Legal Updates (May 25 – May 30, 2026)
CASE UPDATES
A resolution applicant whose plan has scored higher under the evaluation matrix does not acquire any vested right to have that plan approved, since the evaluation matrix is only a facilitative tool and the ultimate decision of the Committee of Creditors rests in its commercial wisdom
The Kochi Bench of the National Company Law Tribunal (NCLT) in the case of Ayyappan Nair Raghavan Pillai vs Committee of Creditors [IA(IBC)/379/KOB/2025] dated May 20, 2026, has held that a resolution applicant whose plan has scored higher under the evaluation matrix does not acquire any vested right to have that plan approved, since the evaluation matrix is only a facilitative tool and the ultimate decision of the Committee of Creditors rests in its commercial wisdom.
The NCLT held that judicial interference with the CoC’s decision is limited to cases of statutory non-compliance, jurisdictional infirmity, material irregularity, illegality or arbitrariness, and the Adjudicating Authority cannot substitute its own assessment for the commercial decision of the CoC merely because another plan secured a higher score or offered a different value proposition. Where the record shows that the CoC considered the competing plans, deliberated upon feasibility, viability, sustainability and implementation factors, and no material procedural unfairness or statutory breach is established, no interference is warranted under Section 60(5) of the IBC.
The Tribunal observed that the principal question was whether the approval of the successful resolution plan suffered from material irregularity, illegality, arbitrariness or violation of the Insolvency and Bankruptcy Code, 2016 and the CIRP Regulations so as to warrant interference under Section 60(5). It noted that the evaluation matrix is only a guiding tool for comparative assessment and does not confer any vested or enforceable right upon the highest-scoring resolution applicant to demand approval of its plan.
The Tribunal recorded that the CoC is entitled to consider several commercial factors beyond the scoring matrix, including feasibility, viability, implementation capability, financial strength, long-term sustainability, operational continuity and overall effectiveness of the resolution.
The Tribunal further clarified that issues relating to the merits, feasibility, viability, implementability and legal compliance of the approved resolution plan would arise at the stage of adjudication of the plan approval application under Section 31, and not in the proceedings confined to the challenge to the decision-making process under Section 60(5).
A search engine operator that actively sells trademarked terms as keywords to trademark proprietor’s direct competitors, without the proprietor’s consent and for commercial gain, amounts to infringement under Section 29(8) of the Trade Marks Act
The Delhi High Court in the case of Hindware vs Grohe India [CS(COMM) 591/2017] dated May 22, 2026, has held that use of a registered, coined, and well-known trademark as a keyword under a paid search advertising programme, even where the keyword is invisible
to the consumer, constitutes “use” of the trademark within the meaning of Sections 2(2)(c)(i) and 29(6)(d) of the Trade Marks Act, 1999. A search engine operator that actively suggests, auctions, and sells trademarked terms as keywords to the trademark proprietor’s direct competitors, without the proprietor’s consent and for commercial gain, is not a passive intermediary but an active participant in such use. Such conduct amounts to infringement under Section 29(8) of the Trade Marks Act as it takes unfair advantage of the trademark’s reputation and goodwill, and is contrary to honest practices in industrial and commercial matters, regardless of whether likelihood of confusion is established.
The Court further laid down that the safe harbour under Section 79 of the Information Technology Act is unavailable to such a search engine operator because it selects the receiver of the transmission, fails to observe due diligence under the Intermediary Guidelines, and actively aids or induces the infringing use. The advertising function of a trademark, its ability to attract consumers to the proprietor’s goods and services, is a protectable commercial asset, and a search engine cannot be permitted to auction or monetise that asset without the proprietor’s authorisation.
The Court categorically held that use of the trademark as a keyword amounts to use by Google and not merely by the advertiser. Google does not operate as a neutral or passive platform. It actively suggests trademarked terms to advertisers through its Keyword Planner Tool, conducts real-time auctions for the use of trademarks as keywords, and determines which advertisements are ultimately displayed on the SERP through its proprietary algorithms. The final decision on which ad is displayed is Google’s, not the advertisers. Google monetises this process by earning CPC revenue at the precise moment a user clicks on the advertisement and is diverted to a rival’s website.
No prior consent or approval was taken from the plaintiff for offering, suggesting, or selling its registered trademark to third parties. Therefore, there is no permitted use within the meaning of Section 2(1)(r)(ii) of the Trade Marks Act, added the Court.
The Court held that Google’s conduct constitutes trademark infringement under Section 29(8) of the Trade Marks Act, which provides that a registered trademark is infringed by “any advertising” of that trademark if such advertising (a) takes unfair advantage of and is contrary to honest practices in industrial or commercial matters; (b) is detrimental to its distinctive character; or (c) is against the reputation of the trademark. Importantly, proof of likelihood of confusion is not required for infringement under Section 29(8).
On unfair advantage, the Court held that the term “unfair advantage” means a benefit or profit earned by free-riding on the goodwill of another’s mark. ‘HINDWARE’ is a coined word, a consumer types that term in the search bar only because the plaintiff has built a reputation for it through years of investment. Google exploits this consumer recognition by auctioning the mark to the plaintiff’s direct competitors, without the plaintiff’s consent and without sharing revenue with the plaintiff. Google generates higher revenue from third-party bidding on ‘HINDWARE’ than the plaintiff itself would generate by bidding on its own mark. This constitutes unfair advantage and free-riding on the plaintiff’s commercial asset.
On honest practices, the Court held that a practice is “honest” if it is fair with respect to the legitimate interests of the trademark proprietor, and is regarded as honest by a substantial and responsible section of the industry. Google’s conduct of selling a trademark it does not own to the proprietor’s direct competitors, without consent and without sharing profits, violates commercial morality. It amounts to misappropriating the advertising value of the plaintiff’s trademark and does not constitute honest practice in industrial or commercial matters.
The High Court therefore granted permanent injunction restraining Google LLC and Google India from using the mark ‘HINDWARE’, or ‘HINDWARE SANITARYWARE’, ‘HINDWARE SANITARY’, ‘HINDWARE SANITARYWARE INDIA’, or any combination thereof, as advertising keywords or AdWords, or in any manner amounting to infringement. The Court also awarded nominal damages of Rs. 15 lakhs in each suit, totalling Rs. 30 lakhs, payable jointly and severally by Google LLC and Google India within eight weeks. Actual costs of litigation were held payable jointly and severally by the defendant.
Once real estate project was undertaken under a collaboration arrangement with substantial construction and allotments were made to allottees, and neither HARERA nor the arbitral tribunal has accepted that collaboration agreement stood validly terminated, then unsold inventory cannot be excluded from valuation of the corporate debtor
The New Delhi Principal Bench of the National Company Law Appellate Tribunal (NCLAT) in the case of Ishan Singh vs Narender Kumar Sharma [Company Appeal (AT) (Insolvency) No. 1107 of 2025] dated May 11, 2026, has held that where a real estate project has been undertaken under a collaboration arrangement, substantial construction has been carried out, allotments have been made to allottees, and neither HARERA nor the arbitral tribunal has accepted that the underlying Collaboration Agreement stood validly terminated, the unsold inventory and the subject project property cannot be excluded from the valuation of the corporate debtor or from the Information Memorandum in CIRP.
The NCLAT asserted that merely because the arbitral tribunal found that the Collaboration Agreement could not be specifically enforced and described it as inoperable for that purpose, it did not follow that the project assets ceased to form part of the corporate debtor’s estate for insolvency purposes, particularly when the landowner’s specific prayer for declaration of lawful termination and for transfer of the project back to him had been refused, and the rights of allottees remained statutorily protected.
The Tribunal observed that the HARERA order dated Feb 09, 2022 had treated both the corporate debtor and the landowner as promoters of the project and had directed both of them to commence and complete the construction/development, while also recording that the inter se disputes between the landowner and the developer could not prejudice the statutory rights of innocent allottees.
The Tribunal further noted that the arbitral award dated Sep 14, 2022 did not grant the landowner’s prayer for a declaration that the Collaboration Agreement and subsequent addenda stood lawfully terminated; rather, the arbitral tribunal only held that the agreements were inoperable for purposes of specific enforcement and restrained the corporate debtor from acting upon the powers of attorney.
The Tribunal also emphasized that the arbitral tribunal had specifically rejected the appellant’s prayer for transfer of the project land and project-related documents in his favour. On that basis, it held that this was not a case where termination of the Collaboration Agreement had been accepted by a competent forum. The NCLAT also pointed out that the present matter involved a project where development had been undertaken, construction had been raised, allotments had been made to 147 allottees, and the rights of such allottees had acquired statutory protection. Accordingly, the NCLAT upheld the rejection of the appellant’s application seeking exclusion of the unsold inventory and subject property from the CIRP process.
If cheque is presented after company has gone into liquidation and the official liquidator has taken over, the company cannot be said to have committed an offence under Section 138, and the directors, who have ceased to control the affairs of the company, cannot be fastened with liability under Section 141 of the NI Act
The Delhi High Court in the case of Raj Kumar Jain vs Shree Balaji Enterprises [CRL.M.C. 1665/2023] dated May 04, 2026, has held that where, prior to the dishonour of the cheque and prior to issuance of the statutory demand notice, a Provisional Liquidator has already been appointed in respect of the company and the directors have been divested of authority over the company’s assets and bank accounts, the directors become functus officio and cannot be said to be maintaining the account within the meaning of Section 138 of the Negotiable Instruments Act, 1881. In such a case, the legal and practical impossibility of operating the account or complying with the demand notice means that the essential ingredients of the offence under Section 138 are not met, and the complaint against such director is not maintainable.
The Court examined Sections 450, 456 and 457 of the Companies Act, 1956 and observed that appointment of a Provisional Liquidator does not dissolve the company, but it suspends the authority of the Board of Directors and renders them functus officio. The company continues to exist corporately, but its business operations, asset management and contractual dealings thereafter stand under the supervision and formal authority of the Provisional Liquidator, who becomes custodian of the corporate estate.
The Court noted that once an Official Liquidator is appointed as Provisional Liquidator, the Board of Directors becomes functus officio and the contention that erstwhile directors continue to perform their functions in the company is untenable in law. The Bench specifically noted that it is only the Provisional Liquidator who is empowered under Section 457(2)(iii) of the Companies Act, 1956 to draw, accept, make and endorse negotiable instruments in the name and on behalf of the company.
The Court reiterated that where a cheque is presented after the company has gone into liquidation and the official liquidator has taken over, the company cannot be said to have committed an offence under Section 138 because payment is legally barred and beyond its control. In such circumstances, the directors, who have ceased to control the affairs of the company, cannot be fastened with liability under Section 141 of the NI Act.
On the language of Section 138 of the NI Act, the Court emphasized the expression “an account maintained by him” and held that one of the prerequisite ingredients of the offence is that the accused must have control over the account at the relevant time. The Court observed that “maintained” cannot be understood merely as ownership of an account; it implies an account that is alive and operative, with the account holder being capable of issuing effective instructions to the banker and keeping the account functional for honour of cheques.
Accordingly, the Court concluded that, since the appointment of the Provisional Liquidator preceded the dishonour of the cheques and issuance of the demand notice, the petitioner was no longer in charge of the affairs of the company and did not maintain the account within the meaning of Section 138 of the NI Act. Therefore, the essential ingredients of the offence were not satisfied, the complaint was legally non-maintainable against the petitioner, and the pending complaint and all proceedings emanating therefrom qua the petitioner were quashed.
The right of a secured creditor to realise its security interest outside liquidation under Section 52 is a qualified statutory right and can be exercised only upon strict compliance with the Code and the Liquidation Regulations. Mere assertion of an intention not to relinquish security is insufficient
The New Delhi Principal Bench of the National Company Law Appellate Tribunal (NCLAT) in the case of STCI Finance Limited vs IMP Powers Limited [Company Appeal (AT) (Ins.) No. 1019 OF 2024] dated April 27, 2026, has held that the right of a secured creditor to realise its security interest outside liquidation under Section 52 is a qualified statutory right and can be exercised only upon strict compliance with the Code and the Liquidation Regulations. Mere assertion of an intention not to relinquish security is insufficient.
The NCLAT clarified that if the secured creditor fails to comply with Regulation 21A(2), including payment of the required dues within the prescribed period, and fails to take the necessary steps for realisation of security, Regulation 21A(3) operates automatically and the secured asset becomes part of the liquidation estate.
The Tribunal also held that where the alleged pari passu charge is conditional and the foundational contractual conditions for its creation are not fulfilled, such charge does not become legally enforceable merely because charge documentation exists or charge registration has been made. Further, in a consortium lending structure involving joint security, Section 13(9) of the SARFAESI Act applies as the applicable law under Section 52(4), with the consequence that a decision of secured creditors holding the requisite statutory majority binds the dissenting creditor.
The Tribunal examined, first, whether STCI could validly insist on standing outside liquidation under Section 52, and second, whether the issue of distribution of sale proceeds should be decided at the appellate stage. On the security issue, the Tribunal observed that STCI’s alleged first pari passu charge never became operative in law because the underlying NOCs from existing consortium lenders were conditional, and the essential conditions, particularly execution of an inter se agreement and reciprocal ceding of pari passu charge by STCI, were never fulfilled.
The Tribunal further observed that even assuming STCI was a secured creditor, it did not comply with the mandatory requirements of Regulation 21A(2), since it did not pay CIRP/liquidation-related dues within 90 days, did not intimate any proposed realization value, and did not take concrete steps to enforce security. It also noticed that the majority of secured creditors, first above 69% and later above 85% in value, had relinquished their security interest, and that in a consortium lending structure Section 13(9) of the SARFAESI Act would apply as the “applicable law” for purposes of Section 52(4).
The Tribunal therefore held that the secured assets became part of the liquidation estate by operation of law and the liquidator was justified in proceeding with the e-auction sale of the corporate debtor as a going concern.
If material on record shows a continuous commercial trading relationship supported by purchase and sales invoices, and there is no written loan agreement and no interest clause, to show that the transaction was a loan at inception, the debt cannot subsequently be recharacterized as financial debt merely by later communications or unilateral assertions
The Chennai Bench of the National Company Law Tribunal (NCLT) in the case of Supreme Plascare India vs Shiroo Polymers [CP/IBC/76/CHE/2025] dated May 05, 2026, has held that, for admission of a Section 7 application, the applicant must establish that the claimed debt is a “financial debt” within the meaning of Section 5(8), namely a debt disbursed against consideration for the time value of money. Where the material on record shows a continuous commercial trading relationship supported by purchase and sales invoices, and there is no written loan agreement, no interest clause, and no contemporaneous evidence that the transaction was a loan at inception, the debt cannot subsequently be recharacterized as financial debt merely by later communications or unilateral assertions. Further, interest cannot be added without contractual basis to artificially cross the statutory threshold for maintainability under Section 7 of the IBC.
The Tribunal observed that the principal issue was whether the debt claimed by the applicant qualified as a “financial debt” under Section 5(8) of the Code. On examining the invoices on record, it found that the parties were engaged in a continuous business-to-business relationship and that the documents showed purchase and sales invoices indicative of an operational rather than a financial arrangement. It reiterated that, to qualify as a financial debt, the debt must be disbursed against consideration for the time value of money, and that the burden lay on the applicant to prove that the transaction was not merely a commercial payment but a loan carrying an inherent element of time value of money.
The Tribunal also found the material relied upon by the applicant insufficient. It observed that the NeSL report was not duly authenticated and that the ledger account produced was only the applicant’s own ledger statement. As regards the WhatsApp message stating, “Sir, please consider as loan, we will adjust within a month later,” the Tribunal held that the phrase “please consider as loan” implied that the amount was not a loan at its inception, but rather reflected an attempt to recharacterize a pre-existing commercial liability.
The Tribunal stated that the nature of a debt is sacrosanct and that the legal character of a transaction is determined at the time of its inception and cannot be shifted at the whims of the parties to suit the jurisdiction of the Adjudicating Authority. It further noted that no written loan agreement, interest clause, or board resolution had been produced to support conversion of commercial dues into financial debt.
The Tribunal additionally accepted the respondent’s challenge on the statutory threshold. While the applicant claimed Rs. 1.13 Crores, the respondent’s case was that only Rs. 99.13 lakhs had actually been transferred as principal, with the rest added as interest without any underlying agreement. The Tribunal held that, in the absence of any financial contract or provision for interest, inclusion of such interest to cross the Rs. 1 crore threshold was legally untenable. On that basis, it concluded that the applicant had failed to establish that the amount due and payable was a financial debt, and Section 7 application was dismissed.
REGULATORY UPDATES
SEBI has simplified investor onboarding and the nomination process, by allowing nominations to be submitted either online or offline
The Securities and Exchange Board of India (SEBI) vide its Circular No: SEBI/HO/OIAE/OIAE_IAD-3/P/CIR/2026/12676, dated May 29, 2026, has modified the nomination norms for demat accounts and mutual fund folios. The changes are aimed at simplifying investor onboarding and the nomination process. Under the revised norms, investors opening new single-holder demat accounts or mutual fund folios will have to either nominate a beneficiary or formally opt out of nomination. For jointly held accounts and folios, nomination will be optional.
SEBI has also permitted investors to nominate up to three persons. In case of multiple nominees, the nominees may either continue in the same account or folio. Alternatively, they may open separate accounts or folios for their respective holdings after the investor’s demise. The circular allows nominations to be submitted either online or offline. For online nominations, validation may be carried out through a Digital Signature Certificate, Aadhaar-based e-sign, any other e-sign facility recognised under the Information Technology Act, 2000, or two-factor authentication.
For physical nominations, witness signatures will not be required where the account or folio holder signs the form. However, where the holder affixes a thumb impression, the nomination must be witnessed by two persons. The names and addresses of the witnesses must also be captured in the nomination form. The circular will come into effect from September 1, 2026.
IBBI requires resolution professional to appoint set of registered valuers within three days of appointment in cases of pre-packaged insolvency
The Insolvency and Bankruptcy Board of India (IBBI) has amended its pre-packaged insolvency rules to require resolution professionals to appoint registered valuers within three days of taking charge, while allowing the consultation committee to require two sets of valuers if reasons are recorded in writing. The changes have been introduced through the Insolvency and Bankruptcy Board of India (Pre-Packaged Insolvency Resolution Process) (Second Amendment) Regulations, 2026, notified on May 19.
The amended rules require the resolution professional to appoint a set of registered valuers within three days of appointment to determine the corporate debtor’s fair value and liquidation value. However, the consultation committee may decide, for reasons recorded in writing, that two sets of registered valuers should be appointed. The amendments also introduce eligibility restrictions for registered valuers. A related party of the corporate debtor cannot be appointed as a registered valuer. The disqualification also applies to any person who served as an auditor of the corporate debtor at any time during the five years preceding the commencement of the pre-packaged insolvency resolution process.
Further, a partner or director of an insolvency professional entity of which the resolution professional is a partner or director is barred from appointment. The same restriction extends to relatives of the resolution professional and relatives of such partners or directors.
The IBBI has also revised the valuation methodology under Regulation 39. Where one set of valuers is appointed, the fair value submitted by the coordinating valuer will be treated as the fair value of the corporate debtor. Where two sets are appointed, the average of the two fair value estimates submitted by the coordinating valuers will be taken as the fair value.
For liquidation value, where one set of valuers is appointed, the aggregate of liquidation value estimates submitted by registered valuers for each asset class will be treated as the liquidation value. Where two sets are appointed, the aggregate of the averages of the two estimates for each asset class will be considered the liquidation value. The amended regulations came into force on May 19, 2026, the date of publication in the Official Gazette.
