Legal Updates ( March 23 – March 28, 2026 )
CASE UPDATES:
As per Section 32A of the IBC, the liability of a corporate debtor for an offence committed under any law prior to the commencement of CIRP shall cease, and the corporate debtor will not be prosecuted for such an offence from the date the resolution plan is approved by the adjudicating authority
The Delhi High Court in the case of Jas Infrastructure and Power Ltd vs Central Bureau of Investigation [CRL.A. 1596/2025] dated March 17, 2026, has refused to suspend the sentence of Jas Infrastructure and Power Ltd (appellant) finding that the appellant does not meet out the necessary conditions as envisaged under Section 32A of the Insolvency and Bankruptcy Code, 2016 (IBC), specifically, the approval of a resolution plan resulting in a change of management, coupled with the gravity of the offence committed.
The High Court observed that as per Section 32A of the IBC, the liability of a corporate debtor for an offence committed under any law prior to the commencement of CIRP shall cease, and the corporate debtor will not be prosecuted for such an offence from the date the resolution plan is approved by the adjudicating authority.
However, the Court cautioned about the conditions attached to this benign provision, and stated that exemption under Section 32A can be availed only if the resolution plan results in the change in the management or control of the corporate debtor to a person who was not a promoter, or in the management or control of the corporate debtor or a related party of such person; or a person who abetted or conspired for the commission of the offence.
The Court observed that in the present case, it is admitted that the resolution plan was not approved by the adjudicating authority. It categorically stated that the immunity is premised on various conditions being fulfilled, the foremost being that there must be a resolution plan and it must be approved. The Court also observed that the aforementioned provision aims at the extinguishment of the liability of the corporate debtor to provide a clean slate to the ‘new management’ and not for the wrongdoers to get away with the liability.
Further, the Court observed that Section 32A of the IBC has no direct bearing on Section 14 of the IBC, which provides for a mandatory moratorium period to the corporate debtor from the insolvency commencement date. The Court detailed that Section 32A deals with the extinguishment of liability of the corporate debtor from the date the resolution plan has been approved by the Adjudicating Authority, so that the new management may make a clean break with the past and start on a clean slate.
In contrast, the Court observed that a moratorium provision does not extinguish any liability, civil or criminal, but only casts a shadow on proceedings already initiated and on proceedings to be initiated, which shadow is lifted when the moratorium period comes to an end. During the moratorium period, the institution of new suits or continuation of the pending suits against the corporate debtor are temporarily suspended until the completion of the CIRP. The Court also noted that the present criminal proceedings were instituted much prior in time from the date of insolvency.
Non-inclusion of a claim in the resolution plan results in its extinguishment, and any claim which is not expressly included in the resolution plan, and which is not expressly barred as per such plan, cannot be inferred to have been included therein
The Supreme Court in the case of Ujaas Energy Ltd vs West Bengal Power Development Corporation [2026 INSC 268] dated March 20, 2026, has clarified that non-inclusion of a claim in the resolution plan results in its extinguishment, and any claim which is not expressly included in the resolution plan, and which is not expressly barred as per such plan, cannot be inferred to have been included therein.
The Court held that the West Bengal Power Development Corporation (respondent), although not entitled to independently pursue its claim by way of counterclaim post-approval of the resolution plan, ought to be permitted to raise the plea of set-off at least by way of defence. Further, the respondent shall not derive any positive or affirmative relief on the basis of the said defence and may only defend itself against the claim raised by the appellant to the extent necessary to prevent the appellant from succeeding in the arbitration proceedings either entirely or in part.
In the event the amount claimed in the counterclaim of the respondent, or any part of it, is found to be due and payable to the respondent by the appellant and such amount exceeds the amount awarded to the appellant, the surplus amount shall not be recoverable by the respondent, added the Court.
Conversely, the Court clarified that if any amount remains payable to the appellant after adjustment of the respondent’s defence plea, the same shall be recoverable by the appellant and the Tribunal may order accordingly. If the arbitration proceedings initiated by the appellant are withdrawn, the counterclaim of the respondent shall also fail, as the same is permitted only for the limited purpose of defence.
The Court observed that Section 31(1) of the IBC provides that the terms of an approved resolution plan are binding and attach finality to the plan. The terms are to be read strictly, given the binding nature and extinguishment of claims not part of it, which aligns with the resolution objective of the IBC.
Relying on the precedent set in Ghanashyam Mishra & Sons (P) Ltd. v. Edelweiss Asset Reconstruction Co. Ltd. [(2021) 9 SCC 657], the Court observed that on the date of approval of the resolution plan by the adjudicating authority, all claims which are not a part of the resolution plan shall stand extinguished, and no person will be entitled to initiate or continue any proceedings in respect to a claim which is not part of the resolution plan. The Court added that the respondent cannot seek any affirmative relief from the Tribunal because the respondent’s claim, raised by way of counterclaim before the Tribunal, does not find a place in the resolution plan and hence stands extinguished.
On the Interpretation of the resolution plan and the plea of set-off, the Court noted three specific aspects: first, the respondent raised its counterclaim prior to the approval of the resolution plan; second, the Resolution Professional was aware of the counterclaim, yet it was not made part of the resolution plan; and third, the resolution plan bars all future “payments/settlements” in respect of claims which were not raised before it.
The Court emphasised that Paragraph 12.4.1 of the resolution plan explicitly states that no other payments or settlements will have to be made in respect of claims against the Company, and all such claims, including counterclaims under pending arbitration proceedings, stand irrevocably and unconditionally abated, discharged, settled, and extinguished in perpetuity. Thus, going by the exact words employed in Paragraph 12.4.1 of the plan, it does not appear to bar a plea of set-off being raised as a ‘defence’ in any pending arbitral proceedings, although claims for any “payment” or “settlement”, including a counterclaim, not included therein are specifically not recoverable.
There is no “deemed liability” concept for a ‘Director’ merely by virtue of their designation, and the presence of specific factual averments linking a director to the day-to-day management of a company is not a mere procedural formality but a jurisdictional prerequisite under Section 141 of the Negotiable Instruments Act
The Calcutta High Court in the case of Masud Tarif vs State of West Bengal [CRR 2128 of 2025] dated March 20, 2026, has discarded “deemed liability” concept for a ‘Director’ merely by virtue of their designation, and held that the presence of specific factual averments linking a director to the day-to-day management of a company is not a mere procedural formality but a jurisdictional prerequisite under Section 141 of the Negotiable Instruments Act (NI Act). The Court pointed out that ‘Silence’ in a complaint regarding an individual director’s specific role constitutes a substantive failure to establish a prima facie case.
Where an underlying debt is restructured through a Settlement Agreement, the Court explained that the ‘material time’ for assessing liability shifts to the execution and implementation of said settlement. In settlement-based transactions, vicarious liability must be examined strictly against those who negotiated and executed the restructured debt, and a director who is a documented stranger to such an agreement cannot be held vicariously liable for the dishonour of cheques issued pursuant thereto.
In the exercise of inherent powers under Section 528 of the BNSS, the High Court said that it must prioritize the prevention of an illegal prosecution over procedural technicalities. The Court asserted that procedural delay is intended as a shield to prevent the abuse of the legal system, not a sword to perpetuate an illegal prosecution where the complaint is ‘facially deficient’, and an inherent illegality in a summoning order cannot be cured by the mere passage of time.
A summoning order that fails to distinguish between “Managing Directors/Signatories” and “Non-Executive Directors”, particularly in the absolute absence of specific averments regarding the latter’s role, reflects a failure of judicial application of mind. To allow such a trial to proceed would be to weaponize criminal machinery for civil recovery, amounting to a manifest abuse of the process of law, added the Court.
The Court observed that while the law discourages the ‘mechanical parroting’ of statutory language, it absolutely mandates the presence of a factual nexus, noting that the Complainant specifically attributes the request, negotiations, and discussions to Accused Nos. 2 and 3 alone. The conspicuous omission of the Petitioner is not a mere failure of elective language, but a fundamental failure of jurisdictional fact.
The Court examined the ‘Initial Transaction’ versus the ‘Novation of Debt’, observing that the Settlement Agreement functioned as a ‘novation’, effectively replacing the original 2013 contract with a restructured obligation. The negotiations for this settlement and the subsequent issuance of Post-Dated Cheques were handled exclusively by Accused Nos. 2 and 3, making the Petitioner a stranger to this agreement.
Further, the Court noted that Paragraph 3 of the complaint makes a blanket statement that all directors were ‘carrying on business’, but fails to provide the specific disclosure of facts required to link the individual director to the default. The ‘total silence’ regarding the Petitioner’s overt acts breaks the chain of liability.
It is an essential requirement to specifically aver in a complaint under Section 141 of NI Act that the person accused was in charge of, and responsible for the conduct of business of the company. Further, in the case of a Director, the complaint should specifically spell out how and in what manner the Director was in charge of or was responsible to the accused company for the conduct of its business, pointed out the Court.
Further, the Court observed that while the Magistrate’s hands were tied from recalling the summoning order, the High Court’s inherent jurisdiction is not; if a complaint discloses no offence against a specific individual, the continuation of that proceeding becomes an exercise in futility and a manifest violation of the right to personal liberty under Article 21 of the Constitution of India.
Addressing the Complainant’s plea regarding the Petitioner’s ‘deep slumber’, the Court observed that while delay is a relevant factor in discretionary relief, it cannot sanitize a proceeding that is fundamentally void of jurisdictional competence. The Court therefore concluded that it is the duty of the High Court to intervene where continuation of criminal proceedings would amount to an abuse of process of law, and procedural delay cannot outweigh the substantive injustice of an untenable prosecution.
Disputes arising out of contractual obligations between parties, even if they involve issues of tax reimbursement or compliance, do not fall within the category of non-arbitrable disputes relating to sovereign functions, provided neither party is questioning the validity or legality of the levy of the tax itself
The Allahabad High Court in the case of Shri Pramhans Enterprises vs Varanasi Aurangabad NH-2 Tollway Pvt Ltd [Arbitration and Conciliation Application u/s 11(4) No. – 129 of 2025] dated March 17, 2026, has held that the disputes arising out of contractual obligations between parties, even if they involve issues of tax reimbursement or compliance, do not fall within the category of non-arbitrable disputes relating to sovereign functions, provided neither party is questioning the validity or legality of the levy of the tax itself.
Further, while exercising jurisdiction under Section 11 of the Arbitration and Conciliation Act, 1996, the Court is not required to go into the merits of the dispute; and the scope is strictly limited to examining the existence of an arbitration agreement and whether the dispute is prima facie arbitrable, added the High Court.
The Court observed that sovereign functions of the State, including taxation, being inalienable and non-delegable, are non-arbitrable. However, it is evident that disputes arising out of contractual obligations between parties, even if they involve issues of tax reimbursement or compliance, do not fall within the category of non-arbitrable disputes.
Reference was made to the decision of the Delhi High Court in Spectrum Power Generation Limited vs. Gail (India) Limited [ARB.P. No. 746 of 2022], where it was held that where the issue does not relate to the taxing power of the State but rather whether GST/VAT liability could be passed on or reimbursed under an agreement, the dispute is arbitrable.
The Court noted that in the present case, neither party is questioning the validity or legality of the levy of GST. The dispute is essentially with regard to the payment of the contractual dues, which has been withheld by the respondents on the ground of alleged non-compliance of GST obligations by the applicant. The Court observed that such a dispute is contractual in nature and is, therefore, arbitrable. It is always open to the respondents to raise their defence or counterclaim before the arbitral tribunal with regard to GST compliance or any consequential liability.
Further, the Court observed that at this stage, while exercising jurisdiction under Section 11(4) of the Arbitration and Conciliation Act, it is not required to go into the merits of the dispute. Thus, referring to the case of Duro Felguera S.A. vs. Gangavaram Port Limited, the Court noted that the scope is limited to examining the existence of an arbitration agreement and whether the dispute is prima facie arbitrable, nothing more, nothing less.
Procedural requirements introduced by IBBI Circulars regarding approaching the Special Court under PMLA for restitution of attached assets) cannot be applied retrospectively to applications that were registered and reserved for orders prior to the issuance of such circulars
The Kolkata Bench of the National Company Law Tribunal (NCLT) in the case of Santanu T. Ray vs Axis Bank [I.A. (IBC) 1521(KB) of 2025] dated March 27, 2026, has held that statutory mandate under Section 25(2)(a) of the Insolvency and Bankruptcy Code, 2016 (IBC), coupled with the overriding effect under Section 238, obligates the Resolution Professional to take immediate control and custody of the assets of the Corporate Debtor, invalidating any lien created by statutory authorities (such as the Income Tax Department and Enforcement Directorate) during the subsistence of the moratorium under Section 14 of the IBC.
The NCLT clarified that the financial institutions are statutorily obligated under Section 17(1)(d) to act on the instructions of the Resolution Professional and cannot refuse to remove a lien or handover custody of an asset based on attachments made in violation of the IBC.
Procedural requirements introduced by IBBI Circulars (specifically Circular No. IBBI/CIRP/87/2025 dated Nov 04, 2025 regarding approaching the Special Court under PMLA for restitution of attached assets) cannot be applied retrospectively to applications that were registered and reserved for orders prior to the issuance of such circulars, added the Tribunal.
The Tribunal observed that the term deposit in question constitutes an asset of the Corporate Debtor and that the lien created by statutory authorities during the CIRP period directly falls foul of the moratorium imposed under Section 14 of the Code. A conjoint reading of Section 25(2)(a) and Section 17(1)(d) of the Insolvency and Bankruptcy Code, 2016 makes it clear that the Resolution Professional is duty bound to take control and custody of all assets of the Corporate Debtor, and the banks are equally obligated to facilitate such control and act on the instructions of the Resolution Professional.
Further, the Tribunal noted that the Income Tax Department had already filed its claim before the Resolution Professional, which had been duly admitted. Therefore, any attempt to secure its dues by creating a lien over the assets of the Corporate Debtor dehors the IBC framework is not permissible.
Relying on the Supreme Court decision in Pr. Commissioner of Income Tax v. Monnet Ispat and Energy Ltd, the Tribunal observed that Section 238 of the Code has an overriding effect, and any action taken by any authority, including statutory authorities, which is inconsistent with the provisions of the Code, cannot be sustained.
The Tribunal took note of Circular No. IBBI/CIRP/87/2025 dated Nov 04, 2025 issued by the Insolvency and Bankruptcy Board of India (IBBI), which advises that where assets are attached by the Enforcement Directorate under the PMLA, the Insolvency Professional may approach the Special Court under Section 8(7) or 8(8) of the PMLA for restitution.
However, the Tribunal observed that the present Interlocutory Application was registered on Sep 24, 2025 and was reserved for orders on Nov 03, 2025, prior to the issuance of the said Circular. Consequently, the procedural requirement as envisaged under the aforesaid Circular cannot be applied retrospectively so as to defeat or delay the relief sought in the present application, particularly when the issue pertains to custody and control of the assets of the Corporate Debtor during the subsistence of CIRP.
REGULATORY UPDATES
SEBI amends ICDR Regulations, and calls for submission of draft abridged prospectus
The Securities and Exchange Board of India (SEBI) vide its Notification No. SEBI/LAD-NRO/GN/2026/299 dated 16 March, 2026, has amended the SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018, by notifying the SEBI (ICDR) (Amendment) Regulations, 2026, on 16 March.
Under the amended regulations, a draft abridged prospectus must be submitted along with the offer documents and filed with SEBI and the stock exchanges. The abridged prospectus is required to be made available on the websites of the issuer, SEBI, stock exchanges, and lead managers, and must include QR codes and links to access the red herring prospectus, the abridged prospectus, and the price band advertisement.
The amendments mandate that all disclosures in the abridged prospectus be in clear, simple, and easily understandable language. Annexure–1 of the regulations has been substituted to prescribe the format of disclosures, including summaries of business, industry, financial information, risk factors, and other relevant details. The disclosure framework has also been expanded to include summaries of contingent liabilities and related party transactions.
The regulations will come into force on the date of their publication in the Official Gazette.
SEBI postpones implementing Intraday Borrowing Norms for Mutual Funds
The Securities and Exchange Board of India (SEBI) vide its Circular No. HO/(92)2026-IMD-POD-2/1/7885/2026 dated 25 March 2026, has deferred the implementation of guidelines on intraday borrowing by mutual funds to 15 July 2026, citing operational challenges faced by asset management companies.
The circular, issued as an addendum to SEBI’s earlier circular dated 13 March 2026 on borrowing by mutual funds, noted that intraday borrowing norms were specified under clause 5.9.1 of the Master Circular.
To address operational difficulties raised by AMCs, SEBI has postponed the applicability of these provisions. Therefore, the norms, initially scheduled to take effect from 1 April 2026, will now be effective from mid-July 2026.
Click here to read/ download the original circular
SEBI reduces Social Impact Fund Investment Threshold to Rs. 1000
The Securities and Exchange Board of India (SEBI) vide its Press Release PR No.18/2026 dated 23 March, 2026, has approved multiple measures to enhance ease of doing business, strengthen regulatory frameworks, and improve governance. The Board approved proposals to amend the SEBI (Alternative Investment Funds) Regulations, 2012 to allow alternative investment funds (AIFs) to retain liquidation proceeds beyond the completion of their tenure.
SEBI permits tagging certain AIFs as ‘inoperative funds’ with reduced compliance requirements. Further, it reduced the minimum investment by individual investors in Social Impact Funds from Rs. 2 lakh to Rs. 1,000 to facilitate wider participation. The Board also allowed net settlement of funds for foreign portfolio investors (FPIs) in the cash market to reduce costs and improve operational efficiency. It introduced various ease-of-doing-business measures for Infrastructure Investment Trusts (InvITs) and Real Estate Investment Trusts (REITs), including relaxations in investment conditions.
The Board amended the ‘fit and proper person’ criteria under the SEBI (Intermediaries) Regulations, 2008, covering disqualification, disclosures, and the opportunity to be heard. Additionally, it approved recommendations of the High-Level Committee on the conflict-of-interest framework for SEBI Board Members and officials, including enhanced disclosure requirements and restrictions on certain transactions.
Click here to read/ download the original press release
SEBI relaxes reporting norms for stock brokers
The Securities and Exchange Board of India (SEBI) vide its Circular No. HO/38/11/(1)2026-MIRSD-POD//7656/2026 dated March 23, 2026, has introduced ease of doing business measures by relaxing reporting requirements for stock brokers, including doing away with the requirement for brokers to report their own demat accounts to stock exchanges.
The circular amends provisions relating to enhanced supervision of stock brokers and depository participants under para 15 of the Master Circular for Stock Brokers dated June 17, 2025. Under the existing framework, stock brokers were required to tag all demat accounts and report details of their existing and new bank and demat accounts to stock exchanges, including reporting the opening and closure of such accounts.
Under the revised framework, stock brokers will no longer be required to report demat accounts to stock exchanges. Instead, depositories will provide details of all demat accounts opened or closed by a stock broker to the concerned stock exchanges, with the periodicity and mechanism to be jointly decided by stock exchanges and depositories.
SEBI has also clarified that where a stock broker is also a bank or a primary dealer, it will be required to report only those bank accounts that are used for stock broking activities. Details of such bank accounts must be reported within seven working days of opening or closure. Further, the requirement of tagging of demat accounts will not apply to stockbrokers that are also primary dealers, for demat accounts used exclusively for activities other than stock broking.
The regulator has mandated uniform nomenclature for naming or tagging of bank and demat accounts and clarified that once the nomenclature for a demat account is assigned, it cannot be modified. SEBI added that any non-compliance relating to nomenclature or reporting of accounts will attract penal action as per the rules of stock exchanges or depositories. The circular states that the revised reporting framework will come into force with effect from April 17, 2026.
