Legal Updates (June 01 – June 06, 2026)
CASE UPDATES
The Competition Act, 2002, did not confer any power on the CCI to keep an approval under Section 31(1) in abeyance or compel a fresh Form II filing after approval, whether under Section 45(2), Regulation 5(5), or any condition in the approval order
The Supreme Court in the case of Amazon.com NV Investment Holdings LLC vs Competition Commission of India [Civil Appeal No.4974 of 2022] dated May 27, 2026, on a proper construction of Section 6(2) of the Competition Act, 2002 read with Regulations 9(4) and 9(5) of the Combination Regulations, has that the requirement is to place before the CCI, in a single notice, the inter-connected steps and agreements that explain the substance of the composite arrangement, and that requirement is satisfied where the relevant instruments and linkages are on the CCI’s record and are capable of assessment in the same review process. A later disagreement as to legal or economic characterisation of disclosed material does not convert such disclosure into non-notification so as to attract Section 43A.
Further, the Apex Court held that penal action under Sections 44 and 45 can be sustained only upon strict proof of the specific statutory ingredients, including material falsity or material omission and the requisite mental element; internal deliberative material cannot, by itself, substitute for that inquiry where the executed agreements and review record were already before the CCI. The proviso to Section 20(1) is a jurisdictional limitation which bars the CCI, after one year from the date the combination has taken effect, from taking steps which in substance reopen the combination for fresh merits review.
The Competition Act does not contemplate an extra-statutory power to keep an approval in abeyance or compel re-notification of the same approved transaction, and such power cannot be sourced in Section 45(2), Regulation 5(5), or an approval condition. In proceedings of this nature, fair notice must extend not only to the allegations but also to the nature of the adverse action proposed, added the Court.
The Court observed that merger control under the Competition Act is an ex-ante, disclosure-based regime, but the CCI, being a creature of statute, must act strictly within the limits of the Act and the Combination Regulations. On the contemporaneous record, the Court found that the Form I notice, annexed executed agreements, and responses furnished during review had placed before the CCI the FRL-linked aspects, the FRL shareholders’ agreement, and the business commercial arrangements as part of the same review process, and that the approval order itself showed that the CCI had in fact examined retail-market overlaps involving FRL.
The Court therefore held that this was not a case of absence of a composite notice in substance, but at most a later dispute over characterisation of disclosed arrangements. It further held that Section 43A, being a penal provision, could not be invoked where notice had in fact been filed, processed, and approved, and that Sections 44 and 45 required strict satisfaction of statutory ingredients including materiality and the prescribed mental element, which had not been established merely by relying on internal communications predating the final transaction documents.
The Court also held that the proviso to Section 20(1) imposed a jurisdictional bar against reopening combination review after one year from the date the combination took effect, and that the proceedings culminating in approval abeyance and a direction to file Form II were, in substance, an impermissible reopening of the combination review. It additionally held that the Act did not confer any power on the CCI to keep an approval under Section 31(1) in abeyance or compel a fresh Form II filing after approval, whether under Section 45(2), Regulation 5(5), or any condition in the approval order.
Accordingly, the Supreme Court allowed the appeal, set aside the NCLAT’s and the CCI’s order in revoking the approval for the 2019 Amazon -Future Coupons investment, in entirety, and directed that if any amount had been deposited or recovered from Amazon pursuant to the impugned orders, the same be refunded within eight weeks together with simple interest at 6% per annum from the date of deposit/recovery until actual refund. The Court further directed that if the refund was not made within that eight-week period, the unpaid amount would thereafter carry simple interest at 9% per annum from the expiry of eight weeks until payment.
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If a duplicate SIM is issued without proper verification, such issuance constitutes negligence and deficiency in service, and if it enables OTP diversion and fraudulent withdrawals, it is the proximate cause of the resulting financial loss. The telecom service provider is vicariously liable for such wrongful acts of its officials
The Karnataka High Court in the case of Basaveshwara Pattana Sahakara Bank Niyamitha vs Canara Bank [WP No. 16104 of 2025] dated June 01, 2026, has held that a civil compensation claims against a telecom service provider for negligent issuance of a duplicate SIM card, resulting in diversion of OTPs and fraudulent banking transactions, is maintainable before a Permanent Lok Adalat as a dispute concerning deficiency in a public utility service, notwithstanding the existence of parallel criminal proceedings arising from the same facts.
The Court held that where a duplicate SIM is issued without proper verification, such issuance constitutes negligence and deficiency in service, and if it enables OTP diversion and fraudulent withdrawals, it is the proximate cause of the resulting financial loss. The telecom service provider is vicariously liable for such wrongful acts of its officials when committed in the course of their authorised functions. Direct recoveries of the defrauded amount reduce the net loss, but insurance proceeds received from an independent insurer do not reduce the wrongdoer’s liability.
The Court observed that the dispute was a civil compensation claim for deficiency in telephone service and therefore fell within the jurisdiction of the Permanent Lok Adalat under Sections 22A and 22C of the Legal Services Authorities Act, 1987. It rejected BSNL’s contention that the matter was excluded merely because the underlying facts also involved allegations of fraud and criminal conduct. The Court observed that a civil compensation claim does not become a “matter relating to an offence” only because the same facts may also give rise to criminal proceedings, and that civil and criminal remedies may proceed independently.
The Court further held that the unauthorised issuance of a duplicate SIM card without proper verification amounted to negligence and deficiency in service attributable to BSNL. It found that the duplicate SIM enabled diversion of OTPs and was the proximate cause of the fraudulent transactions. The Court emphasised that the OTP was the final and indispensable authentication step, and without the duplicate SIM the fraud could not have been completed. It also drew an adverse inference against BSNL for not producing its SIM issuance and verification records and held that the doctrine of res ipsa loquitur applied in the circumstances.
On liability, the Court held BSNL vicariously liable for the acts of its official involved in issuing the duplicate SIM, observing that SIM issuance was squarely within the functions entrusted to the official and that wrongful performance of an authorised function does not take the act outside the course of employment. At the same time, the Court affirmed that Canara Bank bore no liability, since its system employed a two-factor authentication model, the OTP channel was externally subverted through the BSNL-side SIM swap, and no independent negligence or deficiency on the part of Canara Bank was established.
The Court also held that while the reverse credit of Rs. 30 lakhs and the police recovery of Rs. 7.12 lakhs were direct recoveries that reduced the gross loss, the insurance proceeds received by the Co-operative Bank did not reduce BSNL’s liability. Applying the collateral source rule, it held that insurance proceeds arose from an independent contractual arrangement between the Bank and its insurer and could not be used by BSNL to avoid or reduce its own liability. It also recognised that the Co-operative Bank had suffered consequential harm including liquidity stress, operational disruption and reputational damage.
Repayment of dues or conclusion of a one-time settlement does not erase fraudulent conduct by the borrower that jeopardised the bank’s security. A bank’s decision to settle the debt does not prevent it from continuing proceedings under the RBI Master Circular dated 1 July 2016, if the settlement is silent on such proceedings
The Calcutta High Court in the case of Bhanu Properties vs Reserve Bank of India [APOT/299/2025] dated May 18, 2026, has held that, although principles of natural justice apply to proceedings for classifying a borrower’s account as fraudulent under the RBI Master Circular, such proceedings are not vitiated merely because one audit report was allegedly not supplied, unless the borrower demonstrates actual prejudice. Where the borrower had access to the underlying stock statements, had already received the majority of the forensic audit reports, and chose not to respond to the show-cause notice, the plea of breach of natural justice fails.
The Court therefore held that repayment of dues or conclusion of a one-time settlement does not eclipse or erase fraudulent conduct by the borrower that jeopardised the bank’s security. A bank’s decision to settle the debt does not prevent it from continuing proceedings under the RBI Master Circular dated 1 July 2016, particularly where the settlement is silent on such proceedings and the object of the circular is deterrence as well as protection of the banking system.
The Court observed at the outset that it was difficult to understand how a writ court could interfere with proceedings initiated by the bank under the SARFAESI Act, particularly when settled law requires a challenge to SARFAESI measures to be made in accordance with Section 17 of the Act. However, the Court proceeded on the basis of the factual record before it and focused on the fraud-classification challenge under the RBI Master Circular.
On natural justice, the Court accepted that the principles of natural justice apply to a quasi-judicial proceeding even where not expressly provided. However, it noted that the appellants were found to have submitted misleading stock audit reports from 2018 till 30 April 2022, and that the suppression and misrepresentation in those stock reports could have seriously exposed the bank to the risk of being left without security. It held that this itself constituted the fraudulent conduct alleged, even assuming that the last stock audit report dated 30 March 2023 had not been supplied.
The Court further observed that the stock statements analysed by the forensic auditors were, at all material times, in the appellants’ possession. It considered significant that the appellants neither challenged the initial show-cause on merits nor formally sought the forensic stock audit reports from the respondents, and indeed chose not to reply to the show-cause notice at all. In that backdrop, the Court held that the appellants could not demonstrate any real prejudice from the alleged non-supply of one forensic stock audit report, especially when they had already received most of the reports for the period from March 2018 to 30 April 2022.
On the effect of repayment and the OTS, the Court acknowledged that declaration as a fraudster under the RBI Master Circular has serious civil and commercial consequences, including debarment from availing loans from banks and financial institutions for five years. Even so, it held that repayment of the bank’s dues does not extinguish the borrower’s fraudulent conduct where the borrower had exposed the bank to financial risk by jeopardising its security. The Court emphasised that the OTS was silent regarding the fraud-classification proceedings and that settlement of dues cannot absolve the borrower from the consequences under the RBI Master Circular, whose purpose includes deterrence against borrowers misleading banks into lending or continuing to lend.
The pendency of a Section 34 challenge to an arbitral award does not defeat a Section 7 IBC application where the insolvency application is independently founded on an earlier payment default, and that the arbitral award, in any event, gives a fresh period of limitation for initiating CIRP if filed within three years thereof
The New Delhi Principal Bench of the National Company Law Appellate Tribunal (NCLAT) in the case of Bindu Kapoor vs Sapan Mohan Garg [Company Appeal (AT) (Insolvency) No. 2040 of 2025] dated May 29, 2026, has held that where a financial creditor establishes the existence of financial debt and a continuing default, a Section 7 application is maintainable even if the creditor has also obtained an arbitral award and pursued execution proceedings, because those remedies are not mutually exclusive. In the present case, the default was held to have arisen independently upon non-payment pursuant to the valid loan recall notices, and was not dependent solely on the arbitral award.
The Tribunal further held that a contractually defined “material adverse effect” clause can validly support recall of the loan where the lender forms the opinion that circumstances affecting the guarantors impair the obligors’ ability to perform their obligations, particularly where guarantors are expressly included within the definition of “Obligor(s).” Consequently, non-payment within the recall period constituted default for the purpose of Section 7.
It was also held that the pendency of a Section 34 challenge to an arbitral award does not defeat a Section 7 application where the insolvency application is independently founded on an earlier payment default, and that the arbitral award, in any event, gives a fresh period of limitation for initiating CIRP if filed within three years thereof.
The Tribunal observed that the loan recall notices were not infirm and were issued in accordance with the contractual framework. The Tribunal noted that the loan agreements defined “Material Adverse Effect” broadly and included within “Obligor(s)” not only the borrower but also guarantors and other security providers. Since Rana Kapoor was an admitted guarantor, and criminal investigation and arrest had occurred, the lender was entitled, under Clause 12.1.8 and the consequences of default provision in Clause 12.2, to form the opinion that a material adverse effect had arisen and to recall the loans.
The Tribunal further observed that the Section 7 application against Bliss Abode was not founded only on the arbitral award. It specifically relied on the default that first occurred upon failure to pay the recalled dues by March 14, 2020, and pleaded that such default continued thereafter. Therefore, the appellant’s reliance on Regulation 2A and the contention that a non-final arbitral award could not be the basis of the insolvency application did not assist the appellant, because the award was not the sole basis of the claimed default.
On the argument that Section 7 was being used as an execution mechanism, the Tribunal held that the facts did not disclose abuse of process. It observed that the inquiry under Section 7 is confined to the existence of financial debt and default, and once those are established, admission follows. It also reiterated that there is no general discretionary power to refuse admission once debt and default are proved.
The Tribunal also rejected the limitation objection, and held that in addition to the continuing default after the recall notice, the arbitral award gave a fresh cause of action, and since the Section 7 application had been filed within three years thereafter, it was within limitation. The Tribunal finally concluded that for more than six years no payment had been made by either corporate debtor despite the recalled outstanding debt, and that debt and default stood proved.
If the plaintiff is the prior adopter and user of a registered trademark which has acquired substantial reputation, and the defendant adopts a mark that retains the dominant and essential features of that registered mark with only a minor insertion, such alteration does not dispel deceptive similarity
The Delhi High Court in the case of Capital Foods Private Limited vs Kishan Rameshbhai Kaswala Trading [CS(COMM) 562/2026] dated May 22, 2026, has held that where the plaintiff is the prior adopter and user of a registered trademark which has acquired substantial reputation, and the defendant adopts a mark that retains the dominant and essential features of that registered mark with only a minor insertion such as the word “DIPPING”, such alteration does not dispel deceptive similarity. If the overall commercial impression remains such as to cause confusion to an unwary consumer of average intelligence and imperfect recollection, the use is not honest or bona fide, and a prima facie case for injunction in an infringement and passing off action is made out.
The Court observed that since the suit was founded on infringement and passing off of the plaintiff’s registered trademark, comparison of the rival marks was necessary. On such comparison, the Court found that the emphasis on the words “Schezwan” and “Chutney” on a white background in the defendant’s products appeared similar to that of the plaintiff, and that merely using the word “dipping” between those words did not create such a distinction as would enable an unwary consumer of average intelligence and imperfect recollection to differentiate between the two products.
The Court observed that the defendant had been using the mark “Schezwan Chutney” openly on e-commerce platforms, and that such use was bound to create confusion in the minds of the public as to whether the defendant’s products were those of the plaintiff or were associated with it. It noted that the presence of brand names such as “K Masala”, “Green Piece” or “Fruvanta” at the top would not sufficiently alert the public that the products belonged to the defendant and not the plaintiff.
The Court also held that the defendant’s products shown on e-commerce websites were deceptively similar to the plaintiff’s products bearing the registered trademark “SCHEZWAN CHUTNEY”, and that adoption of the mark “SCHEZWAN CHUTNEY”, with or without the word “DIPPING” in between, did not appear honest or bona fide. The Court thus recorded that the plaintiff’s registered mark had garnered substantial reputation and goodwill over the years, as reflected from the sales figures and promotional expenditure, and that the defendant appeared to be riding on the coattails of the plaintiff’s immense reputation and goodwill, which was bound to dilute the plaintiff’s trademark.
Accordingly, the Court granted an ex parte ad interim injunction restraining the defendant, its agents, suppliers, distributors, directors, employees and all others acting on its behalf from directly or indirectly dealing in the impugned products “K3 MASALA SCHEZWAN DIPPING CHUTNEY”, “GREEN PIECE SCHEZWAN DIPPING CHUTNEY”, and “FRUVATA SCHEZWAN DIPPING CHUTNEY”, and/or any products or services bearing the mark “SCHEZWAN CHUTNEY” and/or “SCHEZWAN DIPPING CHUTNEY”, and/or from using any other mark deceptively similar to the plaintiff’s registered trademark “SCHEZWAN CHUTNEY”.
The Court further directed the defendant to place on record, in a sealed cover and within six weeks from the date of service, its books of account, invoices, sales memos and/or any other documents evidencing sale of the infringing products referred to in the injunction direction. Further, the matter was directed to be listed before the Joint Registrar (Judicial) on Aug 11, 2026 for completion of service and pleadings, and before the Court on Nov 17, 2026.
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If directors are vicariously liable under Section 141 of the NI Act and are themselves undergoing insolvency or bankruptcy under Part III of the IBC, they are entitled to the benefit of moratorium in respect of the compensatory liability, but not in respect of their personal criminal liability under Section 138 of the NI Act
The Supreme Court in the case of Dineshchand Surana vs UCO Bank [Special Leave Petition (Crl.) No. 12135 of 2024] dated May 27, 2026, has held that proceedings under Section 138 of the Negotiable Instruments Act are not in the nature of legal action for recovery of money simpliciter; they are quasi-criminal proceedings with a tilt towards the criminal side, and their predominant object is to maintain the credibility and integrity of cheques in commercial transactions by attaching penal consequences to cheque dishonour. Accordingly, the moratorium provisions under Part III of the IBC do not apply to the criminal aspect of Section 138 proceedings, namely the prosecution and punishment for the offence, but do apply to the compensatory aspect, namely the recovery of compensation ordered in such proceedings.
The Court further held that where directors are vicariously liable under Section 141 of the NI Act and are themselves undergoing insolvency or bankruptcy under Part III of the IBC, they are entitled to the benefit of moratorium in respect of the compensatory liability, but not in respect of their personal criminal liability under Section 138 of the NI Act.
The Court undertook an extensive examination of the nature of proceedings under Section 138 of the NI Act and held that though such proceedings arise from a civil transaction and have a compensatory element, the provision is predominantly criminal in nature because the dishonour of cheque is deemed to be an offence and is punishable with imprisonment or fine or both.
The Court observed that the offence is the act of cheque dishonour, while the non-payment of the debt is the injury caused by that offence. It further held that Section 138 proceedings cannot be treated merely as recovery proceedings, although the provision also contains a compensatory aspect through orders of compensation under Section 395 of the BNSS.
Therefore, the Court bifurcated Section 138 proceedings into two tiers: the criminal aspect, which culminates in punishment, and the compensatory aspect, which is civil in nature and concerns recovery of compensation. On the moratorium provisions under Part III of the IBC, the Court observed that they cannot apply to the criminal aspect of Section 138 proceedings, particularly because liability to pay fine is an “excluded debt” under Section 79(15) of the IBC; however, the moratorium would apply to the compensatory aspect of Section 138 proceedings, including recovery of compensation ordered by the criminal court.
The Court also observed that directors made vicariously liable under Section 141 of the NI Act may obtain the benefit of moratorium in respect of the compensatory liability, even where such liability originally arose from the company’s debt, because Sections 96 and 101 of the IBC use the expression “any debt.”
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The object of attachment, seizure or freezing under the PMLA is preservative in nature, and where the property is market-linked, preservation cannot be understood merely as retention of legal title or custody, but must extend to preservation of economic value as well
The High Court of Chhattisgarh in the case of Dream Achiever Consultancy Services vs Union of India [WPC No. 2073 of 2025] dated April 27, 2026, has held that where frozen or attached property under the PMLA consists of market-linked securities such as listed shares, preservation of the property necessarily includes preservation of its economic value, and not merely retention of the asset in its original frozen form. In the absence of any express statutory mechanism under the PMLA or the Prevention of Money-laundering (Taking Possession of Attached or Frozen Properties Confirmed by the Adjudicating Authority) Rules, 2013, for protecting the value of such volatile financial assets, the High Court may, in exercise of jurisdiction under Article 226, issue limited protective directions to permit consideration of liquidation and reinvestment of the assets into regulated, low-risk instruments under the exclusive supervision and control of the ED, provided the corpus remains fully secured, identifiable, traceable, and beyond the petitioners’ control, and without affecting the merits of pending PMLA proceedings.
The Court observed that the limited issue before it was not the legality of the freezing order or the confirmation order, since those were already under challenge before the Appellate Tribunal, but whether a mechanism could be devised to preserve the value of frozen market-linked securities pending culmination of proceedings under the PMLA. It noted that the assets were not static assets such as land or fixed deposits, but listed equity shares whose value remained subject to constant market fluctuation. The Court held that the object of attachment, seizure or freezing under the PMLA is preservative in nature, and where the property is market-linked, preservation cannot be understood merely as retention of legal title or custody, but must extend to preservation of economic value as well.
The Court further found substance in the submission that neither the PMLA nor the 2013 Rules provided a specific mechanism for management or preservation of the value of market-linked securities after freezing. While Rule 4(4) contemplates transfer of shares, debentures, mutual fund units or instruments in favour of the Director of Enforcement, the Rules are silent on protection against adverse market movements. The Court considered that this statutory silence could not be treated as a prohibition against adopting reasonable measures for preservation of value, particularly when the statutory objective itself is preservation of property pending adjudication.
The Court also observed that the apprehension of the ED regarding dissipation of assets could be addressed by safeguards, because the petitioners were not seeking control over the sale proceeds and had stated that the proceeds could remain under the exclusive control of the ED. It reasoned that if the corpus remained identifiable, traceable, fully secured and beyond the control of the petitioners, conversion from market-traded equities into regulated and low-risk financial instruments would not prejudice the ED or frustrate proceedings under the PMLA.
Accordingly, the Court directed the petitioners to submit to the ED a detailed proposal identifying the securities sought to be liquidated, the mode of liquidation, and the SEBI-regulated instruments in which the proceeds were proposed to be invested. Upon receipt, the ED was permitted to obtain the opinion of an independent SEBI-registered investment adviser, portfolio manager or other financial expert. If satisfied that liquidation of any part or whole of the frozen securities was necessary or desirable for preservation of value, the ED could permit such liquidation strictly under its supervision and through a SEBI-registered intermediary. The sale proceeds were not to be released to the petitioners and were to remain subject to the freezing order and PMLA proceedings.
The Court further directed that the sale proceeds be transferred into a separate escrow or custodial account or another designated account identified by the ED, with no operational control of the petitioners. The realized amount could then be invested only in low-risk and regulated financial instruments, including government-backed securities, treasury-linked instruments, debt-oriented mutual funds, liquid funds, money-market instruments, or other SEBI-regulated products approved by the ED upon expert advice, keeping in view preservation of capital and liquidity. Any income, dividend, interest, appreciation, redemption amount or other accretion was also to remain subject to the PMLA and abide by the final outcome of proceedings.
The petitioners were specifically restrained from claiming any right of possession, withdrawal, transfer, encumbrance, pledge, lien, beneficial enjoyment or management in respect of either the original securities or the sale proceeds and accretions during the pendency of proceedings. If the ED formed the view that liquidation would prejudice pending proceedings or would not serve preservation of value, it was required to pass a reasoned order within eight weeks from submission of the proposal. The Court clarified that it had not adjudicated upon whether the assets constituted proceeds of crime, or upon the validity of the freezing order, retention order or prosecution complaint, and left all such issues open for decision by the Appellate Tribunal, the Special Court and other competent forums.
An agreement of sale and an amendment agreement, even if executed prior to commencement of CIRP, do not by themselves confer any right, title or interest in immovable property of the corporate debtor in favour of the applicant, since title passes only through a duly executed and registered conveyance deed
The National Company Law Tribunal (NCLT), Bengaluru Bench in the case of Fortuna Integral Projects Private Limited vs Shivadutt Bannanje [I.A. No. 596 of 2024] dated May 26, 2026, has held that an agreement of sale and an amendment agreement, even if executed prior to commencement of CIRP, do not by themselves confer any right, title or interest in immovable property of the corporate debtor in favour of the applicant, since title passes only through a duly executed and registered conveyance deed.
Accordingly, where the applicant seeks enforcement of such pre-CIRP agreements in respect of a corporate debtor’s asset, and the transaction is already under challenge in avoidance proceedings as preferential, undervalued or fraudulent, the applicant cannot claim conveyance as of right merely on the basis of those agreements, particularly when payments were made during moratorium and no cogent proof of possession is produced.
The Tribunal identified as undisputed that the agreement of sale and amendment agreement had been executed before commencement of CIRP, that TGMC Bank was the secured creditor in respect of the schedule property, that CIRP commenced, that the applicant made payment to TGMC Bank during moratorium, that application seeking avoidance of the impugned sale transactions was pending, and that the applicant was seeking enforcement of the sale transaction by execution of the sale deed in its favour.
The Tribunal observed that the applicant had not filed any document showing physical possession of the schedule property except the recital in the amendment agreement, and further held that since payment was made by the applicant during CIRP, possession could not have been delivered earlier. It also observed that the agreement of sale and amendment agreement by themselves did not confer title or convey interest in favour of the applicant in the schedule property. The Tribunal also reiterated that an agreement to sell is only a promise of future transfer and does not itself create any interest in or charge upon immovable property; transfer of right, title and interest occurs only upon execution and registration of the sale deed.
The Tribunal further took note of the memo filed by the successful resolution applicant enclosing the discharge deed executed by TGMC Bank, under which the bank acknowledged satisfaction of its claims and discharged the equitable mortgage over the schedule property after payments under the approved resolution plan. On that basis, the Tribunal recorded that this reflected a possible dubious role of TGMC Bank in receiving money from the applicant while keeping the CoC in the dark, and again receiving amounts under the approved resolution plan, thereby warranting explanation from the bank regarding the entire scenario and its conduct as a public institution. The Tribunal also observed that the application, which sought enforcement in 2024 of agreements of 2019–20 without cogent explanation for the delay, was barred by limitation.
The Tribunal thus dismissed the application seeking enforcement of the 2019–20 agreements and execution of the sale deed in favour of the applicant. In addition, while noting the discharge deed issued by TGMC Bank after implementation of the resolution plan, the Tribunal stated that TGMC Bank needed to be summoned to explain the entire scenario and its conduct in receiving money both from the applicant and again under the approved resolution plan.
For purposes of Section 141 of the Negotiable Instruments Act, vicarious liability cannot be fastened merely on account of office or designation, and the complaint must disclose sufficient foundational facts showing the role of each accused in the conduct of the business of the company
The Supreme Court in the case of Mansi Finance (Chennai) Ltd vs M. Lalitha [Criminal Appeal No. 2849 of 2026] dated May 26, 2026, has asserted that, for purposes of Section 141 of the Negotiable Instruments Act, vicarious liability cannot be fastened merely on account of office or designation; the complaint must disclose sufficient foundational facts showing the role of each accused in the conduct of the business of the company or society at the relevant time.
However, it is clarified that while testing the complaint at the quashing stage, the Court must read it as a whole along with the documents forming part of it, and if such material prima facie reveals participation in the underlying transaction giving rise to the legally enforceable debt, continuation of prosecution is justified. Accordingly, quashing is warranted where the complaint contains only general assertions unsupported by transaction-specific material, but not where documentary material prima facie links the accused to the antecedent financial arrangements forming the substratum of the dishonoured cheque.
The Court reiterated that Section 141 of the NI Act creates vicarious criminal liability and therefore requires the complaint to disclose that the person sought to be prosecuted was in-charge of, and responsible to, the company or society for the conduct of its business at the relevant time.
Mere designation as an office bearer is insufficient, and a bald reproduction of statutory language without factual foundation cannot sustain prosecution. At the same time, the complaint must be read as a whole, and the Court is not required to insist on mechanical reproduction of the exact phraseology of Section 141 if the substance of the allegations and accompanying material disclose the factual basis for liability.
Applying this principle, the Court held that respondent nos. 1, 2 and 4 stood on a different footing because the complaint and accompanying documents prima facie connected them with the underlying transaction: the MoU bore the signature of respondent no. 1, the dishonoured cheque bore the signature of respondent no. 2, and the promissory notes and allied documents showed participation of respondent nos. 1, 2 and 4.
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If a franchisee has expressly acknowledged that it has no proprietary right in the franchisor’s trademark, and the franchise arrangement has been terminated, then any continued use of the mark thereafter is prima facie unauthorised
The Delhi High Court in the case of Moti Mahal Delux Management Services vs Zikra Hotels and Restaurants LLP [CS(COMM) 502/2026] dated May 14, 2026, has held that where a franchisee has expressly acknowledged that it has no proprietary right in the franchisor’s trademark, and the franchise arrangement has been terminated, any continued use of the mark thereafter is prima facie unauthorised and not bona fide. In such circumstances, as the plaintiff has shown subsisting trademark registrations, long-standing goodwill, deceptive similarity, and likelihood of consumer confusion, the High Court granted an ex parte ad interim injunction restraining Zikra Hotels and Restaurants LLP (defendant no.1) and all persons acting for or through it from running, advertising, selling, marketing or promoting any restaurant or catering business under the impugned marks of the Moti Mahal Delux.
The Court noted at the outset that, since the suit contemplated urgent interim relief, exemption from the requirement of pre-institution mediation under Section 12A of the Commercial Courts Act, 2015 was justified. On the merits of the interim injunction application, the Court observed that under the Franchise Agreement the defendant had only a limited contractual authority to use the mark “MOTI MAHAL DELUX TANDOORI TRAIL” for the agreed period, and the defendant had clearly acknowledged that it had no right in that name.
The Court further observed that, once the Franchise Agreement stood terminated, defendant no.1 could not have continued using the mark for any reason whatsoever. It found that the plaintiffs’ investigation prima facie suggested continued unlawful use of the mark by defendant no.1 after termination, and that the contractual clauses appeared to prohibit such use. It therefore observed that the defendant’s continued use was not bona fide and appeared to be unauthorised.
The Court also recorded that a visual comparison of the rival marks demonstrated deceptive similarity likely to cause confusion and deception in the minds of unwary consumers. It further accepted that the plaintiffs’ trademark registrations, long use, sales figures, advertisement expenses, and prior enforcement history sufficiently established goodwill and reputation in the marks.
Based on these factors, the Court held that the plaintiffs had made out a prima facie strong case, that the balance of convenience was in their favour, and that irreparable loss and injury would be caused if interim protection was denied. Accordingly, the Court granted an ex parte ad interim injunction restraining defendant no.1 and persons acting on its behalf from using the impugned marks and directed removal of such marks from the restaurant premises, menus, advertising material, e-commerce websites, and social media platforms.
The Court also directed the defendant to remove all references to those marks from restaurant boards, hoardings, menus, cutlery, brochures, advertising material, e-commerce websites, and social media platforms within two weeks of receipt of the order.
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Once the notice fails to mention the specific amount due, the possibility of the drawer repaying the specific amount becomes impossible, and in the absence of specific mentioning of the amount in the demand notice, there is no demand for payment of the specific amount covered by the dishonoured cheque
The Kerala High Court in the case of Rajesh. K vs Asokan P.K. [CRL.A NO. 212 OF 2013] dated May 26, 2026, has held that a demand notice under proviso (b) to Section 138 of the NI Act must specifically state the actual amount covered by the dishonoured cheque. In the absence of such specific mention of the amount in the demand notice, the notice is incomplete and does not constitute a valid legal notice in the eye of law. Consequently, the recipient of such a notice cannot be said to have had the opportunity to pay the amount to avoid penal consequences, and therefore no offence under Section 138 of the NI Act would be completed, particularly the “deemed offence”. The High Court therefore confirmed the finding of the Magistrate and held that the verdict of acquittal did not require any interference.
The Court observed that the offence under Section 138 of the NI Act is a deemed offence, and its completion requires the fulfilment of five stages: (1) issuance of a cheque for a legally enforceable debt or liability; (2) presentation of the cheque within its time limit of three months; (3) dishonour of the cheque; (4) issuance of a demand notice under proviso (b) to Section 138 within thirty days from the date of receipt of information regarding dishonour; and (5) failure of the drawer to make payment of the amount demanded within fifteen days, followed by filing of the complaint within thirty days after expiry of the notice period.
The Court further observed that proviso (b) to Section 138 specifically employs the phraseology “makes a demand for the payment of the said amount of money,” which necessarily indicates that the notice must specifically state the amount to be paid consequent upon dishonour of the cheque. Only when the notice is specific about the amount is it possible for the recipient to pay the amount demanded and thereby avoid penal consequences.
The Court rejected the argument of the appellant/complainant that where there is only one transaction between the parties, the amount demanded may be inferred from the notice even without its specific mention. It held that such an argument cannot be countenanced on a meticulous reading of provisos (b) and (c) to Section 138 of the NI Act, as the statute specifically mandates demand of the “said amount of money,” which must be expressly stated in the notice.
The Court further observed that once the notice fails to mention the actual/specific amount due, the possibility of the drawer repaying the actual/specific amount becomes impossible, and in the absence of specific mentioning of the amount in the demand notice, there is no demand for payment of the actual/specific amount covered by the cheque in the eye of law.
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If the successful resolution applicant fails to furnish the performance guarantee or otherwise fails to comply with the plan process, forfeiture of the earnest money deposit in terms of the RFRP is valid, particularly where the non-compliance does not arise from non-receipt of the LoI or imposition of additional terms outside the resolution plan process
The Supreme Court in the case of Sanjay Dave vs Andhra Bank [Civil Appeal Nos.12264-12266 of 2024] dated May 26, 2026, has held that once a resolution plan has been approved by the CoC, the successful resolution applicant is bound by it and cannot seek to evade implementation by raising objections to LoI stipulations that are either inherent in the process, already known to it, or expressly accepted by it. The Court reaffirmed that after CoC approval, there is no scope under the IBC for the successful resolution applicant to negotiate further, modify the plan, or withdraw from it at its own instance; the only surviving statutory contingency is adjudicatory approval under Section 31, subject to the limits of Section 30(2).
The Court further held that where the successful resolution applicant fails to furnish the performance guarantee or otherwise fails to comply with the plan process, forfeiture of the earnest money deposit in terms of the RFRP is valid, particularly where the non-compliance does not arise from non-receipt of the LoI or imposition of additional terms outside the resolution plan process. The Court also affirmed that under Section 33(2), read with its Explanation, the CoC is entitled, at any time before confirmation of the resolution plan, to resolve to liquidate the corporate debtor, and such commercial decision is not amenable to judicial review except within the narrow statutory framework.
In short, the Court reinforced the binding and irrevocable character of a CoC-approved resolution plan as between the CoC and the successful resolution applicant, the permissibility of EMD forfeiture for non-compliance, and the primacy of CoC commercial wisdom in opting for liquidation when the applicant defaults. It clarified that all interim orders would stand vacated upon dismissal of the appeals, and further directed respondent No. 3, the Liquidator, to proceed with the remaining part of the liquidation in accordance with the Code.
The Court observed that the appellant’s contention that the Letter of Intent (LoI) were “conditional” was without merit. The stipulation that the LoI would remain subject to the final decision in pending judicial proceedings involving prospective resolution applicants did not convert it into a conditional LoI in any legally objectionable sense, because any adjudicatory order would in any event govern the process.
The Court also found, from the minutes of the CoC meetings, that the appellant was fully aware of the pending litigation and the relevant stipulations before insisting on issuance of the LoI, and therefore his later objection was an afterthought. As regards litigation risk relating to workers and employees, the Court noted that the appellant had expressly agreed in the CoC discussions that such risk and cost would be borne by the resolution applicant, and therefore could not subsequently disown that position.
On the issue of timeline for performance guarantee, the Court accepted that though 45 days had been relaxed during the pandemic in an earlier meeting, the appellant had later agreed to submit the performance guarantee within seven days as prescribed in the RFRP, and thus could not rely on the earlier relaxation. The Court repeatedly characterised the appellant’s conduct as an impermissible attempt to approbate and reprobate, or to blow hot and cold, and held that the appellant had acquiesced in the stipulations and could not indirectly withdraw from a CoC-approved plan by calling the LoI conditional.
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For maintaining an application under Section 95 of the IBC against a Personal Guarantor, the Financial Creditor must establish not only the existence of a guarantee but also valid invocation of that guarantee by a specific contractual demand and a subsisting legally enforceable default against the guarantor
The Guwahati Bench of the National Company Law Tribunal (NCLT) in the case of UCO Bank vs Mallika Barooah [CP(IB)/13/GB/2025] dated June 01, 2026, has that, for maintaining an application under Section 95 of the Insolvency and Bankruptcy Code against a Personal Guarantor, the Financial Creditor must establish not only the existence of a guarantee but also valid invocation of that guarantee by a specific contractual demand and a subsisting legally enforceable default against the guarantor. A demand notice in Form B under Rule 7(1) of the Personal Guarantor Rules is only a procedural requirement prior to filing and does not amount to invocation of the guarantee.
The Tribunal observed that it had jurisdiction under Section 60(2) of the Code because insolvency proceedings of the Corporate Debtor were pending before the same Adjudicating Authority. It identified the principal issue as whether the Respondent could be proceeded against as a Personal Guarantor within the meaning of Section 95 and whether a legally enforceable debt and default had been established against her. The Tribunal also recorded that the demand notice under Rule 7(1), though initially returned unserved by post, was thereafter published in English and Assamese newspapers, and sufficient proof of service was produced before it.
On merits, the Tribunal found that the Respondent had admittedly executed the Letter of Guarantee dated May 20, 2008 for the original cash credit facility of Rs. 145 lakhs. However, the Applicant failed to produce cogent material showing that she continued to execute guarantee documents or expressly reaffirm liability after her resignation on March 31, 2009. The Tribunal further noted that the compromise approval dated Feb 14, 2018, extension of repayment dated June 25, 2020, and proposal for revival of OTS dated Nov 07, 2022 neither contained her signature nor attributed liability to her, and instead referred to other guarantors while excluding her.
The Tribunal attached significance to the SARFAESI demand notice dated Nov 12, 2011, observing that it was not addressed to the Respondent and that it specifically named only four other personal guarantors as liable towards the facilities. The omission of the Respondent from that statutory notice weighed against the Applicant’s present case that she continued to remain liable as Personal Guarantor.
The Tribunal also accepted the contention that the guarantee had never been validly invoked. It held that liability against a personal guarantor crystallises only upon issuance of a specific contractual demand invoking the guarantee, and that the Form B notice under Rule 7(1) is merely a procedural prerequisite for filing under Section 95. Since no prior invocation of the guarantee deed dated May 20, 2008 had been shown, no default within the meaning of Section 3(12) of the Code could be said to have arisen against the Respondent.
Further, where the material relied on to extend liability or limitation is not executed by, addressed to, or attributable to the respondent guarantor, such material cannot be used either to continue guarantor liability for enhanced facilities or to extend limitation under Section 18 of the Limitation Act, added the Tribunal.
The NCLT also clarified that although the Respondent’s status as guarantor in respect of the original 2008 facility could not be completely disputed, that by itself was insufficient for admission of the Section 95 application in the absence of proof of invocation, enforceable default, continuity of liability for subsequent facilities, and filing within the prescribed limitation period. Accordingly, the Tribunal broadly concurred with the Resolution Professional’s recommendation to reject the application, and held that the requirements of Section 95 of the Code had not been fulfilled, that no default could be said to have arisen qua the Personal Guarantor, and that the application was not maintainable.
