Legal Updates (September 14 – September 26, 2026)
CASE UPDATES
Corporate Debtor’s own audited balance sheets and ledger entries are conclusive acknowledgement of liability under Section 18 of the Limitation Act, 1963. Financial Creditor and Corporate Debtor being sister concerns with common directors, cannot by itself render a transaction sham when Corporate Debtor has repeatedly acknowledged the liability in its own books
The Mumbai Bench of the National Company Law Tribunal (NCLT) in the case of B.Y. Agro And Infra Ltd. vs Wardha Mega Food Park Private Limited [C.P. (IB)/9/MB/2026] dated September 04, 2026, has held that the Financial Creditor (FC) and Corporate Debtor (CD) being sister concerns with common directors and shareholders is a relevant circumstance requiring scrutiny, but cannot by itself render the transaction sham or collusive when the CD has repeatedly acknowledged the liability in its own books.
The Tribunal clarified that the IBC does not mandate a document styled as a ‘loan agreement’, rather, what matters is the substance of the dealings and the surrounding documentary record, particularly the CD’s own audited financial statements and ledger entries. Following the Supreme Court’s ruling in M/s Orator Marketing Pvt Ltd. Vs M/s Samtex Desinz Pvt Ltd. [Civil Appeal No. 2231 of 2021], the Tribunal held that the absence of contractual interest does not, by itself, take a transaction outside Section 5(8), especially where the advance was made for working capital requirements and recognised by the recipient as a borrowing.
The Tribunal observed that the absence of a formal loan agreement, repayment schedule, sanction letter, or Board resolution cannot, by itself, defeat a claim of financial debt under Section 5(8) of the IBC. What is required at the Section 7 stage is to examine whether, on the material placed on record, there exists a financial debt and a default in respect thereof, gathered from the substance of the dealings between the parties. The Bench reiterated that interest-free loans advanced to finance business operations can constitute financial debt under Section 5(8).
The Tribunal further observed that the related-party relationship, while a relevant circumstance requiring scrutiny, cannot by itself lead to the conclusion that the transaction is sham or collusive, particularly when the alleged borrower has repeatedly acknowledged the liability in its own books. The NeSL record was treated as corroborative rather than as independent proof of the debt.
Carving out a generic phrase from a wider branded mark cannot attract registration under Section 9 of the Trade Marks Act, and a trademark consisting of a simple combination of generic, descriptive or laudatory words is devoid of distinctive character and falls foul of both Section 9(1)(a) and Section 9(1)(b) of the Trade Marks Act, 1999
The Bombay High Court in the case of Graviss Foods Private Limited vs Registrar of Trade Marks [Commercial Miscellaneous Petition No. 20 of 2026] dated September 16, 2026, has held that carving out a generic phrase from a wider branded mark cannot attract registration under Section 9 of the Trade Marks Act. The Court said that a trademark consisting of a simple combination of generic, descriptive or laudatory words such as ‘ICE CREAM ROCKS’ is devoid of distinctive character and falls foul of both Section 9(1)(a) and Section 9(1)(b) of the Trade Marks Act, 1999, even where the applicant actually uses the mark in the market with a brand differentiator.
The Court clarified that an applicant cannot, by carving out the generic and descriptive integers from a wider branded mark actually used in commerce as ‘Baskin Robbins Ice Cream Rocks’, secure a statutory monopoly over those integers alone, since the proviso to Section 9 cannot be invoked on the strength of use of the wider mark. The Court also clarified that acquired distinctiveness under the proviso to Section 9 requires long, continuous and extensive use; a period of seven months between the attested commencement of use and the date of application is insufficient to clothe generic words with secondary meaning, particularly where the mark is not shown to be a household name.
The High Court went on to explain that the registration of other marks containing the same generic expression neither creates a precedent nor confers a right upon a later applicant to demand similar treatment, especially where those registrations carry a distinguishing brand element that the subject mark lacks. Further, where a mark is hit by the absolute bar under Section 9, the relative grounds under Section 11, including the Registrar’s invocation of likelihood of confusion with prior cited marks, become academic and need not be further analysed, even if the Section 11 reasoning itself is inadequately articulated.
The Court observed that the actual use of the mark in the market was ‘BR Ice Cream Rocks’ with the ‘Baskin Robbins’ prefix, but what was sought to be registered was only the phrase ‘ICE CREAM ROCKS’, a combination of two generic words with no brand differentiator. The Court noted that ‘ICE CREAM’ is the name of the goods themselves and cannot be monopolised, while ‘ROCKS’, whether read as a noun, a verb, or colloquially, does not, when combined with ‘ICE CREAM’, produce a mark capable of distinguishing the Petitioner’s goods from those of others.
The Court further observed that the Petitioner had placed reliance on about 130 registrations containing the expression ‘ICE CREAM’, but almost all of them carried a distinguishing brand element such as ‘Amul’, ‘Arun’, ‘METRO THE DAIRY ICECREAM’ or ‘HOKEY POKEY ICE CREAM PARLOUR’, precisely the element that the Subject Mark, as applied for, lacked. On the question of acquired distinctiveness, the Court noted that the applications were filed within seven months of the attested commencement of use, on the very same day as the Affidavit of User, and that such short use of a wider mark could not confer distinctiveness on a part of that wider mark that was itself generic and descriptive.
IBC 2026 amendment operates on pending applications and aligns guarantor treatment with SARFAESI regime. The interim moratorium under Section 96 is procedural and transitory in nature, operating only till the resolution professional submits a report under Section 99, and does not create a vested right in the personal guarantor
The Bombay High Court in the case of Indian Bank vs Shabbir Abbas Patel [Writ Petition No. 2819 of 2026] dated September 18, 2026, has ruled that the IBC 2026 amendment operates on pending applications and aligns guarantor treatment with SARFAESI regime. By curbing the rampant misuse of Sections 94–96 IBC by personal guarantors to corporate debtors, the Court explained that the newly inserted sub-section (4) of Section 96 of the IBC, introduced with effect from May 26, 2026, applies retroactively and covers applications under Sections 94 and 95 that were pending on the cut-off date, and those filed thereafter.
The Court went on to explain that the interim moratorium under Section 96 is procedural and transitory in nature, operating only till the resolution professional submits a report under Section 99, and does not create a vested right in the personal guarantor. The Court also invoked the Mischief Rule (Heydon’s Rule) to give full effect to the legislative intent of curbing the rampant misuse of the interim moratorium, which the IBBI Chairperson had flagged as the ‘number one mechanism’ for siphoning of crores by debtors.
The Court observed that the interim moratorium under Section 96 of the IBC was being rampantly misused by personal guarantors to corporate debtors, who would file applications under Sections 94/95 of the IBC at the fag end of recovery proceedings merely to trigger the moratorium and frustrate legitimate creditor action. The Court took judicial notice of this mischief.
The Court noted that the process between Sections 94 and 99 of the IBC is purely procedural in nature, and the substantive step of insolvency resolution begins only when the adjudicating authority passes an order under Section 100. The Court further observed that the interim moratorium under Section 96 is a transitory arrangement operating only till the resolution professional submits a report under Section 99 and therefore cannot be treated as an absolute or indefeasible right in favour of the debtor.
Margin money is the borrower’s contribution deposited as a condition precedent for issuance of Bank Guarantees and is not a ‘security interest’ of the Corporate Debtor under the IBC. Accordingly, upon expiry of the Bank Guarantee without invocation, the corresponding margin money must be released to the Corporate Debtor
The Mumbai Bench of the National Company Law Tribunal (NCLT) in the case of Jayanti Lal Jain vs Pranaya Prusty [IA/5149/2024] dated September 07, 2026, has held that margin money is the borrower’s contribution under lien only during subsistence of a live Bank Guarantee. The NCLT explained that margin money is the borrower’s contribution deposited as a condition precedent for issuance of Bank Guarantees and is not a ‘security interest’ of the Corporate Debtor under the IBC. Accordingly, upon expiry of the Bank Guarantee without invocation, the corresponding margin money must be released to the Corporate Debtor.
Once the underlying Bank Guarantees have lapsed, the Bank has no right to retain the margin money or adjust it towards any other liability of the Corporate Debtor, including fund-based working capital exposure, added the Tribunal.
The Tribunal noted that no security interest had been created by the Corporate Debtor on the margin money, and that the margin money was deposited as a condition precedent for the sanction of Bank Guarantees. The margin money is a contribution on the part of the borrower seeking a Bank Guarantee, and the margin money remitted with the Bank is under lien as long as the Bank Guarantee is alive.
Once the Bank Guarantee is invoked by the beneficiary, the Bank would be able to remit the amount to the beneficiary along with the amount of margin money. The margin money can be utilised by the Bank as a matter of right as per the contract, and in case the Bank Guarantee is not invoked or has lapsed, the borrower/Corporate Debtor would be entitled to the margin money. The Bank has its rights over the margin money in terms of the contract only, added the Tribunal.
The Tribunal placed reliance on the order of the NCLAT in Indian Overseas Bank v. Arvind Kumar RP M/s Richa Industries Ltd [(2020) ibclaw.in 285 NCLAT], which held that the margin money remains with the Bank as long as the Bank Guarantee is alive. If the Bank Guarantee expires without being invoked, the margin money reverses back to the borrower, and in case the Bank Guarantee is invoked by the beneficiary, the margin money goes towards payment of the Bank Guarantee to the beneficiary, and nothing remains with the financial institutions which can be reversed to the Corporate Debtor.
The NCLT also observed that the tax department may determine tax, interest, fine or penalty and file its claim before the Resolution Professional during moratorium, but cannot enforce attachment or recovery against the Corporate Debtor’s property during the subsistence of the moratorium. However, permitting attachment or enforcement by the VAT Department during moratorium undermines the resolution process and prejudices the interests of all stakeholders, and is contrary to the spirit of the IBC.
On the VAT Department’s lien, the Tribunal relied on the NCLAT decision in Commissioner of State Tax Department v. Ramchandra Dallaram Chaudhary (Liquidator) [(2024) ibclaw.in 331 NCLAT], observing that during the moratorium period, the tax department could determine the tax, interest, fine or any penalty due, but could not enforce its claims for recovery or levy of interest on the tax due during the moratorium. Allowing attachment over property during the subsistence of the moratorium would undermine resolution of the Corporate Debtor and would prejudice the interests of all stakeholders, which is against the spirit of the Code.
Pre-CIRP land acquisition agreements and welfare-oriented rehabilitation benefits stand extinguished under Section 31(1) read with Section 238 of the IBC once the NCLT approves a resolution plan, and the State cannot fasten such liabilities on the new corporate debtor
The High Court of Madhya Pradesh in the case of Keshav Prasad Jayaswal vs State of Madhya Pradesh [Writ Petition No. 4668 of 2011] dated September 15, 2026, has held that pre-CIRP land acquisition agreements and welfare-oriented rehabilitation benefits stand extinguished under Section 31(1) read with Section 238 of the IBC once the NCLT approves a resolution plan, and the State cannot fasten such liabilities on the new corporate debtor. The Court clarified that once the NCLT approves a resolution plan, all non-plan claims stand extinguished by operation of law and the successful resolution applicant steps into the shoes of the corporate debtor free of pre-existing liabilities.
The High Court went on to observe that overriding effect of the IBC extends to State enactments, executive instructions, and welfare-oriented policies such as the Madhya Pradesh Model Rehabilitation Policy, 2002, which cannot be invoked as an exception to fasten liabilities on the new corporate debtor. Hence, land acquisition and rehabilitation agreements executed between the State and the erstwhile corporate debtor prior to approval of the resolution plan cannot be enforced against the resolution applicant or the converted entity. The Court also expressly rejected the argument that rehabilitation claims, being welfare-oriented in nature, constitute an exception to the binding nature of an approved resolution plan.
The Court observed that under Section 31(1) of the IBC, the approved resolution plan is binding on the corporate debtor, creditors, government authorities and all stakeholders, and all non-plan claims stand extinguished by operation of law. Referring to Section 238 of the IBC, the Court noted that the Code overrides any State enactment, policy, executive instruction, or prior administrative/judicial order.
The Court placed strong reliance on the Coordinate Bench decision in Mahan Energen Limited vs. State of M.P. [W.P. No. 4131/2012], which held that pending liabilities under adjudication cannot be fastened on a resolution applicant without being placed before the Committee of Creditors after due publication under Section 15 of the IBC. The Court further observed that the agreements were executed prior to the approval of the resolution plan, and therefore the rehabilitation claims arising therefrom cannot survive against the new corporate debtor.
In a closely held quasi-partnership, exclusion of a 40% founder-shareholder from management and remuneration without due process constitutes oppression. Where a substantial shareholder of a family-owned quasi-partnership company is kept away from management and denied the fruits of the company without due process or justification, allegations of oppression under Section 241 of the Companies Act, 2013 stand confirmed
The New Delhi Bench of the National Company Law Appellate Tribunal (NCLAT) in the case of Nayan Shah vs Cheers Interactive (India) Private Limited [Company Appeal (AT) No. 122 of 2026] dated September 18, 2026, has held that in a closely held quasi-partnership, exclusion of a 40% founder-shareholder from management and remuneration without due process constitutes oppression. The NCLAT explained that where a substantial shareholder of a family-owned quasi-partnership company is kept away from management and denied the fruits of the company without due process or justification, allegations of oppression under Section 241 of the Companies Act, 2013 stand confirmed.
The NCLAT observed that Respondent No. 2, being a substantial shareholder holding more than 40% shares, was the original founder of the company and had been side-lined from management and denied the fruits of the company without due process or justification. Important financial decisions including borrowings and grant of interest-free loans to the appellants were taken in his absence, ignoring his legitimate expectation to participate in management.
The NCLAT clarified that the vacation of office of a Director under Section 167(1)(b) for absence from all board meetings during twelve months is not triggered unless notices of the meetings were actually served on the Director On the question of vacation of office of Respondent No. 2 as Director under Section 167(1)(b) of the Companies Act, 2013, the NCLAT held that there was no evidence on record to show that notices of board meetings were ever served on Respondent No. 2. The minutes of meetings were also not served on him. The Tribunal placed reliance on Raj Singh Chopra v. Jagat Singh Chopra [(2018) 206 Comp Cas 440] and held that for vacation of office under Section 167(1)(b), service of notice of the meetings which the director is alleged to have not attended is a must, and meetings held without notice are not valid meetings.
Further, the NCLAT held that the NCLT has the power under Section 242(2)(b) of the Companies Act, 2013 to direct a competitive inter se bidding process through the Swiss Challenge Method under the supervision of an independent observer, where both warring groups are willing to buy out the other and are competent to run the company. NCLAT asserted that a duly executed settlement between family factions recording the exit terms, consideration and absence of a non-compete clause is binding, and attempts to expand its scope after the payment deadline has expired will not be entertained. The Tribunal also said that where a minority shareholder first agrees to sell his shares to the majority at an agreed price and, on default, offers to buy out the majority at the same terms with a premium, the spirit of pre-emptive rights under the Articles of Association stands substantially complied with.
Bank cannot unilaterally debit the bank account or fixed deposit of a third party, such as the wife of a deceased borrower, to recover dues owed by the deceased, when there is no privity of contract between the bank and such third party
The Allahabad High Court in the case of Neha Mishra vs Reserve Bank of India [Writ – C No. – 6722 of 2026] dated September 10, 2026, has ruled that a bank cannot unilaterally debit the bank account or fixed deposit of a third party, such as the wife of a deceased borrower, to recover dues owed by the deceased, when there is no privity of contract between the bank and such third party.
The Court explained that retiral benefits such as gratuity, pension, and provident fund retain their character as protected benefits even after they are received by the beneficiary, and cannot be attached, forfeited, or appropriated by a bank through private or unilateral action. At the same time, the Court cautioned that the surreptitious transfer of a fixed deposit account between branches for the purpose of debiting the amount and then transferring it back constitutes mala fide action and is anathema to banking practice, amounting to a serious breach of trust since banks are merely custodians of bank accounts.
The High Court observed that the petitioner had no privity of contract with the Bank and that the recovery sought to be made from her account was not legally permissible and was against all banking norms. while a bank may have a legal right to proceed against the legal heir of a deceased borrower and recover dues, the same has to be done strictly as per the due process of law and not in an arbitrary, capricious, or whimsical manner.
The Court further observed that gratuity cannot be forfeited unless the conditions under Section 4(6) of the Payment of Gratuity Act, 1972 are met. The Court noted that there were no documents on record to show what amount of gratuity received after the husband’s death was traceable to the amount debited from the wife’s account. The Court found that the entire process adopted by the Bank of transferring the fixed deposit from one branch to another to debit the same and then transferring the account back stinks of mala fide action, both with regard to procedure and substantive law, and that the Bank tried to take advantage merely because the petitioner had a fixed deposit in the respondent-Bank.
The Court characterised the Bank’s conduct as a serious breach of trust, since banks are merely custodians of bank accounts and hold the money in trust for and on behalf of the account holder.
A Vice-President or individual Director cannot lodge a complaint on behalf of the company without a Board resolution, and an employee acting on the directions of his employer cannot be indicted for copyright infringement
The Bombay High Court in the case of Nilesh Suryakant Jangam vs State of Maharashtra [Criminal Application No. 1686 of 2019] dated August 21, 2026, has ruled that a Vice-President or individual Director cannot lodge a complaint on behalf of the company without a Board resolution, and that an employee acting on the directions of his employer on ready material cannot be indicted for copyright infringement. The Court clarified that an employee cannot be made vicariously liable in criminal law for acts of the company or its directors, since criminal liability requires sufficient evidence of an active role coupled with criminal intent.
The Court held that mere presence of allegedly infringing content in a public folder of an employee is insufficient to infer involvement in the commission of the offence, particularly where the employee was working on ready material provided by the employer. Thus, where a complaint under the Copyrights Act is filed by an unauthorised person and the employee has no privity of contract with the complainant company, the proceedings against the employee are liable to be quashed under Section 482 of the Code of Criminal Procedure.
The Court noted that the Applicant was an ex-employee of the Complainant’s company and observed that the JMFC, Pune had taken cognizance of the complaint without establishing the existence of any agreement between the Complainant’s company and the Applicant that could hold him liable for copyright infringement. The Court further observed that the complaint was filed by Mr. Agarwal claiming to be the Vice-President of Brainvisa, but no authorisation or board resolution was produced to show that the complaint was filed on behalf of the company.
The Court recorded that the source codes alleged to have been infringed were registered in the name of Brainvisa company, and that under settled law, unless there is a resolution by the Board of Directors, the Complainant as Vice-President or individual Director has no power to lodge a complaint on behalf of the company. It was further observed that no cognizance could have been taken on a complaint filed by the Vice-President without such a resolution, and the accused could not have been indicted on that basis.
On the Applicant’s role, the Court observed that he was an employee of Accused No. 1 and had merely followed the directions of his master while working on ready material made available by Accused No. 1, including assistance in setting up the domain server. The Court held that merely finding the alleged content in a public folder of the Applicant does not amount to his involvement in the commission of the crime. The Court also recorded that the matter had been pending since 2009 and charges were not yet framed, and that there was no material on record to even suggest that the Applicant had committed any of the alleged offences.
An arbitration clause in a contract is a private legal remedy based on consensus and cannot deprive an Operational Creditor of the statutory remedy under Section 9 of IBC
The Chennai Bench of the National Company Law Appellate Tribunal (NCLAT) in the case of Posco International Corporation vs Mohana Cotton Ginning Private Limited [Company Appeal (AT) (Ins) No.1228/2019] Dated August 27, 2026, has ruled that statutory remedy under IBC overrides private arbitration arrangement and that dispute raised only in reply to demand notice does not qualify as pre-existing dispute. The NCLAT clarified that an arbitration clause in a contract is a private legal remedy based on consensus and cannot deprive an Operational Creditor of the statutory remedy under Section 9 of the Insolvency and Bankruptcy Code, 2016, since the IBC has overriding effect under Section 238.
The Tribunal held that a person to whom an operational debt is owed qualifies as an Operational Creditor under Section 5(20) of the IBC, and where the underlying transaction involves supply of goods, the resulting claim assumes the character of operational debt under Section 5(21), entitling the creditor to invoke Section 9. The phrase ‘in respect of’ in Section 5(21) of the IBC must be interpreted in a broad and purposive manner to include all persons who provide or receive operational services from the corporate debtor, and the interpretation cannot be restricted.
A dispute raised for the first time in reply to a demand notice under Section 8 of the IBC does not qualify as a pre-existing dispute, and the mere existence of communications between parties referring to inter-se claims, without any material showing that the dispute was agitated before any adjudicatory platform, is insufficient to establish a pre-existing dispute, added the Tribunal.
The Tribunal observed that the existence of an arbitration clause in a contract is a private legal remedy based on consensus between the contracting parties and is not statutorily prescribed to be mandatorily resorted to, and therefore, the availability of such private remedy would not deprive the Appellant of the statutory remedy under the IBC. The Appellate Tribunal relied on the Principal Bench’s decision in Hasan Shafiq vs. CT Technologies [(CA (AT) (Ins) No. 802/2020)], where it was held that the proceedings under the Code having been given overriding effect, the right to initiate an application under Section 9 cannot be taken away by any agreement of arbitration in the contract when the Operational Creditor elects to initiate proceedings under Section 9.
On the question of whether the Appellant qualifies as an Operational Creditor, the NCLAT held that under Section 5(20) of the IBC, an Operational Creditor means a person to whom an operational debt is owed, and under Section 5(21), operational debt includes a claim arising out of provision of goods, services, employment, or government dues. Since the parties were engaged in the transaction of supply of raw cotton, which amounts to provision of goods, the amount that fell due in the course of such transaction would assume the character of operational debt, and the Appellant would have the status of an Operational Creditor.
Where the Revenue places prima facie material showing that an Advocate was actively involved in the affairs of the entity under investigation, the protection of professional privilege does not operate as an absolute bar to search, seizure and examination of electronic devices, subject to safeguards for genuinely privileged third-party client data
The Delhi High Court in the case of Puneet Batra vs Union of India [W.P.(C) 11021/2025] dated September 18, 2026, has held that where the Revenue places prima facie material showing that an Advocate was actively involved in the affairs of the entity under investigation, the protection of professional privilege does not operate as an absolute bar to search, seizure and examination of electronic devices, subject to safeguards for genuinely privileged third-party client data. The Court also held that a search authorization under Section 67(2) of the CGST Act for the premises of a law firm covers all cabins situated within those premises, and the mere fact that one cabin is used by an Advocate does not, by itself, render the search of that cabin unauthorized.
The High Court clarified that Section 132 of the Bharatiya Sakshya Adhiniyam, 2023 confers a privilege for the protection of the client and not a personal privilege of the Advocate. Consequently, the privilege cannot be invoked to prevent investigation into the Advocate’s own activities where those activities are themselves the subject matter of investigation. Further, the investigative material, including statements of persons examined, produced before the Court in a sealed cover during the pendency of investigation need not be furnished to the person under investigation, since disclosure cannot be directed as a matter of course where it may impede or interfere with the investigation.
The Court observed that the Petitioner’s cabin is situated inside the office of Bass Legal and forms part and parcel of the same premises, and the Petitioner’s letterhead carries the same address. On examination of the reasons to believe recorded by the competent authority, the Court was satisfied that the reasons disclosed a sufficient basis for authorizing the search of the Bass Legal premises under Section 67(2) of the CGST Act, and once the premises were validly authorized to be searched, the fact that one of the cabins within those premises was being used by the Petitioner would not, by itself, render the search of that cabin unauthorized.
On the question of advocate-client privilege, the Court observed that the protection is intended to preserve the confidentiality of communications made in the course of the professional relationship between an Advocate and his client, and that the privilege attaches to the nature of the communication or material and the circumstances in which it came into existence, and does not follow merely from the fact that the material is found in the office or possession of an Advocate. The Court further observed that the privilege under Section 132 of the Bharatiya Sakshya Adhiniyam, 2023 is, in substance, a privilege conferred for the protection of the client and not a personal privilege of the Advocate, since the statutory scheme prohibits an Advocate from disclosing a professional communication except with the express consent of the client.
The Court observed that administrative instructions and circulars may regulate the manner in which the statutory power is to be exercised but cannot curtail or extinguish a power which the statute itself confers, and in the absence of any demonstrated violation of a mandatory statutory requirement affecting the validity of the authorization or the jurisdiction to conduct the search, such procedural deviation would not, by itself, warrant declaring the entire search illegal. The Court also observed that the fact of deletion of certain files from a remote location during the search, by itself, cannot be treated as establishing any wrongdoing on the part of the Petitioner, but is a circumstance which the Respondents are entitled to examine in the course of the investigation.
A personal guarantor’s liability under a continuing guarantee is independent of the principal debtor’s insolvency proceedings and survives the conclusion of CIRP or liquidation of the corporate debtor
The National Company Law Tribunal (NCLT) in the case of State Bank of India vs Amit Sethi [I.A. NO.4399/2024] dated August 13, 2026, has reaffirmed that a guarantor’s liability is co-extensive with the principal debtor and is not extinguished by the latter’s CIRP or liquidation. The NCLT clarified that a personal guarantor’s liability under a continuing guarantee is independent of the principal debtor’s insolvency proceedings and survives the conclusion of CIRP or liquidation of the corporate debtor.
The NCLT further held that an individual consortium lender is competent to file an application under Section 95 of the IBC, since Section 95 permits a creditor to file an application either by itself, jointly with other creditors, or through a resolution professional, and does not require all consortium lenders to collectively institute proceedings against a personal guarantor.
On the question of discharge of the guarantor upon insolvency of the principal debtor, the Tribunal held that the liability of a guarantor is co-extensive with that of the principal debtor unless otherwise provided by the contract, and the liquidation, resolution or discharge of the principal debtor by operation of law does not automatically discharge the guarantor from liability under a valid and subsisting guarantee.
The Tribunal rejected the objection that the application was barred by limitation, holding that the liability of the principal borrower and the Personal Guarantor arise from distinct legal obligations, and the period of limitation in respect of the Personal Guarantor is to be examined with reference to the guarantee obligations and the demand raised upon the guarantor. As per Clause 8 of the Agreement of Guarantee, the guarantee is in the nature of a continuing guarantee, and the liability of the guarantor continues so long as the debt remains unpaid.
The period of limitation against a personal guarantor runs from the date of failure to comply with the demand raised under the guarantee, and not from the date of default of the principal borrower, added the Tribunal.
A court cannot set aside an arbitral award merely because the passage of time may have weakened the arbitrator’s memory, and there must be a positive demonstration that the delay impacted the findings, and the party challenging the award must point to a specific submission that was left unaddressed
The Delhi High Court in the case of Unison Hotels vs Iffco Tokio General Insurance [FAO(OS) (COMM) 29/2026] dated September 16, 2026, has held that the Single Judge erred in setting it aside on a mere ‘possibility of forgetting’ arguments, without identifying any specific finding vitiated by delay. The Court said that a mere delay in rendition of an arbitral award is insufficient to invoke Section 34 of the Arbitration and Conciliation Act, 1996.
A court cannot set aside an arbitral award merely because the passage of time may have weakened the arbitrator’s memory, and there must be a positive demonstration that the delay impacted the findings, and the party challenging the award must point to a specific submission that was left unaddressed. Further, a plea of non-arbitrability under Clause 13 of the insurance policies, having not been specifically raised in the Statement of Defence before the Arbitral Tribunal, could not be raised for the first time in Section 34 proceedings, added the Court.
The Court observed that the Insurance Company had not specifically pleaded, in its Statement of Defence before the Arbitral Tribunal, any objection to the arbitrability of the dispute in the light of Clause 13, and the only plea actually raised was that the claims stood discharged by accord and satisfaction on account of the unconditional discharge vouchers signed by UHPL. A reading of the Statement of Defence confirmed that the Insurance Company did not categorically deny its liability to pay UHPL, and the dispute was only about the quantum payable, which squarely fell within the scope of arbitrable disputes under Clause 13.
The Arbitral Tribunal had, in fact, examined the accord and satisfaction plea exhaustively in paragraphs 15 to 32 of the award, applying Section 15 (coercion) and Section 16 (undue influence) of the Indian Contract Act, 1872, and recording detailed findings that the discharge vouchers were obtained under financial duress and abuse of dominant bargaining position by the Insurance Company, added the Court.
The Court further noted that the three-member Tribunal consisted of a retired Judge of the Supreme Court, a retired Chief Justice of the Jammu & Kashmir High Court, and a retired Judge of the Delhi High Court, and that the delay was reasonably explained by the COVID-19 pandemic and the parties’ own delay in filing written submissions. The Insurance Company had, notably, not raised any objection regarding the delay at any stage before the Tribunal, nor had it filed any application under Section 14(2) of the 1996 Act seeking termination of the mandate on the ground of inordinate delay, and the plea was raised only when it found the award going against it.
Homebuyers as a class, voting through the Authorised Representative, are bound by the collective majority decision, and the Successful Resolution Applicant cannot be compelled to honour pre-CIRP refund obligations under Section 18 of RERA or the original Agreement for Sale
The Mumbai Bench of the National Company Law Tribunal (NCLT) in the case of Vivek Talwar vs Rajesh Jhunjhunwala [I.A. (IB) No. 3688 of 2025] Dated September 09, 2026, has ruled that homebuyers as a class, voting through the Authorised Representative, are bound by the collective majority decision, and the Successful Resolution Applicant cannot be compelled to honour pre-CIRP refund obligations under Section 18 of RERA or the original Agreement for Sale.
On the interplay between RERA and the IBC, the Tribunal observed that there is no conflict between the two enactments as they operate in different spheres, as the IBC is a proceeding in rem focused on rehabilitation of the corporate debtor for the benefit of all stakeholders, while RERA protects the individual investor. However, in the event of any clash, RERA must give way to the IBC by virtue of Section 238 of the Code.
The NCLT dismissed the homebuyer’s application seeking to stall approval of the Resolution Plan on the ground that it did not incorporate refund or exit rights under Section 18 of RERA, holding that the IBC framework operates on collective resolution and individual remedies outside that framework are not maintainable. The Tribunal drew a clear distinction between the erstwhile promoter/developer and the Successful Resolution Applicant, holding that the SRA does not step into the shoes of the promoter until the Plan is approved, and therefore cannot be compelled to honour pre-CIRP contractual obligations under the Agreement for Sale or treated as a ‘promoter’ under RERA at the plan-approval stage.
The Tribunal reaffirmed that the commercial wisdom of the CoC is paramount and that judicial review under Section 30(2) of the IBC is confined to examining statutory compliance. Essentially, the Tribunal cannot direct modification of commercial terms or compel renegotiation of an approved Plan. Applying Section 25A(3A) of the IBC, the Tribunal held that individual members of the homebuyer class are bound by the collective decision taken through the Authorised Representative.
The Tribunal observed that the Applicants’ grievance was essentially that the Resolution Plan did not provide a refund mechanism for homebuyers wishing to withdraw from the project, which they argued was inconsistent with Section 18 of RERA and Clause 18 of the Agreement for Sale. The Tribunal noted that the SRA, whose Plan was awaiting approval, had not yet stepped into the shoes of the promoter/developer, and therefore could not be treated as the ‘promoter’ of the project at that stage. The responsibility of the SRA to complete the project would only begin upon approval of the Plan by the Adjudicating Authority.
