Legal Updates (March 16 – March 21, 2026)
A bank has a strict duty to comply with the express mandate of its customer. It cannot unilaterally act contrary to clear instructions, and any concerns regarding regulatory compliance or underlying agreements do not justify remitting funds to an unauthorized party. A breach of this duty renders the bank liable for the resulting loss to its customer
The Supreme Court in the case of Canara Bank Overseas Branch vs Archean Industries [Civil Appeal No. 13861 of 2024] dated March 17, 2026, has clarified that a contract of guarantee is established by a clear and unequivocal undertaking to discharge the liability of a third person in case of default, and the court will look at the substance of the communications and the conduct of the parties to determine if such an undertaking exists, rather than just the title of a document. Also, a party is estopped by its conduct from relying on a contractual condition to evade liability if it has acted in a manner that indicates a waiver of that condition.
The plaintiff is the dominus litis and generally cannot be compelled to implead a party against whom no relief is sought. On the other hand, a defendant cannot use the non-impleadment of another potentially liable party as a defence, especially when a procedural remedy like a third-party notice is available to the defendant to claim contribution or indemnity, added the Court.
Hence, the Apex Court upheld the liability of Canara Bank (appellant) for erroneously remitting USD 100,000 to a third party and affirmed the Madras High Court ruling which directed the Canara Bank to indemnify Archean Industries Pvt Ltd (respondent) for the mistaken transfer. The Court ruled that a bank has a strict duty to comply with the express mandate of its customer. It cannot unilaterally act contrary to clear instructions, and any concerns regarding regulatory compliance or underlying agreements do not justify remitting funds to an unauthorized party. A breach of this duty renders the bank liable for the resulting loss to its customer.
The Court addressed whether the letter dated 25.04.1998 was a valid contract of guarantee under Section 126 of the Indian Contract Act, 1872, or merely a freight payment arrangement. It observed that a conjoint reading of the letter dated 22.04.1998 and the Corporate Guarantee dated 25.04.1998 clearly established an independent guarantee. The documents contained an unequivocal undertaking by Defendant No. 1 to discharge the liability of the vessel owner.
The Court noted that Defendant No. 1’s subsequent conduct, such as issuing remittance instructions to its bank, reflected its intention to honour this undertaking. Further, Defendant No. 1’s own witness admitted during cross-examination that the document was a ‘conditional guarantee letter’, thereby acknowledging its nature as a guarantee. The Court, therefore, rejected the contention that it was merely a freight payment arrangement.
The Court considered the argument that the vessel owner was a necessary party to the suit. It held that the plaintiff, as dominus litis, has the right to choose the parties against whom relief is sought and cannot be compelled to sue a person unless their presence is indispensable for adjudication. In this case, the liability of Defendant No. 1 arose from an independent guarantee, making the vessel owner’s presence not necessary for the effective adjudication of the dispute against the guarantor.
Also, the Court pointed out that Defendant No. 1 had the procedural remedy under Order VIII-A of the CPC to issue a third-party notice to the vessel owner to claim contribution but failed to do so. Having failed to invoke this available remedy, Defendant No. 1 could not shift the burden onto the plaintiff.
Further, the Court examined the bank’s liability for the erroneous remittance. The bank contended that it could not have remitted the funds to the plaintiff without RBI approval and that it acted based on the underlying Charter Party Agreement. The Court found that the bank, not being a party to the Charter Party Agreement, could not rely on its terms to justify its actions. The bank’s primary duty was to act in accordance with the express instructions of its customer, Defendant No. 1, as the instructions in Exhibit P14 and Form A-2 clearly directed payment to the plaintiff.
If the bank had concerns about regulatory approval, it should have sought clarification from its customer or withheld the funds, not unilaterally remitted them to the vessel owner contrary to the mandate. This act constituted a breach of duty, making the bank liable to indemnify its customer, added the Court.
A scheme of amalgamation framed under Section 45 of the Banking Regulation Act, 1949, can validly create different classes of depositors and provide for differential treatment, including staggered repayment schedules and reduction of interest. Such classification is not violative of Article 14 of the Constitution, if it is based on an intelligible differentia
The Bombay High Court in the case of Bhalchandra Dinkar Gondekar vs Reserve Bank of India [Writ Petition No. 8534 of 2022] dated March 09, 2026, has ruled that the scope of judicial review in matters of economic and financial policy, particularly schemes of bank amalgamation formulated by the Reserve Bank of India under Section 45 of the Banking Regulation Act, 1949, is extremely limited. Courts will not interfere with the expert judgment of a specialized regulatory body like the RBI unless the decision is proven to be arbitrary, irrational, mala fide, or vitiated by procedural impropriety.
The Court explained that a scheme of amalgamation framed under Section 45 of the Banking Regulation Act, 1949, can validly create different classes of depositors (e.g., retail and institutional) and provide for differential treatment, including staggered repayment schedules and reduction of interest. Such classification is not violative of Article 14 of the Constitution, provided it is based on an intelligible differentia and has a rational nexus with the object of the scheme, which is to act in the public interest and the interest of depositors to save a failing bank.
Section 45 of the Banking Regulation Act, 1949, is a self-contained code for the amalgamation of banking companies in emergent situations. Its provisions, by virtue of the non-obstante clause in Section 45(14), have an overriding effect on any other law, agreement, or instrument. This includes the power to reduce interest and rights of depositors and creditors to the extent the RBI considers necessary in the public interest, which is a permissible restriction and not an unconstitutional deprivation of property, added the Court.
On the issue of discrimination and classification of depositors, the Court observed that the classification between retail depositors (individuals, proprietorships, HUFs) and institutional depositors (corporations, firms, societies) is based on their distinct characteristics and nature of deposits. The Court held that this classification is reasonable and has a rational nexus to the object of the scheme, which is to serve the public interest and protect the maximum number of depositors by prioritizing individuals over institutions.
The Court noted that while Article 14 forbids class legislation, it permits reasonable classification. Treating these two distinct classes differently does not amount to treating equals unequally. The Court also justified prioritizing smaller depositors, stating that it catered to approximately 84% of the total depositors, thereby preventing potential widespread unrest.
On the issue of staggered payments, denial of interest, and deprivation of property, the Court observed that Section 45(5)(f) of the Banking Regulation Act, 1949, explicitly permits a scheme of amalgamation to include provisions for the ‘reduction of the interest or rights’ of depositors and creditors. Given the precarious financial condition and negative net worth of PMC Bank, the RBI was empowered to take such measures to ensure the stability of the transferee bank and the eventual repayment of the principal amount to all depositors.
The Court reasoned that the alternative was liquidation, under which depositors would have likely received only up to the DICGC insured amount of Rs. 5 lakhs, and that too after a prolonged process. Therefore, the scheme, by ensuring 100% return of the principal amount, was a more favourable outcome for depositors.
On procedural impropriety and lack of consultation, the Court, relying on the RBI’s affidavit, noted that the draft scheme was placed in the public domain, suggestions were invited, and appropriate changes were made before finalization. The Court held that Section 45 provides for an adequate opportunity for representation through written objections and does not mandate an oral hearing for every depositor. It affirmed that in such emergent situations involving a large number of stakeholders, considering written representations is sufficient compliance with the principles of natural justice.
On the role and liability of DICGC, the Court observed that the liability of the DICGC is fixed by the DICGC Act, 1961, at the insured amount (Rs. 5 lakhs per depositor). The withdrawals allowed during the moratorium were to provide immediate relief to depositors facing hardship. The Court found no violation of the DICGC Act, stating that the scheme ensured the DICGC’s liability was met as per the statute and that the transferee bank was obligated to repay the DICGC over time, as permitted by law.
Under the Investor Education and Protection Fund Authority (Accounting, Audit, Transfer and Refund) Rules, 2016, if a claimant for securities, valued up to Rs. 5 Lakhs, provides one of the documents specified in Rule 2.2(a), such as a succession certificate, the authorities cannot compel the claimant to also furnish an indemnity bond as required under Rule 2.2(b)
The Gujarat High Court in the case of Daksha Nanavati vs Investor Education and Protection Fund Authority [R/Special Civil Application No. 12112 of 2023] dated March 09, 2026, has clarified that under the Investor Education and Protection Fund Authority (Accounting, Audit, Transfer and Refund) Rules, 2016, if a claimant for securities, valued up to Rs. 5 Lakhs, provides one of the documents specified in Rule 2.2(a), such as a succession certificate, the authorities cannot compel the claimant to also furnish an indemnity bond as required under Rule 2.2(b).
The Court ruled that the requirement to submit an indemnity bond under Rule 2.2(b) is an alternative, applicable only when the documents under Rule 2.2(a) are absent. The lawful property of a citizen cannot be denied based on an unwarranted and erroneous interpretation of statutory rules, and any such action by the authorities is arbitrary, unsustainable, and liable to be set aside.
The Court noted that the central issue was whether the respondent authorities were justified in insisting that the petitioner furnish an indemnity bond for the transmission of shares, despite her having already submitted a valid succession certificate, especially when the value of the securities was less than Rs. 5 Lakhs. The respondents contended that the requirement for an indemnity bond was a mandatory part of the procedure prescribed by the IEPF Rules for processing the claim.
The Respondent No. 2 clarified that while it had found the petitioner’s documents to be in order, the insistence on the indemnity bond was due to the procedural requirements of the IEPF Authority’s online portal and rules. However, Respondent No. 2 also stated it would have no objection to the transmission if the IEPF Authority (Respondent No. 1) waived this requirement.
The Court observed that the respondents’ insistence was based on a misinterpretation of Rule 2.2 of the Investor Education and Protection Fund Authority (Accounting, Audit, Transfer and Refund) Rules, 2016. The Court performed a plain reading of Rule 2.2, which stipulates the documentary requirements for claims involving securities valued up to Rs. 5 Lakhs. It noted that Rule 2.2(a) requires documents like a succession certificate, probate of will, or a court order. At the same time, Rule 2.2(b) requires an indemnity bond and a no-objection certificate from other legal heirs, but this clause is explicitly applicable only ‘in the absence of the documents as mentioned at (a) above’.
The Court found that since the petitioner had already furnished a succession certificate under Rule 2.2(a), there was ‘no justification whatsoever’ to demand compliance with Rule 2.2(b). The Court held that the respondents’ action was ‘wholly misconceived’, ‘arbitrary and unsustainable in law’, and that they could not impose additional conditions not contemplated in the rules once the prescribed requirements were met.
The Magistrate cannot mechanically close the proceedings when faced with obstruction and must take necessary steps to execute the warrant, as the objective of the SARFAESI Act is to facilitate the recovery of dues without forcing the secured creditor to initiate fresh proceedings repeatedly
The Supreme Court in the case of IIHFL vs Nageswara Rao Perikala [SLP (Civil) No. 26160 of 2025] dated March 16, 2026, has clarified that the time limits specified in Section 14 of the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002 (SARFAESI Act), are directory in nature. Thus, a Chief Judicial Magistrate (CJM) or District Magistrate has a statutory obligation to ensure the execution of a warrant of possession, including providing police protection, and is not rendered functus officio merely because the possession could not be taken within the initially prescribed period.
The Court cautioned that the Magistrate cannot mechanically close the proceedings when faced with obstruction and must take necessary steps to execute the warrant, as the objective of the SARFAESI Act is to facilitate the recovery of dues without forcing the secured creditor to initiate fresh proceedings repeatedly.
Accordingly, the Apex Court quashed the impugned orders passed by the CJM and the High Court respectively, and restored the proceedings under Section 14 of SARFAESI Act. The Court also directed the CJM to provide Police protection to the Advocate Commissioner and to ensure that the warrant of possession is executed expeditiously, preferably within a period of one month.
The Court observed that the CJM is under a statutory obligation under Section 14 of the Act to ensure that the warrant of possession is executed and the secured creditor is not made to ‘run from pillar to post’. The Court also noted that the CJM is empowered to take all necessary steps and use such force as may be necessary to take possession of the secured asset.
Further, the Court held that the CJM’s order which mechanically directed the return of the unexecuted warrant and closed the petition without considering the Advocate Commissioner’s memo for a time extension, suffered from non-application of mind. This was deemed an ‘abdication of the statutory duty’ cast upon the CJM under Section 14 of the Act.
While concluding, the Court observed that the High Court also failed to appreciate this failure of duty by the CJM, and instead, granted liberty to the appellant to file a fresh petition, which defeats the purpose of the Act. The Court therefore reiterated that the time limits prescribed under Section 14 are directory and not mandatory, and the inability to take possession within the prescribed time does not render the Magistrate functus officio.
The principle of finality attached to court-confirmed auction sales is not absolute and does not prevent judicial scrutiny, especially concerning the adequacy of property valuation
The Supreme Court in the case of Om Sakthi Sekar vs V. Sukumar [Civil Appeal No. 3362 of 2026] dated March 13, 2026, has held that the principle of finality attached to court-confirmed auction sales is not absolute and does not prevent judicial scrutiny, especially concerning the adequacy of property valuation. The objective of an auction in recovery proceedings is to secure the best possible price for the asset, and the court’s supervisory jurisdiction can be invoked to examine whether this objective was met.
The dispute arose out of recovery proceedings initiated by Indian Bank against a borrower and guarantors for outstanding dues arising from an “at par facility” agreement entered into in 1992. After the borrower defaulted, the bank approached the Debts Recovery Tribunal, Chennai, which in January 2010 held the borrowers and guarantors jointly and severally liable and issued a recovery certificate. Pursuant to the recovery certificate, the DRT attached the mortgaged properties and conducted a public auction on 29 October 2010. The appellant emerged as the highest bidder with a bid of ₹2,10,98,765. The sale was confirmed by the DRT on 31 January 2011, and a sale certificate was issued and registered in February 2011.
The guarantors challenged the recovery proceedings before the Debts Recovery Appellate Tribunal (DRAT), which upheld the validity of the auction. When the matter reached the Madras High Court, the Court affirmed the legality of the mortgage, the bank’s right to recover its dues, and the validity of the auction sale. However, it directed the DRT to reconsider the valuation of the properties and examine whether the assets had been sold for a value lower than their actual worth.
The Apex Court observed that while the rights of a bona fide auction purchaser ordinarily deserve protection, such protection is not absolute. It emphasised that where credible concerns arise regarding the adequacy of valuation or fixation of reserve price, courts may exercise supervisory jurisdiction to ensure that the secured asset fetches the best possible value. The Court noted that while there can be no quarrel with the settled proposition that the rights of a bona fide auction purchaser deserve due protection and that confirmed court sales should not ordinarily be interfered with, it is equally well established that such protection is not absolute. Where credible issues are raised regarding the adequacy of valuation or the fairness of the process leading to the fixation of the reserve price, the supervisory jurisdiction of the Court may be invoked to ensure that the recovery proceedings have been conducted in a manner that secures the best possible value of the property.
The Court noted that the purpose of an auction is to secure the most remunerative price through competitive bidding and ensure transparency in the sale process. Further, the High Court had not set aside the auction sale or questioned the purchaser’s participation. Instead, it had issued a limited direction for reconsideration of valuation by the DRT. Such a remand, the Court said, does not disturb the recovery already effected nor render the auction void. The Court observed that a limited remand by a higher court to a tribunal for the specific purpose of reconsidering valuation, without setting aside the entire auction, is a balanced exercise of jurisdiction and is legally tenable. Therefore, the Supreme Court dismissed an appeal filed by an auction purchaser challenging a Madras High Court direction that remitted the issue of property valuation to the Debts Recovery Tribunal (DRT) in bank recovery proceedings, and held that the High Court did not err in remitting the matter to the DRT to re-examine the valuation of the properties.
Consumer complaints involving highly disputed questions of fact or allegations of a criminal or tortious nature, such as fraud and forgery, cannot be adjudicated in the summary proceedings under the Consumer Protection Act, 1986
The Supreme Court in the case of Sant Rohidas Leather Industries and Charmakar Development Corporation vs Vijaya Bank [Civil Appeal No. 4841 of 2023] dated March 19, 2026, has held that consumer complaints involving highly disputed questions of fact or allegations of a criminal or tortious nature, such as fraud and forgery, cannot be adjudicated in the summary proceedings under the Consumer Protection Act, 1986. Such matters are to be decided by a regular civil or criminal court which is equipped to handle complex factual determinations.
While the National Consumer Disputes Redressal Commission’s (NCDRC) reasoning for dismissing the complaint (that earning interest on a deposit automatically makes it a ‘commercial purpose’) was not entirely correct, the ultimate dismissal of the complaint was justified because the dispute centred on allegations of fraud that were outside the scope of the consumer forum’s summary jurisdiction. The Apex Court, however, clarified that this dismissal does not bar the appellant from seeking recourse in an appropriate court or forum.
The Court observed that to determine if a service is availed for a ‘commercial purpose’, one must look at the dominant object or purpose of the transaction. The identity of the person (whether an individual or a body corporate) is not the sole determining factor. The Court disagreed with the NCDRC’s view that merely because a fixed deposit earns interest, the banking service is availed for a commercial purpose. Rather, it reasoned that there could be various non-commercial reasons for depositing money in a bank, such as statutory requirements or safe-keeping of funds.
However, the Court distinguished this from situations where a deposit is made specifically to leverage credit facilities for augmenting business. Such a transaction would have a direct nexus with revenue generation and could be considered a commercial purpose. In this case, the transaction was between two business entities (company and bank). The Bank’s defence was that the FDR was pledged to avail a credit facility for business use. The Court noted that without first determining the truth behind the allegations of fraud and forgery concerning the pledge and loan, it was not possible to ascertain the true purpose of the deposit and, consequently, whether the services were availed for a commercial purpose.
Further, the Court observed that ‘deficiency in service’ under the 1986 Act must be distinguished from tortious or criminal acts like fraud or cheating. It reiterated that the burden of proving deficiency in service lies on the complainant. Since proceedings before the Consumer Commission are summary in nature, they are not meant to adjudicate complex factual issues, especially those involving criminality.
In the present case, the core of the dispute was the Bank’s claim of a subsequent contract of pledge, which the appellant alleged was fraudulent. The Bank contended that the FDR held by the appellant was forged and that the original was with the Bank as security for the overdraft facility. Thus, the Court concluded that these allegations of fraud and forgery could not be properly adjudicated in a summary proceeding under the 1986 Act and were more appropriate for a regular civil or criminal court. The complaint as framed was not maintainable before the Consumer Commission.
Since SEBI’s regulations are framed to protect the rights of multiple stakeholders in the securities market, a violation of these regulations is a matter of public law and cannot be condoned by a private resolution of shareholders
The Supreme Court in the case of SEBI vs Terrascope Ventures Limited [Civil Appeal Nos. 5209-5211 of 2022] dated March 17, 2026, has held that the diversion of funds raised through a preferential issue for purposes other than those disclosed in the explanatory statement to the shareholders is a fraudulent and unfair trade practice under Regulations 3 and 4 of the SEBI (Prohibition of Fraudulent and Unfair Trade Practices Relating to Securities Market) Regulations, 2003 (PFUTP Regulations). Such an act, being illegal and contrary to statutory regulations that are a matter of public policy, is void ab initio and cannot be subsequently legitimized or validated by a resolution of ratification passed by the shareholders.
Further, the Court clarified that initiation of separate proceedings by the SEBI’s Whole Time Member for remedial directions (like debarment from the market) and by the Adjudicating Officer for imposing monetary penalties on the same set of facts is permissible, as these authorities exercise distinct jurisdictions and powers under the SEBI Act.
The Court observed that the funds raised through the preferential issue were immediately diverted for purposes not disclosed in the notice of the Extraordinary General Meeting (EoGM). This act was held to be a clear breach of Regulations 3 and 4 of the PFUTP Regulations. The Court emphasized that the disclosure of objects for a preferential issue, as mandated by Regulation 73 of the SEBI (ICDR) Regulations, 2009, is of utmost significance as it influences the decisions of investors and stakeholders.
Also, the Court noted that the definition of ‘fraud’ under the PFUTP Regulations is broad and does not require deceit; it includes any act, omission, or concealment that induces another person to deal in securities. The immediate diversion of funds upon receipt indicated that the respondents had no intention of using the funds for the stated objects from the very inception, making the disclosure untrue and misleading. This also constituted a violation of Section 21 of the Securities Contracts (Regulation) Act, 1956 (SCRA) read with Clause 43 of the Listing Agreement, which mandates reporting of variations between projected and actual utilization of funds.
The Court also found the reliance on Section 27 of the Companies Act, 2013, to be misplaced as it applies to a ‘prospectus’ for a public offer, not a private placement, which was the nature of the preferential allotment in this case. The Court distinguished between private rights, which can be waived or ratified, and matters involving public interest and public policy, which cannot. Since SEBI’s regulations are framed to protect the rights of multiple stakeholders in the securities market, a violation of these regulations is a matter of public law and cannot be condoned by a private resolution of shareholders.
An act that is ultra vires the regulations is void and cannot be ratified, even with unanimous shareholder consent. The diversion was contrary to the PFUTP Regulations and disclosure norms, making it a plainly illegal act that could not be legitimized post-facto, added the Court.
On the validity of parallel proceedings by the WTM and the Adjudicating Officer, the Court found no fault in the parallel proceedings, noting that the two authorities were vested with different powers and operated in separate fields during the period in question. The Whole Time Member (WTM), exercising powers under Sections 11, 11(4), and 11B of the SEBI Act, had the authority to take remedial measures like restraining persons from the securities market to protect investors’ interests. In contrast, the AO had the power under Section 15HA to impose monetary penalties for fraudulent and unfair trade practices.
The Court therefore observed that at the time of the proceedings, the power to levy a penalty under Section 15HA was not vested with the WTM (it was vested later by the Finance Act, 2018). Therefore, the AO rightly stepped in to exercise the distinct jurisdiction of imposing a penalty, and this did not amount to double jeopardy or an impermissible overlap of jurisdiction.
Employer is entitled to withhold gratuity and adjust penal rent from it for the unauthorised occupation of company quarters by a retired employee, in accordance with the governing service rules
The Supreme Court in the case of The Management of Steel Authority of India vs Shambhu Prasad Singh [2026 INSC 263] dated March 18, 2026, has ruled that an employer (Steel Authority of India) is entitled to withhold gratuity and adjust penal rent from it for the unauthorised occupation of company quarters by a retired employee, in accordance with the governing service rules. The Court held that the obligations to vacate the accommodation and to release gratuity are mutual and reciprocal.
However, an order passed by a court on the specific facts of a case, without laying down a legal principle, does not serve as a binding precedent. Further, where service rules authorise the withholding of gratuity for non-vacation of quarters, the employee is not entitled to any interest on the withheld amount for the period of unauthorised occupation.
However, exercising its equitable jurisdiction, the Apex Court fixed a penal rent of Rs. 1,000 per month for the present batch of cases only, considering the hardship to retired workers and other specific circumstances, explicitly stating that this shall not be treated as a precedent.
The Court observed that under Rule 3.2.1(c) of the SAIL Gratuity Rules, 1978, the management is expressly empowered to withhold the gratuity amount for non-compliance with company rules, including the non-vacation of accommodation. The rules further stipulate that no interest shall be payable on the gratuity amount so withheld during the period of unauthorised occupation.
The Court also affirmed that the obligation of the Ex-Employee to vacate the quarters and the obligation of the management to release the gratuity are mutual and reciprocal, and neither can be enforced in isolation. Citing the binding judgment in Secretary, ONGC Ltd. v. V. U. Warrier [(2005) 5 SCC 245], it was established that if an employee occupies a quarter beyond the specified period, penal rent is a natural consequence and can be adjusted against dues payable, including gratuity.
Insurance company is not statutorily liable to indemnify the insured for compensation awarded to gratuitous passengers travelling in a goods vehicle, and the liability under Section 147 of the Motor Vehicles Act, 1988, does not extend to such passengers
Emphasising the liability of the insurance company vis-à-vis the insured on the matter of gratuitous passenger carried in a goods vehicle, the High Court of Himachal Pradesh in the case of United India Insurance Company vs Puran Chand [FAOs No. 87 to 90 of 2013] dated March 05, 2026, has ruled that the insurance company is not statutorily liable to indemnify the insured for compensation awarded to gratuitous passengers travelling in a goods vehicle, and the liability under Section 147 of the Motor Vehicles Act, 1988, does not extend to such passengers.
The High Court pointed out that a Motor Accidents Claims Tribunal (MACT) does not have the jurisdiction to direct an insurance company to ‘pay and recover’ compensation in cases where there is no statutory liability on the insurer, such as in the case of gratuitous passengers in a goods vehicle.
Such a direction is beyond the powers of the Tribunal, as the power to issue such directions in the interest of justice is an extraordinary power vested in the Supreme Court under Article 142 of the Constitution, added the Court, while concluding that the entire liability to satisfy the award and pay the compensation rests solely with the owner of the vehicle.
The Court observed that it is undisputed that the deceased and injured individuals were gratuitous passengers in the offending vehicle, which was a goods vehicle. The Bench analysed the definitions under the Motor Vehicles Act, 1988, noting that a ‘goods carriage’ is a motor vehicle constructed or adapted for use ‘solely for the carriage of goods’ and that the definition of ‘goods’ explicitly excludes ‘living person’.
The Court examined Section 147 of the 1988 Act and the impact of the 1994 amendment, which inserted the words ‘including owner of the goods or his authorized representative carried in the vehicle’. Citing the Supreme Court’s decision in New India Assurance Co. Ltd. vs. Asha Rani [(2003) 2 SCC 223], the Court noted that this amendment was not merely clarificatory but was intended to bring the owner of goods or their representative within the sweep of compulsory insurance coverage for a goods vehicle.
Further, relying on National Insurance Company Limited vs. Baljit Kaur [(2004) 2 SCC 1], the Court reiterated that even after the 1994 amendment, the legislative intent was not to cover all persons travelling in a goods carriage. The statutory liability of the insurer does not extend to passengers in a goods vehicle, especially gratuitous passengers, for whom no premium was paid to cover such a risk.
Thus, the Court concluded that since the deceased and injured were gratuitous passengers for whom no additional premium was paid, the insurance company has no liability under the law to pay the compensation.
Post-dated cheques not issued as an inducement to secure the funds but given later to discharge an existing liability of investor who agreed to share profit in a movie’s release, while potentially give rise to an action under Section 138 of the Negotiable Instruments Act, 1881, does not ipso facto constitute cheating
The Supreme Court in the case of V. Ganesan vs State [Criminal Appeal No. 1470 of 2026] dated March 19, 2026, has held that a mere breach of contract or the failure to fulfil a promise, especially in a high-risk commercial venture, does not automatically give rise to a criminal offence of cheating under Section 420 of the IPC. For an offence of cheating to be established, it is imperative for the complainant to demonstrate that the accused possessed a fraudulent or dishonest intention at the very inception of the transaction when the inducement was made.
The Apex Court ruled that the subsequent dishonour of a post-dated cheque, issued to discharge a pre-existing liability rather than as an initial inducement, is insufficient in itself to prove the existence of such dishonest intention from the beginning. Where the facts of a case primarily disclose a civil dispute, criminal proceedings should not be sustained, and the High Court ought to exercise its inherent powers to quash them to prevent an abuse of the process of law.
The Court concurred with the High Court’s finding that no offence under Section 406 IPC was made out because the essential element of ‘entrustment’ of property was absent in the transaction between the parties. On cheating and dishonest intention, the Court reiterated that a crucial ingredient for the offence of cheating is the existence of a fraudulent or dishonest intention at the time of making the promise or inducement.
A mere subsequent failure to keep a promise cannot be the sole basis to infer that such dishonest intention existed from the very beginning, added the Court, while emphasising that every breach of contract does not amount to cheating; it becomes cheating only if deception was played at the very inception of the transaction.
On the nature of the business transaction, the Court observed that the High Court had overlooked the fundamental nature of the transaction. Movie-making is an inherently high-risk business where returns are not guaranteed. When an individual agrees to invest in a movie for a share of the profits, they are knowingly taking the risk of a possible zero return. This commercial risk is a vital factor in determining whether the dispute is civil or criminal in nature.
On the fulfilment of the promise, the Court noted that the appellant did not make a false promise to make a movie, as the movie was, in fact, completed and released. Regarding the promise of sharing profits, the prosecution made no allegation that the movie actually generated any profits. Therefore, the failure to share profits, in this context, does not prove an initial dishonest intention.
On the dishonour of post-dated cheques, the Court clarified that the two post-dated cheques were not issued as an inducement to secure the funds but were given later to discharge an existing liability after the complainant objected to the movie’s release. The dishonour of such post-dated cheques, while potentially giving rise to an action under Section 138 of the Negotiable Instruments Act, 1881, does not ipso facto constitute cheating. This is because a post-dated cheque does not represent that there are sufficient funds at the time of issuance, and for cheating, the dishonest intention must be present from the very beginning.
When comparing two trademarks, if a part of the marks is common to the trade or descriptive, that common element cannot be the decisive factor in determining similarity. The comparison must be made by giving greater regard to the uncommon elements of the marks
The Delhi High Court in the case of Volkswagen AG vs Registrar of Trade Marks [C.A.(COMM.IPD-TM) 30/2024] dated March 12, 2026, has clarified that when comparing two trademarks, if a part of the marks is common to the trade or descriptive (in this case, the word ‘MOTION’ for the automobile industry), that common element cannot be the decisive factor in determining similarity. The comparison must be made by giving greater regard to the uncommon elements of the marks. Accordingly, it rejected Volkswagen’s petition against the Registrar of Trademarks’ decision to register Maruti Suzuki’s ‘TRANSFORMOTION’ trademark.
The Court held that a trademark that is perceived as a single, composite word should be considered as a whole and should not be artificially dissected for the purpose of comparison. The presence of a distinguishing prefix (‘TRANS’) that creates a different visual and phonetic impression, coupled with a stark visual difference (numeral vs. alphabets), can render two marks dissimilar, even if they share a common suffix.
The likelihood of confusion is diminished when the goods in question are high-value items (like cars) that are purchased after due deliberation by consumers, and when the competing parties are well-known entities with their own independent goodwill and reputation in the market, added the Court.
Hence, the Court explained that a claim of confusion is significantly weakened when the defendant’s use of its mark in a specific market predates the plaintiff’s entry and use of its mark in that same market, as consumers could not have been aware of the plaintiff’s mark at the time the defendant commenced use.
The Court observed that visually, there is no plausible chance of confusion between the two marks, noting the ‘stark difference’ of the Appellant’s mark starting with a numeral ‘4’ versus the Respondent’s mark starting with alphabets. Phonetically, the Bench agreed with the Registrar that the sound of ‘TRANS’ in ‘TRANSFORMOTION’ makes it sufficiently distinct from ‘4MOTION’/‘FORMOTION’.
Regarding conceptual similarity, the Court first noted that this plea was not raised before the Registrar and the Appellant was precluded from raising it on appeal. Nevertheless, the Court found no merit in the argument, as ‘4MOTION’ denotes an existing vehicle feature, while ‘TRANSFORMOTION’ is used in an advertising campaign to convey a transition of technology.
The Court found merit in the Respondent’s submission that the word ‘MOTION’ is common to the automobile industry and descriptive in its use by both parties to denote technology. It held that the word ‘MOTION’ cannot be decisive, and the rival marks must be compared by considering their uncommon parts. The Court was also unable to accept the Appellant’s plea to dissect the impugned mark, stating that ‘TRANSFORMOTION’ ‘commends to the mind of the Court as a single word’ and there is no inclination to split it up.
On likelihood of confusion and prior use, the Court held that since the marks were found not to be deceptively similar, the Appellant’s argument of being the ‘earlier trademark’ was not relevant. The Court was persuaded that there was no likelihood of confusion, considering that both parties (Volkswagen AG and Maruti Suzuki India Limited) have substantial independent goodwill and that cars are high-value products purchased by consumers after due deliberation.
The adjustment of income tax refunds, which are assets of the corporate debtor, against pre-CIRP tax demands during the moratorium period is a form of recovery and is expressly prohibited by Section 14 of the IBC
The Ahmedabad Bench of the National Company Law Tribunal (NCLT) in the case of Wind World (India) Ltd vs Income Tax Department [IA No. 996 of 2025] dated March 06, 2026, has clarified that in view of the overriding effect of Section 238 of the Insolvency and Bankruptcy Code, 2016, (IBC), the powers conferred upon the Income Tax Department under Section 245 of the Income Tax Act, 1961, cannot be exercised during the subsistence of a moratorium under Section 14 of the IBC.
The NCLT ruled that the adjustment of income tax refunds, which are assets of the corporate debtor, against pre-CIRP tax demands during the moratorium period is a form of recovery and is expressly prohibited by Section 14 of the IBC. Consequently, any such adjustment is illegal, arbitrary, and void, and the amount so adjusted or withheld must be refunded to the corporate debtor, along with any applicable statutory interest, to be made available for the insolvency resolution process.
The NCLT observed that while Section 245 of the Income Tax Act empowers the department to set off refunds against outstanding tax dues, this power is not absolute. Section 238 of the IBC contains a non-obstante clause that gives the IBC primacy over any inconsistent provisions in other laws, including the Income Tax Act.
The Tribunal held that once a moratorium under Section 14 is in effect, all actions of recovery or enforcement of pre-CIRP claims are prohibited. Invoking Section 245 during the moratorium would defeat the protection granted by Section 14 and frustrate the objective of preserving the Corporate Debtor’s assets. Since IBC overrides the Income Tax Act in case of any inconsistency, the power under Section 245 of the Income Tax Act cannot be exercised during the CIRP.
The Tribunal noted that the refunds were determined under Section 143(1) of the Income Tax Act and had crystallized into amounts payable to the Corporate Debtor, thus constituting its assets. The Tribunal found the Respondent’s actions to be in clear violation of Section 14 read with Section 238 of the IBC. Hence, it held the adjustments to be illegal and arbitrary, and declared that the amounts adjusted are void and must be restored to the Corporate Debtor.
The Tribunal also observed that the refunds arose from tax returns filed by the Resolution Professional during the CIRP. Once determined under Section 143(1) of the Income Tax Act, the refund becomes a crystallized receivable of the Corporate Debtor.
Referencing the duties of the Resolution Professional under Section 18 and Section 25 of the IBC to preserve and protect the assets of the Corporate Debtor, the Tribunal held that these refunds form part of the insolvency estate. Any unilateral adjustment would lead to a depletion of these assets, frustrating the objective of value maximization under the IBC. The Tribunal therefore concluded that the income tax refunds are indeed assets of the Corporate Debtor and must remain under the control of the Resolution Professional.
REGULATORY UPDATES
Borrowing by Mutual Funds – Bridging temporary timing mismatches between inflow and outflow of funds
The Securities and Exchange Board of India (SEBI) vide its Circular No: HO/(92)2026-IMD-POD-2/I/6961/2026 dated March 13, 2026, has allowed mutual funds to undertake intraday borrowings from banks or financial institutions to bridge temporary timing mismatches between inflow and outflow of funds.
SEBI noted that redemption payouts to investors are often processed in the morning, while maturity proceeds from instruments such as TREPS or reverse repos are received in the evening hours of the same day, creating a temporary timing mismatch. To address this, mutual funds may enter into formal intraday borrowing arrangements with financial institutions such as banks.
As per the circular, with effect from April 1, 2026, intraday borrowing shall be permitted only for the purpose of repurchase or redemption of units or payment of interest or income distribution payouts to unitholders. The borrowing amount must not exceed the guaranteed receivables due on the same day from the Government of India, Reserve Bank of India or the Clearing Corporation of India Limited, including receivables such as maturity proceeds from TREPS, reverse repos, government securities, treasury bills, SDLs, STRIPS, interest on government securities, and sale proceeds of such securities.
SEBI clarified that any cost of intraday borrowing, as well as any loss arising due to delay or unforeseen events in receiving the receivables, shall be borne by the Asset Management Company. The regulator further clarified that borrowing by equity-oriented index funds and equity-oriented ETFs on account of under-execution of sell trades on the stock exchange will be permitted only for participation in the closing auction session of stock exchanges, in the manner specified in SEBI’s circular on the closing auction session.
Click here to read/ download the Circular
Ease of Doing Business – SEBI has introduced a lighter certification requirement for Persons Associated with Research Services (PARS) performing sales and other non-core services
The Securities and Exchange Board of India (SEBI) vide its Circular No: HO/38/12/(5)2026-MIRSD-POD/I/6703/2026 dated March 11, 2026, has introduced a lighter certification requirement for Persons Associated with Research Services (PARS) performing sales and other non-core services, as part of its ease of doing business initiative. Based on the feedback from market participants and as a step towards ease of doing business, it has been decided to specify a lighter NISM certification module for PARS.
Under the SEBI (Research Analysts) Regulations, 2014, PARS are required to obtain certification from the National Institute of Securities Markets (NISM). As per the notification dated February 14, 2025 under the SEBI (Certification of Associated Persons in the Securities Markets) Regulations 2007, such persons were required to pass the NISM Series-XV: Research Analyst Certification Examination.
SEBI has now specified that PARS engaged in sales, relationship management and other non-core services, who have client interaction but are not directly involved in research activities, shall obtain certification by passing the NISM Series-XXV-A (Persons Associated with Research Services – Sales and Other Non-Core Services) Certification Examination.
However, PARS, other than those who perform sales and other non-core services, will continue to be required to obtain the NISM Series-XV Research Analyst certification. The circular also clarifies that PARS who already hold the NISM Series-XV certification will be required to obtain the new certification only after the expiry of the validity of their existing certificate.
The SEBI further states that the new provisions come into effect immediately and the Research Analyst Administration and Supervisory Body has been advised to make necessary amendments to implement the changes.
Click here to read/ download the original circular
Review of Coverage of Settlement Guarantee Fund– SEBI has revised the norms related to Core Settlement Guarantee Fund (Core SGF) in the commodity derivatives segment
The Securities and Exchange Board of India (SEBI) vide its Circular No: HO/47/16/14(1)2026-MRD-POD1/1/7115/2026 dated March 16, 2026, has revised the norms related to Core Settlement Guarantee Fund (Core SGF) in the commodity derivatives segment. Under the revised framework, clearing corporations must calculate credit exposure assuming the simultaneous default of at least three clearing members (and their associates) causing the highest credit exposure.
Earlier, the framework required credit exposure assuming simultaneous default of at least 2 clearing members. The change has been introduced following stakeholder representations and recommendations of the Risk Management Review Committee, with the objective of facilitating ease of doing business. The circular also empowers SEBI to grant case-by-case exemptions or relaxations from SGF provisions considering market conditions and investor protection. The circular has come into force with immediate effect.
