Legal Updates (Jan 05 – Jan 10, 2026)
Under Section 138 of the NI Act, a separate cause of action arises upon each dishonour of a cheque provided the statutory sequence of presentation, dishonour, notice, and failure to pay is complete. The fact that multiple cheques arise from one transaction will not merge them into a single cause of action
The Supreme Court in the case of Sumit Bansal vs MGI Developers and Promoters [Criminal Appeal No. 141 of 2026], has held that the dishonour of multiple cheques arising from the same underlying transaction can give rise to separate causes of action under Section 138 of the Negotiable Instruments Act, 1881, and that such prosecutions cannot be quashed at the threshold merely on the ground of multiplicity. The Court observed that it is well settled that under Section 138 of the NI Act, a separate cause of action arises upon each dishonour of a cheque provided the statutory sequence of presentation, dishonour, notice, and failure to pay is complete. The fact that multiple cheques arise from one transaction will not merge them into a single cause of action.”
The Court reiterated the settled legal principles governing the High Court’s inherent jurisdiction under Section 482 of the Code of Criminal Procedure, 1973. It emphasized that this power must be exercised sparingly, with circumspection, and only in the “rarest of rare cases.” A High Court, while examining a complaint for quashing, cannot embark upon an enquiry into the reliability or genuineness of the allegations. The Court’s role is limited to considering whether the allegations in the complaint, taken at face value, disclose the commission of a cognizable offence.
The Court observed that in the two complaints (one for personal cheques and one for the firm’s cheques) were distinct instruments, drawn on different accounts, presented on different dates, and followed by independent statutory notices. The fact that multiple cheques arise from a single transaction does not merge them into a single cause of action. The Court also observed that the question of whether the cheques were issued as alternative or supplementary instruments, or whether both were intended to be simultaneously enforceable, is a disputed question of fact that requires evidence and must be decided during the trial. Such issues cannot be resolved at the threshold in a proceeding under Section 482 of the CrPC.
The Court also observed that the complaints prima facie disclosed the ingredients of an offence under Section 138 of the NI Act, as the cheques were dishonoured, statutory notices were served, and payments were not made. The respondents’ defence that the entire amount had already been paid and no debt or liability existed is a matter for trial. The Court emphasized the statutory presumption under Section 139 of the NI Act, which presumes that a cheque is issued in discharge of a legally enforceable debt or liability. The burden of rebutting this presumption lies with the accused and must be discharged during the trial.
A bank cannot freeze a company’s accounts merely on the basis of a “management dispute” marking by the Registrar of Companies (ROC), particularly after such marking has been removed on the directions of the Ministry of Corporate Affairs (MCA)
The Calcutta High Court in the case of Ravindra Pratap and another vs Reserve Bank of India [MAT No. 989 of 2025], has held that a bank cannot freeze a company’s accounts merely on the basis of a “management dispute” marking by the Registrar of Companies (ROC), particularly after such marking has been removed on the directions of the Ministry of Corporate Affairs (MCA).
The Court observed that since the marking of the company with “management dispute” has since been unmarked by the ROC on the specific directive of the MCA, there cannot be any further fetter in operation of the account. At the worst, such marking of management dispute might have an impact of statutory compliances on the part of the company insofar as the ROC is concerned, which is entirely within the domain of Company Law and has nothing to do with the transactions of the company with its banker.
The court noted that once the ROC unmarked the company from the management dispute category, there could be no continuing fetter on the operation of its accounts. It further held the concept of a management dispute operates entirely within the sphere of company law and statutory compliances before the ROC, which has no bearing on the banking relationship between a company and its banker.
Therefore, setting aside an earlier order that had stalled implementation of directions to defreeze the accounts, the Court held that Axis Bank must act in accordance with banking norms and company resolutions. It directed that internal management disputes should be resolved before appropriate company law forums.
Merely describing a personal guarantor as a “Director” in a SARFAESI demand notice does not invalidate the invocation of the personal guarantee, as long as the notice clearly demands payment of the outstanding dues under the guarantee deed
The New Delhi NCLAT in the case of Ujwal Gupta v Union Bank of India [Company Appeal (AT) (Ins) No. 2001 of 2024], has held that merely describing a personal guarantor as a “Director” in a SARFAESI demand notice does not invalidate the invocation of the personal guarantee, as long as the notice clearly demands payment of the outstanding dues under the guarantee deed. The NCLAT said the real test is not how the person is described, but what the notice actually asks for.
The Tribunal observed that whether a guarantee may be invoked by giving notice under Section 13(2) of the SARFAESI Act depends on the terms of the guarantee and the content of the notice. If the notice clearly demands payment from the personal guarantor in terms of the guarantee, it can be treated as an invocation of the guarantee. The facts and the wording of the notice are crucial in this determination.
The NCLAT noted that the notice clearly referred to the credit facilities extended to the company. It also recorded that repeated demands had gone unanswered. The notice specifically called upon the addressees to discharge the outstanding liability. According to the NCLAT, the message was unambiguous. The addressee was being asked to clear the dues arising from the loan. The NCLAT also examined the guarantee deed and found that the deed did not prescribe any special format or procedure for invocation.
The NCLAT reiterated that a Section 13(2) notice can amount to invocation of a personal guarantee if the demand is in line with the guarantee agreement, and observed that adding the word “Director” after the appellant’s name did not change his status as a personal guarantor. The personal guarantee had been validly invoked through the SARFAESI notice. Accordingly, the insolvency proceedings against the personal guarantor were allowed to continue.
Valuation reports are confidential and cannot be shared with persons who are themselves potential or competing resolution applicants
The Mumbai NCLT in the case of Abhay Narhar Kadam vs Vakati Balasubramanyam Reddy [IA (IBC) No. 3078 OF 2025 IN CP (IB) No. 144/MB/2021], has held that valuation reports are confidential and cannot be shared with persons who are themselves potential or competing resolution applicants. The NCLT thus dismissed a challenge by a suspended director seeking disclosure of valuation reports and other Corporate Insolvency Resolution Process (CIRP) documents.
The NCLT clarified that the valuation reports are confidential documents, and disclosure to persons who are themselves potential resolution applicants would undermine the sanctity of the process and is contrary to settled legal principles. Essentially, the valuation reports are confidential and meant exclusively for the commercial decision making of the CoC. The Tribunal thus observed that disclosure of valuation reports to persons who are themselves prospective or competing resolution applicants would compromise the sanctity and integrity of the resolution process.
The Tribunal noted that the applicant and persons connected with the erstwhile management had either submitted or sought to submit resolution plans during the insolvency. In such circumstances, furnishing valuation reports or sensitive commercial information would give an unfair advantage and defeat the objective of value maximisation under the Code. Finding no violation of provisions of the Code, the NCLT dismissed the application.
Insolvency proceedings under the Insolvency and Bankruptcy Code, 2016, can be initiated against a personal guarantor even if he is a foreign citizen and does not own any assets in India
The Chennai NCLT in the case of Central Bank of India v. A Dominic Savio [CP(IB)/217(CHE)/2021], has held that insolvency proceedings under the Insolvency and Bankruptcy Code, 2016, can be initiated against a personal guarantor even if he is a foreign citizen and does not own any assets in India. The Tribunal said nationality and absence of property in India do not prevent the Code from applying.
The NCLT observed that the mere fact that the Respondent does not possess any property within the territory of India does not in any manner exclude the applicability of the provisions of the Code to him. Moreso, neither of these provisions restricts the applicability of the Code to the personal guarantor on the basis of nationality or citizenship. Hence, the provisions of IBC are applicable to the Respondent.
Briefly, the Central Bank of India, along with other consortium banks, had extended working capital facilities to Oceanic Edibles. A Dominic Savio stood as a personal guarantor and executed guarantee deeds in 2011 and 2014. The company later defaulted, and its account was classified as a non-performing asset in September 2013. Recovery proceedings before the Debt Recovery Tribunal, Chennai, resulted in a recovery certificate issued in June 2019 for over Rs 103 crore with interest, holding the company and its guarantors jointly and severally liable.
Separately, insolvency proceedings against the company ended in a liquidation order in December 2018. After the provisions relating to insolvency of personal guarantors came into force in December 2019, the bank issued a demand notice to Savio and then approached the NCLT when the dues remained unpaid. Savio opposed the petition, saying he is a US citizen residing outside India. He argued that the IBC applies only within Indian territory and that the tribunal had no jurisdiction since he has no assets or business in India.
The Tribunal rejected these submissions and said the Code does not draw any distinction based on citizenship and applies equally to all personal guarantors. The Tribunal therefore admitted the insolvency plea and initiated insolvency proceedings against the personal guarantor.
Once parties settle and the case is closed, an operational creditor cannot reopen insolvency proceedings without clear bank records showing a fresh default
The Ahmedabad NCLT in the case of Dhyaneshwar Shankar Unde Proprietor of Swadarshan Dairy Products v. Shukla Dairy Private Limited [CP (IB) No.239/9/AHM/2020], has held that once parties settle and the case is closed, an operational creditor cannot reopen insolvency proceedings without clear bank records showing a fresh default. The Tribunal said that bare allegations of non-payment are not enough, especially when the corporate debtor places specific proof of payment on record.
The Tribunal observed that once the parties admittedly entered into a settlement and the petition was disposed of on that basis, it was incumbent upon the Applicant to place on record bank statements or other cogent material evidencing default or non-payment by the Respondent after the settlement. In the absence of any such contemporaneous evidence, the Applicant’s allegation of continued default remains unsubstantiated.
The Tribunal observed that the creditor had not produced a single bank statement for the post-settlement period to back up the claim of non-payment or to show a separate outstanding debt. On the other hand, the corporate debtor’s proof of payment remained largely unchallenged. The Tribunal also rejected the creditor’s reliance on an alleged admission of liability in cheque bounce proceedings, calling it a “bald assertion” unsupported by any certified court order.
Holding that there was no proof of a subsisting debt or default, the Tribunal dismissed the insolvency petition. It said that without solid material to counter the evidence of payment, the insolvency process could not be invoked.
Paying the tender costs of rival bidders and submitting bids from the same IP address is enough to show bid rigging, even without a written cartel agreement
The New Delhi NCLAT in the case of Klassy Enterprises v. Competition Commission of India [Competition Appeal (AT) No. 33 of 2022], has held that that paying the tender costs of rival bidders and submitting bids from the same IP address was enough to show bid rigging, even without a written cartel agreement. The NCLAT thus upheld a Rs 10 lakh penalty imposed by the Competition Commission of India on Klassy Enterprises, and said that “direct evidence of formation of any cartelization or bid rigging is seldom available” and that such arrangements are usually uncovered through surrounding facts.
Finding that the bidders “were not fairly competitive with each other and rather they have formed a cartelization”, the NCLAT noted that Klassy Enterprises had transferred more than Rs 38 lakh through third-party accounts to pay the tender fees and earnest money deposits for all three bidders. When the two unsuccessful bidders got their earnest money back from the Pune Zila Parishad, the money eventually returned to Klassy Enterprises. The NCLAT thus observed this as clear evidence that there was a prior agreement of formation of a cartel.
The NCLAT also observed that independent competitors using the same IP address to upload their bids on the same day, is unlikely, since the call records showed that the bidders were in regular touch, with 51 calls exchanged in the two days just before the bids were submitted. The Tribunal said that the agreement or understanding is to be inferred from the conduct of the parties. Once such an agreement is shown under Section 3(3) of the law, a presumption of harm to competition follows.
A settlement between an operational creditor and a suspended director cannot be used to withdraw a company from insolvency once the Committee of Creditors is in place
The NCLT Ahmedabad, in the case of Prem Agarwal v. Anil Kumar Satyanarayan Agarwal [I.A. No.1389/NCLT(AHM)/2025], has held that a settlement between an operational creditor and a suspended director cannot be used to withdraw a company from insolvency once the Committee of Creditors is in place. The NCLT held that a private arrangement cannot override the claims of financial creditors exceeding Rs 61 crore.
The NCLT observed that after the CoC is formed, withdrawal is governed by Regulation 30A(1)(b) of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016. This requires the approval of at least 90 percent of the committee. It further observed that it is “further significant to note that the total admitted claims of four Financial Creditors far exceed the settlement amount, and the rights of such creditors cannot be defeated by a bilateral arrangement between the Operational Creditor and the suspended director.”
The Tribunal also observed that the filing of the withdrawal form does not create an automatic right to exit insolvency. It described the settlement as “illusory”, noting that it was conditional on withdrawal and that no payment had actually been made. With the CoC already in place and a unanimous rejection on record, the Tribunal directed the insolvency process to continue.
When a corporate debtor has received full consideration and acted upon a slump sale transaction, he cannot later reclaim the property on the ground that the agreement was unregistered, as such conduct is barred by the doctrine of estoppel
The Hyderabad NCLT in the case of Ramachander Rao Bikumalla and Splendid Metal Products Ltd [IA (IBC) No. 124 of 2022 in CP (IB) No. 504/10/HDB/2018], has held that when a corporate debtor has received full consideration and acted upon a slump sale transaction, he cannot later reclaim the property on the ground that the agreement was unregistered, as such conduct is barred by the doctrine of estoppel.
The Tribunal observed that having accepted the full benefits flowing from the contract and having induced SMPL to alter its position irreversibly, the CD (presently through its Liquidator) cannot now be permitted to approbate and reprobate by contending that the property continues to belong to him merely on account of the slump sale agreement being unregistered. Such a contention is hit by the doctrine of estoppel and runs contrary to the settled principle that a party cannot retain the fruits of a transaction while repudiating its corresponding obligations.
The NCLT recorded that the debtor had accepted the entire sale consideration, enabled discharge of its secured liability, and induced SMPL to alter its position irreversibly. The property was reflected only in SMPL’s financial statements and not in the books of the debtor. The Tribunal also noted that the debtor, acting through its liquidator could not be permitted to approbate and reprobate by asserting ownership merely due to non-registration of the agreement.
The Tribunal clarified that although an unregistered agreement may not attract protection under Section 53A of the Transfer of Property Act after the 2001 amendment, it is admissible for collateral purposes, including proof of possession and payment of consideration. Accordingly, it held that the property did not form part of the liquidation estate.
