Legal Updates (Nov 17 – Nov 22, 2025)
A borrower or guarantor cannot claim the benefit of a One-Time Settlement (OTS) as a matter of right, and this decision to accept or reject an OTS proposal lies within the exclusive commercial discretion of the lending bank
The Bombay High Court in the case of Archana Wani vs. Indian Bank [Writ Petition No. 3766 of 2023] dated October 17, 2025, held that a borrower or guarantor cannot claim the benefit of a One Time Settlement (OTS) as a matter of right. The decision to accept or reject an OTS proposal lies within the exclusive commercial discretion of the lending bank, particularly as banks deal with public money and must act in the interest of financial prudence and public accountability.
The High Court observed that the bank was under no statutory or contractual obligation to accept an OTS proposal or to disclose its internal benchmark for such settlements. The grant of OTS is a matter of policy and commercial discretion, not a legal right enforceable by writ jurisdiction. Further, the relationship between a borrower and a bank is governed by contract, and the Court, under Article 226 of the Constitution, cannot rewrite or modify contractual terms by directing acceptance of reduced settlement amounts, since there was no binding policy or RBI circular mandating the acceptance or disclosure of OTS criteria.
The Court further held that the doctrine of legitimate expectation could not apply in the absence of an established or consistent practice of granting OTS benefits. A borrower cannot create a right based on a mere expectation of leniency, especially when the bank has initiated recovery under special enactments such as the SARFAESI Act and the IBC.
Further, if the bank believes it can recover the entire outstanding amount by enforcing its security or selling the mortgaged property, it is fully justified in rejecting an OTS proposal offering a lesser sum. Since banks manage public funds, they are duty-bound to protect depositors’ interests and ensure responsible recovery of dues; judicial compulsion to accept reduced settlements would be contrary to public interest and fiscal discipline. Accordingly, the Court concluded that the decision whether to grant or reject an OTS must remain within the commercial wisdom of the bank and cannot be subjected to judicial direction.
The ‘Registered Office’ does not establish territorial jurisdiction if no cause of action has arisen at that office, and even if parties have agreed to an exclusive jurisdiction clause, they cannot grant jurisdiction to a Court that otherwise lacks authority over the subject matter
The Delhi High Court in the case of Aryan Infraheight P Limited vs Signature Global India Limited [Arbitration Petition No. 644/ 2024] dated November 18, 2025, has held that even if parties have agreed to an exclusive jurisdiction clause, they cannot grant jurisdiction to a Court that otherwise lacks authority over the subject matter. The exclusion of some Courts’ jurisdiction is allowed only if the Court receiving exclusive jurisdiction already has proper jurisdiction, and the ‘Registered Office’ does not establish territorial jurisdiction if no cause of action has arisen at that office.
The Court clarified that exclusive jurisdiction clauses act as ouster clauses. Reference was made to the decision of the Supreme Court in the case of Swastik Gases Private Limited v. Indian Oil Corporation Limited [(2013) 9 SCC 32], where it was held that even if an agreement does not specifically use words like ‘alone’, ‘only’, ‘exclusive’, or ‘exclusive jurisdiction’, the construction of such a clause is unaffected because of the maxim ‘expressio unius est exclusio alterius’, provided there is nothing to the contrary in the agreement.
The Court observed that if the arbitration agreement specifies a “seat” of arbitration, then only the court with jurisdiction over that seat may handle matters related to the arbitration. If the agreement does not specify a seat but does specify a “venue” or “place,” and there are no indications to the contrary, then that “venue or place” will be treated as the juridical seat of arbitration, and only the court at that venue or place will have jurisdiction over arbitration matters. Since, in the present case, there is no designation of seat, place, or venue, the Bench observed that the territorial jurisdiction of the Court will be evaluated according to the principles of Section 20 of the CPC.
The Court noted that the disputes between the parties involve construction contracts given to the Petitioners for projects located in Gurugram, Haryana. Essentially, the disputes concern issues such as breach or non-performance of contracts, plant and machinery, equipment, and non-payment of dues. None of the contracts was executed in Delhi, and no transaction related to the contracts took place there. All project sites, installations, and equipment relevant to the contracts are situated in Gurugram. There is no evidence presented of any part of the contracts being performed in Delhi.
Thus, the Court negated the claim of the Petitioner that the Contract Agreements and Work Orders were executed in Delhi, upon examining the Agreements, which clearly show that they were signed in Gurugram and the stamp duty was paid in Haryana. Hence, no part of the cause of action has arisen in Delhi.
Referring to the Explanation to Section 20 of the CPC, the Court explained that if a corporation (including a company) has a sole or principal office at one place, courts within that jurisdiction will have authority, since the corporation is deemed to carry on its business there by legal fiction. If the corporation has a principal office and also a subordinate office elsewhere, such as a Registered Office in one location and a branch in another, the place for filing will be determined by where the cause of action arises within the local limits, not by the principal place of business.
The Court therefore concluded that it lacks territorial jurisdiction since the Respondent does not operate a business here and no cause of action has arisen in this territory. Further, the Bench also negated the Petitioners’ argument that the Respondent has a bank account in Delhi, used as a basis for complaints under Section 138 of the NI Act, holding it as irrelevant for determining this Court’s territorial jurisdiction. Since the Court lacks territorial jurisdiction, the objection regarding the existence of the arbitration agreements is not addressed.
If a debt is owed by one person, the bank cannot simply seize money from a joint account held with another person who is not a co-debtor. The bank cannot withdraw pension money from a joint account of a retired employee acting as a loan guarantor to recover a defaulted loan that was only taken by one of the joint account holders
The Orissa High Court in the case of Bharat Chandra Mallick vs Branch Manager, SBI [Writ Petition (C) No. 19648 of 2025] dated October 17, 2025, has held that a bank cannot withdraw pension money from a joint account of retired employee acting as loan guarantor, to recover a defaulted loan that was only taken by one of the joint bank account holders and the other was merely a guarantor. The Court also referred to Section 60(1)(g) of the Code of Civil Procedure, 1908, which exempts government pensions from attachment in execution of a decree to hold that the bank cannot withdraw pension money from a joint account of a retired employee acting as a loan guarantor to recover a defaulted loan that was only taken by one of the joint account holders.
The Court observed that, although it appeared at first glance to be a routine banking dispute, it in fact cut to the core of a larger issue: the protection of pension as a lifeline for survival in old age, and the limits of contractual power when weighed against the constitutional right to livelihood. The Court noted that it was evident from the legal framework that pensionary benefits were accorded special protection, wherein Section 60(1)(g) of the Civil Procedure Code, 1908, exempted government pensions from attachment in execution of a decree. The Court further noted that, in the present case, the Bank’s debit of Rs 5 lakh from the petitioner’s account, which contained his pension, had been done without any court order or prior notice, and thus prima facie violated the principle that pension could not be taken except by due process.
The Court emphasised that the fact that the amount was taken from a joint account held by the petitioner and his wife did not legalise the recovery. The Court held that if a debt was owed by one person, the bank could not seize money from a joint account held with another who was not a co-debtor. Further, the Court emphasised that while both the petitioner (guarantor) and his wife (borrower) were liable for the loan, the joint account was treated as a convenient source without distinguishing whose funds were taken. The Court noted that the petitioner was a retiree whose contribution was his pension, which remained protected. Simply because the account was joint did not strip the funds of their pensionary nature.
The Court observed that the recovery process failed basic norms of natural justice. It was undisputed that the Bank had not issued prior notice or obtained consent before debiting the amounts. Further, the Court observed that a unilateral debit from a customer’s account, especially when it consisted of pension money, was an extreme step. The petitioner was entitled to notice and an opportunity to be heard. However, the Court noted that by bypassing any process, the Bank’s action was arbitrary. The Court held that the proper course in case of loan default was to pursue lawful recovery channels, not self-help by dipping into a pension account.
The Court found no indication that the petitioner had acquiesced in the recovery; merely continuing to use the same account for pension credits could not be construed as consent to the Rs 5 lakh deduction. The Court clarified that, while monetary disputes ordinarily fell within the realm of civil courts or tribunals, that did not curtail writ jurisdiction where a public sector bank had acted with manifest illegality, infringing constitutional guarantees. Accordingly, the Court held that the Bank’s action in debiting ₹5 lakh from the petitioner’s joint account was illegal and unsustainable in law. It had violated statutory protections afforded to pension funds and the petitioner’s fundamental right to livelihood under Article 21. Consequently, the Court directed the Bank to reverse the sum of Rs 5 lakh to the petitioner’s account within four weeks. The petitioner was permitted to operate his account freely, and the Bank was restrained from recovering any amount from his pension in the future without adhering to due process.
Enforcement Directorate, under Section 5(1) of the PMLA, can attach a property of equivalent value when the original proceeds of crime obtained by the accused are untraceable, after recording a ‘reason to believe’ that the person is in possession of proceeds of crime and also establish a clear nexus of such proceeds to a scheduled offence.
The Delhi High Court in the case of Directorate of Enforcement vs Prakash Industries [LPA 102/ 2023] dated November 03, 2025, has held that the Enforcement Directorate (ED) under Section 5(1) of the PMLA is empowered to attach a property of equivalent value when the original proceeds of crime obtained by the accused are untraceable. However, before issuing such an order of attachment, the Directorate must necessarily record a ‘reason to believe’ that the person is in possession of proceeds of crime and also establish a clear nexus of such proceeds to a scheduled offence.
The Court observed that the definition of proceeds of crime under Section 2(1)(u) of the Prevention of Money Laundering Act, 2002 (PMLA), not only includes the property derived directly through a criminal activity related to the scheduled offence, rather it also includes any property derived indirectly by such a criminal activity. Thus, the primary objective of Section 5 of the PMLA is preventive and protective, in order to preserve the assets that may be subject to dissipation if not confiscated by the agency.
Even if no separate predicate offence is registered in relation to the subsequent act of utilisation of property to acquire funds through a legalised transaction, the classification of the illegal gains used by means of a legal transaction emanating from an illegal means adopted for attaining coal block allocation would still be construed as “proceeds of crime”. This is because the proceeds nevertheless are traceable either directly or indirectly to the original criminal activity relating to a scheduled offence. Additionally, the offence of money laundering, being continuing in nature, is not confined only to the initial act of criminal acquisition but also extends to every process or activity connected with the proceeds, including layering through multiple transactions, integration into the legitimate economy and projection of the acquired wealth as lawful.
The Court observed that if the sum received as a bribe is invested in the share market, which later increases or goes beyond the value of the actual investment owing to market forces or corporate actions, the entire enhanced amount shall constitute proceeds of crime. The appreciation in value does not cleanse or purify the tainted origin, more so since the augmented value is inextricably and indirectly derived from the original illicit source of the bribe. As per Section 3 of the PMLA, not only the tainted property but every process or activity connected with such property falls within the ambit of money laundering and, therefore, even if the share allotment on preferential basis appears to be a “legal transaction” in form, its foundation is inherently rooted in misrepresentation and fraud underlying the core predicate offence enabling the ED to trace and connect such transactions to the proceeds of crime.
The Court further observed that PMLA is a self-contained and comprehensive legislation enacted to prevent money laundering and connected activities, enabling the authorities to combat the problem of money-laundering and processes related thereto, and confiscate proceeds of crime. Even if it is assumed that the Directorate has defaulted in sharing information as mandated under Section 66(2) of the PMLA, it is to be taken into account that the provision nowhere provides for any specific time limit within which the information must be shared”, it also noted. The Court, therefore, concluded that compliance with Section 66(2) of the PMLA is not a condition precedent for issuance of Provisional Attachment Order (PAO), the Directorate is legally justified in attaching the equivalent value of properties under Section 5 of the PMLA, especially when the prerequisites of the attachment have been satisfied.
Dues under the Employees’ Provident Funds enjoy priority over the claims of secured creditors proceeding under the SARFAESI Act, and the statutory first charge created under the Employee Provident Funds law overrides the “priority” granted to secured creditors in Section 26E of the SARFAESI Act
The Supreme Court in the case of Jalgaon District Central Cooperative Bank vs State of Maharashtra [Special Leave Petition (C) No.27740 of 2011] dated November 20, 2025, has held that the employees’ provident fund dues take precedence over the ‘priority’ rights claimed by banks in the sale of a company’s assets under the SARFAESI Act. Essentially, the dues under the Employees’ Provident Funds and Miscellaneous Provisions Act enjoy priority over the claims of secured creditors proceeding under the SARFAESI Act, and the statutory first charge created under the EPF law overrides the “priority” granted to secured creditors in Section 26E of the SARFAESI Act.
The Court observed that from the proceeds of the sale of the assets, the first charge would be for the dues under the EPF&MP Act, which includes not only the contribution payable but also the interest, penalty and damages, if any, imposed. Hence, the sale proceeds have to be first applied in satisfaction of the dues under the EPF Act and then in satisfaction of the secured debt of the bank.
The Court also observed that Section 11(2) of the EPF & MP Act creates a statutory first charge on the assets of the establishment for any amount due from an employer, be it the employers’ or employees’ contribution, which would include any interest or damages. In that circumstance, the effect of the non obstante clause (in SARFAESI Act), giving precedence over any other law for the time being in force, pales into insignificance.
If a cheque is given as security for a contract or a loan and the liability arising from that contract or loan crystallises into a legally enforceable debt at a later date, the cheque, even if originally a “security” one, assumes the character of a cheque issued in discharge of that debt under Section 138 of the NI Act
The Delhi High Court in the case of Manmohan Gaind vs Negolice India [CRL.M.C. 1379/2021] dated November 11, 2025, has held that when a cheque is given as security and the liability arising from the contract or loan, crystallizes into a legally enforceable debt at a later date, the cheque assumes the character of a cheque issued in discharge of that debt for the purpose of Section 138 of the Negotiable Instruments Act, 1881 (NI Act).
The Court observed that where a cheque is given as security for a contract or a loan and the liability arising from that contract or loan crystallises into a legally enforceable debt at a later date, the cheque, even if originally a “security” one, assumes the character of a cheque issued in discharge of that debt under Section 138. It was noticed that the Security Cheques are only given to be utilised if, subsequently, during the business transactions, certain liabilities arise which are not fulfilled by the Petitioners.
For an offence under Section 138 of the NI Act to be attracted, the cheque must be for the discharge of a debt or liability, and the debt must be equal to or greater than the amount of the cheque presented. Whether the cheque amount was for the existing liability or an excess amount is a matter of trial and cannot be considered at the stage of summoning.
Disputes relating to the rate of interest awarded by an arbitrator do not fall within the narrow scope of interference under Section 34 of the Arbitration and Conciliation Act unless the interest is perverse or unreasonable
The Supreme Court in the case of Sri Lakshmi Hotel Pvt Ltd. vs Sriram City Union Finance Ltd. [Civil Appeal No. 13785 of 2025] dated November 18, 2025, has held that a challenge to an arbitral award cannot be sustained merely because a party disputes the rate of interest awarded, unless the interest component is shown to be so unreasonable as to shock the judicial conscience. The Court emphasised that the ‘public policy’ ground under Section 34 is narrowly construed and does not extend to disagreements over commercial interest rates.
The Court reiterated that, following the amendment of Section 34 of the Arbitration Act, the expression “public policy of India” has been assigned a restricted meaning. The statutory scheme mandates interference only where the award contravenes fundamental principles forming the foundation of the legal system, and not merely because one party considers the outcome harsh. Thus, mere disagreement with the interest rate does not fall within the category of harm contemplated by the provision.
On a plain and grammatical construction of clauses (ii) and (iii) of Explanation 1 to Section 34(2)(b) of the Act, 1996 it cannot be said that the imposition of an exorbitant interest in the background of contemporary commercial practices, would be against the fundamental policy of Indian Law, or against the basic notions of morality or justice. As per the principles governing pre-award and post-award interest under Section 31(7) of the Arbitration Act, the arbitrator possesses discretion to determine reasonable interest unless the contract provides otherwise.
Since both the Section 34 and Section 37 courts had concurrently upheld the arbitral findings regarding the commercial nature of the transaction, the execution of agreements, and the agreed rate of interest, the Supreme Court held that it was impermissible to revisit those factual conclusions. The Court also examined the conduct of the appellants, noting continuing defaults, non-payment despite assurances, and the dishonour of the cheque issued towards settlement. It was observed that failure to honour the contractual obligations had significant financial repercussions for the lender, and that commercial risks justified higher interest rates in such transactions.
A partnership firm has no separate legal recognition in the absence of its partners, and therefore, ‘sleeping partners’ acting through a Power of Attorney holder, cannot avoid their liability under Section 138 of the Negotiable Instruments Act
The Allahabad High Court in the case of Sonali Verma vs State of UP [Application U/s 482 No. 8942 of 2025] dated November 19, 2025, has held that a partnership firm has no separate legal recognition in the absence of its partners, and therefore, refused to quash proceedings under Section 138 read with Section 141 of the Negotiable Instruments Act (NI Act) against two persons who claimed to be ‘sleeping partners’ acting through a Power of Attorney holder.
The Court observed that there is an underlying distinct between the partnership firm and the company, and it is a body corporate, whereas the offence committed by the company is differently dealt with and Section 141 of the Act is attracted, and there is no concept of authorised liability of the partners as such. The liability is jointly and severally.
The Court referred to Section 25 of the Indian Partnership Act, 1932, which says that every partner is liable, jointly with all the other partners and also severally, for all acts of the firm done while he is a partner. Accordingly, the Court concluded that the applicants, being admitted partners under the partnership deed, could not avoid their liability.
When a decree for specific performance does not create or purport to create any right, title or interest in immovable property, an instrument assigning such a decree does not attract compulsory registration
The Supreme Court in the case of Rajeswari vs Shanmugam [Civil Appeal No. 13835 of 2025] dated November 19, 2025, has held that an assignment of a decree for specific performance does not require registration under Section 17(1)(e) of the Registration Act, observing that the decree does not create any right, title or interest in the property. Section 17 of the Registration Act, 1908, provides that “registration is mandatory only for non-testamentary instruments transferring or assigning any decree or order of a Court or any award when such decree or order or award purports or operates to create, declare, assign, limit or extinguish, whether in present or in future, any right, title or interest, whether vested or contingent, of the value of one hundred rupees and upwards, to or in immovable property”. Thus, when the decree itself, which is for specific performance, does not create or purport to create any right, title or interest in any immovable property, the question of registering an instrument assigning such a decree cannot arise.
The Supreme Court examined the nature of a decree for specific performance and reiterated that such a decree does not itself transfer any right or interest in immovable property. The Court referred to the statutory scheme and earlier decisions, noting that title to immovable property passes only upon execution of the sale deed. The Court observed that Section 17(1)(e) applies only where the decree or order “purports or operates” to create, declare, assign, limit or extinguish a right, title or interest in immovable property. Since a decree for specific performance does not have that effect, the Court held that an instrument assigning such a decree does not fall within the scope of Section 17(1)(e).
The Court further stated that an agreement for sale does not create any interest in the property and that the decree for specific performance does not elevate the contractual right into an interest in immovable property. The right under the decree continues to remain a right to seek execution of the sale deed. The Court noted that the personal obligation created by an agreement of sale is described in Section 40 of the Transfer of Property Act as an obligation arising out of a contract and annexed to the ownership of the property, but not amounting to an interest or easement in the property.
If entities that participated in bid-rigging were cover bidders and were not even present in the relevant market, and their relevant turnover is nil, then their egregious nature of conduct and their repeated participation in illegal practices attract maximum penalty in terms of Section 27(b) of the Competition Act, 2002
The Competition Commission of India (CCI) in the case of Nagrik Chetna Manch, In re [Case No. 50 of 2015] dated November 10, 2025, has held that when entities which participated in bid-rigging were cover bidders and were not even present in relevant market of Solid Waste Management business, and their relevant turnover was nil, then their egregious nature of conduct and their repeated participation in illegal practices, attracts maximum penalty in terms of Section 27(b) of the Competition Act, 2002, i.e. at 10 per cent of their average global turnover, for preceding three financial years was to be imposed upon such entities.
Since entire bid-rigging arrangement had been proven to be at behest of certain individuals who rigged not only one or two, but rather at least seven tenders issued by State Municipal Corporation over a period of two years and got other entities, who were not even involved in business of Solid Waste Processing, to be a part of their bid-rigging arrangement, with sole intent of manipulating impugned tenders and ensure failure of competitive bidding process therein, the CCI, after considering egregious nature of conduct and their repeated participation in illegal practices, imposed on these entities.
The CCI observed that where the determination of ‘relevant turnover’ is not feasible, then the CCI may consider the global turnover of the enterprise concerned, derived from all products and services, for the purpose of determining of amount of penalty. As in the present case, the entities that participated in bid-rigging/collusive bidding arrangement were cover bidders and were not even present in the relevant market of the Solid Waste Management business; their ‘relevant turnover’ in terms of the CCI (Determination of Monetary Penalty) Guidelines, 2024, would be Nil.
At the same time, the CCI clarified that if the determination of penalty amounts on basis of ‘relevant turnover’ leads to an inequitable result creating an anomalous situation that would render objectives of the Competition Act infructuous, then, in terms of Penalty Guidelines, the ‘global turnover’ of entities would be considered for purpose of determination of amount of penalty to be imposed upon them.
