimation as well as the refund of the premium amount was made almost 2 and a half years after the date of the proposal, that too after the death of the insured, and after a claim was raised by the wife of the deceased. Since there is nothing on record to show that the husband (deceased) of the respondent did not comply with any request made by the insurer, the Court referred to Regulation 14 of the IRDAI Regulations, which provides that a death claim must be settled or repudiated within thirty days from the date of receipt of all relevant documents, failing which interest at two per cent above the bank rate shall be payable.
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A non-signatory to an arbitration agreement cannot be compelled to participate in arbitral proceedings merely because it purchased the subject property during the pendency of the arbitration
The Bombay High Court in the case of Luxempire Realty Pvt. Ltd. vs. Eminence Landmarks LLP [Writ Petition No. 2068 of 2025] dated October 16, 2025, has held that a non-signatory to an arbitration agreement cannot be compelled to participate in arbitral proceedings merely because it purchased the subject property during the pendency of the arbitration. The Court therefore quashed the arbitral tribunal’s order impleading Luxempire
Realty Pvt. Ltd., as a respondent in an ongoing dispute between Eminence Landmarks LLP and Gagan Platinum Spaces LLP.
The Court noted that Luxempire Realty was a bona fide purchaser of land and was neither a party to the original 2017 agreement, nor did it derive any contractual rights “through or under” the signatories. Observing that the arbitration clause cannot bind non-signatories without express or implied consent, the Court ruled that the arbitral tribunal had exceeded its jurisdiction in directing the impleadment of Luxempire.
The Court clarified the limits of arbitral jurisdiction and observed that an arbitral tribunal is not a civil court strictly governed by Order I Rule 3 of the Code of Civil Procedure, as parties choosing arbitration agree to a private forum of their own making. Further, an arbitral tribunal cannot confer upon itself jurisdiction where the law does not permit, and compelling a stranger to submit to arbitral proceedings would subvert the very foundation of arbitral autonomy.
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The borrower’s liability under the SARFAESI Act is a continuing one until full discharge of the debt; The computation of “debt due” must include the total liability as on the date of filing of the appeal before the DRAT and not confined to the amount specified in the Section 13(2) notice
The Kerala High Court in the case of Mini Zakir vs Phoenix Arc Pvt Ltd [OP (DRT) No. 183 of 2025] dated October 24, 2025, has held that the expression “debt due” under the proviso to Section 18(1) of the SARFAESI Act necessarily includes the entire liability claimed by the secured creditor, inclusive of accrued and future interest up to the date of appeal. The Court also explained that excluding interest would defeat the legislative intent, which seeks to ensure that only genuine borrowers approach the appellate forum after fulfilling part of their financial liability.
The Court clarified that the term “debt”, as defined in Section 2(g) of the RDDB Act, is of the widest amplitude, covering any liability, inclusive of interest claimed as due from the borrower, and when read with Section 18(1) of the SARFAESI Act, it mandates that the pre-deposit must reflect the borrower’s entire subsisting liability, comprising both principal and interest, either as claimed by the secured creditor or as determined by the DRT, whichever is less.
While emphasizing that the borrower’s liability under the SARFAESI Act is a continuing one until full discharge of the debt, the Court observed that there is no exclusion in the statute of future or accrued interest, and, therefore, the computation of “debt due” must necessarily reflect the total liability as on the date of filing of the appeal before the DRAT and not be confined to the amount specified in the Section 13(2) notice.
Accordingly, the Court dismissed the petition filed by the borrower challenging the Debt Recovery Appellate Tribunal (DRAT) order, whereby the borrower was directed to deposit 40% of the amount mentioned in the possession notice, inclusive of interest, as a condition for hearing the appeal.
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Conviction under Section 138 of the Negotiable Instruments Act cannot be termed as an offence involving moral turpitude, and denial of statutory pension to the retiree based on such a conviction is impermissible
The Madras High Court in the case of Srinivasan vs Director, Treasury and Accounts Department [W.P.(MD)No. 24101 of 2025] dated October 13, 2025, has held that a conviction under Section 138 of the Negotiable Instruments Act cannot be termed as an offence involving moral turpitude, and denial of statutory pension to the retiree based on such a conviction is impermissible.
The Court referred to the Pension rules to observe that a person failing to have future good conduct would be disentitled from receiving the pension. However, Section 138 of the Negotiable Instruments Act arises out of a contractual dispute between the parties, and involvement therein cannot be said to be an offence that affects the conduct of the person. The Court therefore quashed the order passed under Rule 8 of Tamil Nadu Pension Rules, 1978, whereby the pension was stopped without offering an opportunity to the petitioner, and directed the Treasury Officer (respondent) to release the pension and to pay the arrears of pension, if any, within a period of twelve weeks.
Click here to read the original judgment
Regulatory Updates:
SEBI sets a timeline for adjustment in BANKNIFTY, FINNIFTY, and BANKEX for derivative indices trading
The Securities and Exchange Board of India (SEBI) vide its Circular No. HO/47/15/11(1)2025-MRD-TPD1/ I/63/2025, dated October 30, 2025, has released guidelines for stock exchanges for the introduction of derivatives on non-benchmark indices, such as BANKEX, FINNIFTY, and BANKNIFTY. Aiming to boost market efficiency, enhance representation of the banking and financial sectors, and give more diverse trading and investment opportunities, the SEBI has asked the stock exchanges to adjust the composition and weights of existing non-benchmark indices. As per this circular, in addition to the existing eligibility criteria for derivatives on indices,
stock exchanges shall follow prudential norms before introducing derivatives on non-
benchmark indices (NBI).
The SEBI has also stated that the indices should have a minimum of 14 constituents, the weight of the top constituents being less than or equal to 20%, and the combined weight of the top three constituents being no more than 45%. Further, the individual weight of all the other constituents on the index should be lower than that of the higher-weighted constituents, which means following a descending weight structure.
As far as implementation is concerned, the Board has directed that for BSE’s BANKEX and NSE’s FINNIFTY, the changes must be implemented in a single phase by December 31, 2025. For NSE’s BANKNIFTY, adjustments will be made in four monthly phases and completed by March 31, 2026, to ensure an orderly rebalancing of index-tracking funds.
However, for the BANKNIFTY, adjustments will be made in four tranches, and the new constituents will be added to the index in the first phase, and by the end of the fourth phase, the top three constituents will have a target weight. In each adjustment, the weight of the top 3 constituents would be checked, and if the weights are beyond the prudential norms, the excess would be targeted for reduction equally over the remaining tranches.
Click here to read the original circular
MeitY amends IT Rules, 2021, and directs Intermediaries to remove unlawful content within 36 Hours of a Government or Court Notice
The Ministry of Electronics and Information Technology (MeitY) vide its Notification G.S.R. 775(E). dated October 22, 2025, has notified the Information Technology (Intermediary Guidelines and Digital Media Ethics Code) Amendment Rules, 2025, which, with effect from November 15, 2025, will amend the existing IT Rules, 2021, tightening obligations on intermediaries and digital platforms regarding unlawful online content.
As per the amendment, intermediaries will be mandated to remove or disable access to information within 36 hours of receiving actual knowledge of unlawful content either through a court order or a reasoned written intimation from an authorised government officer not below the rank of Joint Secretary. For cases involving police authorities, the officer must be at least of the Deputy Inspector General (DIG) rank.
Additionally, such takedown intimations must clearly specify the legal basis, statutory provision invoked, and the precise electronic location (URL or identifier) of the content. All takedown orders will undergo monthly reviews by a secretary-level officer to ensure they are necessary, proportionate, and legally consistent.
Click here to read the original circular
MCA establishes 10 new Registrar of Companies to ensure the timely processing of applications and effective monitoring of corporate compliance
The Ministry of Corporate Affairs vide its Notification No. S.O. 4850(E). dated October 23, 2025, has established ten new Registrar of Companies to discharge functions under the Companies Act, 2013, and other delegated powers, under the powers conferred by Section 396(1) of the Companies Act.
Aligning with the government’s ongoing efforts under the Ease of Doing Business and Digital Corporate Governance initiatives, the MCA has implemented this new structure, which will be effective starting January 1, 2026, seeking to ensure better workload distribution, timely processing of applications, and effective monitoring of corporate compliance.
The key jurisdictions of the new Registrar’s offices are as follows:
- Registrar of Companies, NCT of Delhi–I (South Delhi), shall include the districts of South Delhi, Southwest Delhi, New Delhi, Southeast Delhi, and East Delhi. Whereas, the Registrar of Companies, NCT of Delhi–II (Central Delhi) shall include the districts of Central Delhi, West Delhi, North Delhi, Northwest Delhi, Northeast Delhi, and Shahdara.
- Registrar of Companies, Haryana (Chandigarh) shall have jurisdiction over the entire State of Haryana.
- Registrar of Companies, Uttar Pradesh–I (Kanpur) shall cover the major districts such as Lucknow, Kanpur Nagar, Prayagraj, Varanasi, Bareilly, Gorakhpur, and others across eastern and central Uttar Pradesh. Whereas, the Registrar of Companies, Uttar Pradesh–II (Noida) shall include western UP districts like Agra, Aligarh, Mathura, Meerut, Ghaziabad, and Gautam Buddha Nagar.
- Registrar of Companies, Mumbai–I (Mumbai) shall have limited jurisdiction over Mumbai and Mumbai Suburban districts, whereas the Registrar of Companies, Mumbai–II (Navi Mumbai) shall cover districts such as Nashik, Thane, Raigad, Jalgaon, Aurangabad, and Palghar. Further, the Registrar of Companies, Nagpur, shall cover Vidarbha and Marathwada regions with districts like Nagpur, Amravati, Nanded, Latur, Chandrapur, and Yavatmal.
- Registrar of Companies, Kolkata–I (Kolkata) shall be confined to the district of Kolkata, whereas the Registrar of Companies, Kolkata–II (Kolkata), shall cover the entire State of West Bengal except the district of Kolkata.
Click here to read the original notification
RBI issues new nomination rules for Safe Deposit Lockers kept in safe custody with the banks
The Reserve Bank of India (RBI) vide its Notification No. RBI/2025-26/95 dated October 28, 2025, has issued the RBI (Nomination Facility in Deposit Accounts, Safe Deposit Lockers, and Articles Kept in Safe Custody with Banks) Directions, 2025, which will come into effect from November 01, 2025, seeking to consolidate and update existing instructions to ensure that customers are aware of, encouraged to use, and properly assisted in availing the nomination facility, thereby improving the ease of claim settlement for nominees in case of contingencies.
These Directions apply to all scheduled commercial banks, including small finance banks, payments banks, and regional rural banks, mandating them to offer and publicize the nomination facility for deposit accounts, safe deposit lockers, and safe custody articles to simplify claims settlement upon a customer’s death. Banks must explicitly inform customers about the facility’s benefits and secure a written declaration from those who choose not to nominate.
As per the directions, at the time of account opening or locker allotment, banks must inform customers about the availability, the purpose, and the benefits of the nomination facility. However, if a customer chooses not to avail of the nomination facility, the bank must obtain a written declaration from the customer to that effect before proceeding with account opening or locker allotment, and this refusal cannot be a ground for refusing to open an account.
Further, the banks must devise proper systems to acknowledge the receipt of duly completed forms relating to registration of nomination, cancellation, and/or variation of nomination. Such acknowledgements should be issued promptly and systematically, ensuring an auditable record for both the bank and the customer. It comes with a caveat that, before issuing the acknowledgement, banks must verify and confirm that the nomination is made in accordance with the relevant provisions of the Banking Regulation Act, RBI guidelines, and the applicable Nomination Rules.
Banks are also required to widely publicise the benefits of the nomination facility by printing informative messages on cheque books, passbooks, deposit receipts, and other customer-facing materials; displaying guidance posters at branches; and conducting periodic awareness campaigns through digital and offline channels. The Banks are also directed to ensure complete system readiness and staff training before November 01, 2025, to comply with the new procedural requirements.
