Legal Updates (March 09 – March 14, 2026)

CASE UPDATES:

Where an ex-parte injunction is obtained by deliberately suppressing material facts, the court is empowered under Order 39 Rule 4 of the CPC to vacate the injunction on the ground of suppression alone, as a penalty and to deter such abuse of the court process, without delving into the merits of the case

The Bombay High Court in the case of Elder Prroject Limited vs Elder Neutraciticals Private Limited [Interim Application (L) No. 35091 of 2025] dated March 09, 2026, has held that a party who is itself an infringer of a third party’s registered trademark cannot maintain a suit for infringement or passing off against another party. Referring to the decision of Capital Plastic Industries vs. Kappv Plastic Industries [1998 (8) PTC 182 (Del)], the Court reiterated that a pirator cannot sue another pirator for infringement.

The Court noted that the Plaintiff’s act of applying for and securing ex-parte ad-interim injunction by deliberately withholding the relevant material from Court has undoubtedly led to immense inconvenience and losses for the Defendant. The High Court clarified that a party seeking an equitable relief like an injunction, especially an ex-parte one, must approach the court with clean hands and is under a high duty to make a full, fair, and accurate disclosure of all material facts. A fact is material if it has the potential to significantly influence the court’s decision-making process. Thus, where an ex-parte injunction is obtained by deliberately suppressing material facts, the court is empowered under Order 39 Rule 4 of the CPC to vacate the injunction on the ground of suppression alone, as a penalty and to deter such abuse of the court process, without delving into the merits of the case.

The Court identified four major areas of suppression by the Plaintiff, i.e., (i) the prior registration and use of the ‘ELDER’ mark by EPL since 1983; (ii) the familial relationship between the directors of the Plaintiff and Defendant and their past association with EPL; (iii) four adverse orders from the Delhi High Court where the Plaintiff’s claims over the ‘ELDER’ mark were repeatedly rejected; and (iv) proceedings initiated by the Official Liquidator of EPL against the Plaintiff for unauthorized use of the mark. The Court observed that the Plaintiff approached the court with a plain story of being the originator of the mark since 1992, completely concealing that EPL was the originator and registered owner of the ‘ELDER’ mark and that the Plaintiff was merely a contract manufacturer for EPL.

The Court also found the suppression of the Delhi High Court orders to be ‘more disturbing’, as in those proceedings, the Plaintiff’s director had admitted on oath that the Plaintiff claimed no right in the trademark ‘ELDER’ and was only a job worker for EPL. In its previous order, the Delhi High Court had also held that the Plaintiff was an infringer of EPL’s mark and could not claim any shared or independent reputation.

Further, the Court observed that the Plaintiff itself appears to be an infringer of EPL’s trademark, having taken advantage of EPL’s liquidation to secure a registration for a similar mark. The Bench held that it can go behind a trademark registration at the interim stage if there are doubts about its validity, and in this case, there was substantial material creating such doubts.

Since the Plaintiff’s claim of prior use since 1992-93 was found to be prima facie fallacious in light of its own admissions that it was a contract manufacturer for EPL until March 2016, and in contrast, the Defendant had established prima facie use of its mark since 2015, the Court concluded that the Plaintiff failed to satisfy the classic trinity test for passing off, and that the balance of convenience was tilted in favour of the Defendant.

An attempt to secure a decree behind the back of the true owner is a circumstance that cannot be lightly brushed aside; Passing of an ex-parte decree followed by the expeditious mutation of revenue entries, casts a shadow over the bona fides of the proceedings

The Supreme Court in the case of Govind Singh vs Union of India [Civil Appeal Nos. 5168-5169 of 2011] dated March 09, 2026, has held that parties to an appeal are not entitled to produce additional evidence as a matter of right under Order XLI Rule 27 of the CPC. The appellate court’s discretion to permit additional evidence is to be used sparingly and is limited to cases where it is necessary to pronounce a satisfactory judgment, not to allow a litigant to fill lacunae or cure fundamental defects in their case.

The Apex Court held that an attempt to secure a decree behind the back of the true owner is a circumstance that cannot be lightly brushed aside, and the proximity of events, namely, the passing of an ex-parte decree followed by the expeditious mutation of revenue entries in favour of the appellant-plaintiffs, casts a shadow over the bona fides of the proceedings.

Thus, when the appellant-plaintiffs themselves asserted title on the basis of long and continuous possession through their predecessors, the subsequent attempt to introduce additional evidence at the appellate stage assumes little legal significance, added the Court.

The Court also explained that an application to adduce additional evidence at the appellate stage cannot be used to fortify a claim that is fundamentally flawed from its inception, such as one based on a prior decree that is not binding on the opposing party. If the appellate court can render a satisfactory judgment on the basis of the evidence already on record, the application for additional evidence has no purpose and should be rejected.

The Apex Court noted that while the High Court did not decide the application for additional evidence in its main appeal judgment, it did subsequently consider and reject the application as being without merit while dismissing the review petition. The initial omission was thus addressed in the review proceedings.

On the principles of Order XLI Rule 27 CPC, the Court reiterated that parties to an appeal are not entitled to produce additional evidence as a matter of right. Such evidence can be permitted only in three specific situations: (i) the trial court wrongly refused to admit evidence; (ii) the party proves that despite due diligence, the evidence was not within its knowledge or could not be produced at trial; or (iii) the appellate court itself requires the evidence to pronounce judgment or for any other substantial cause.

The Court observed that the appellant-plaintiffs’ claim of ownership was primarily based on a decree from an earlier suit instituted by their predecessors. However, the respondent-defendants were not parties to that earlier suit, rendering the decree non-est and not binding on them. Consequently, the onus shifted to the appellant-plaintiffs to independently establish their title in the present suit, which they failed to do by not producing any cogent title deeds at the trial stage.

Further, the Court held that the additional evidence sought to be produced, i.e., entries in the General Land Register showing the land as ‘private’, was impermissible at the appellate stage to cure inherent defects in the case. The Court stated that even if this evidence were accepted, it would not impact the High Court’s findings, as mere recording of land as ‘private’ does not establish the appellants’ ownership claim, especially against the respondents’ title traced to a 1953 government decision and a 1954 Gazette Notification.

Principle of business efficacy cannot be invoked by the Arbitral Tribunal to rewrite the express terms of a contract or to imply a term that contradicts the agreed-upon structure, such as converting a deliberately chosen fixed charge into a variable one

The Delhi High Court in the case of JSW Ispat Steel Limited vs Gas Authority of India [FAO(OS)(COMM) 4/2024] dated March 09, 2026, has ruled that the principle of business efficacy cannot be invoked to rewrite the express terms of a contract or to imply a term that contradicts the agreed-upon structure, such as converting a deliberately chosen fixed charge into a variable one. An interpretation that does so is not a ‘plausible view’ but an ‘impossible one’ that amounts to perversity and is a ground for setting aside the award.

The Court clarified that an arbitral award is patently illegal and liable to be set aside if the Arbitral Tribunal fails to consider a vital contractual clause imposing a time limit for disputes and a waiver of rights, that goes to the root of the dispute, affecting jurisdiction, limitation, and the maintainability of the claims.

The Court also asserted that an arbitral award must contain intelligible reasoning that discloses the evidentiary path to its conclusions, especially on contested issues like limitation. Merely stating that one party’s contention is ‘correct’ without addressing the opponent’s arguments does not meet the standard of a reasoned award under Section 31(3) of the Arbitration and Conciliation Act, 1996, and can be a ground for setting aside the award for patent illegality.

Hence, an award that contains irreconcilable internal contradictions, such as finding that an obligation to pay is unaffected by an event but simultaneously ordering a refund based on that same event, is perverse, flawed, and legally untenable, added the Court.

The Court agreed with the Single Judge that the tribunal’s failure to consider the amended Article 12.03 was a fatal flaw. It held that this clause was a vital contractual stipulation going to the root of the matter, as it directly affected the maintainability of the claim, limitation, and the tribunal’s jurisdiction.

The Court also concurred with the Single Judge that the tribunal’s reasoning on limitation was inadequate and legally unsound, as the award failed to provide any intelligible reasoning for rejecting GAIL’s contentions on limitation and merely stated that JSW’s argument was correct.

The Court however, disagreed with the Single Judge’s finding that the tribunal’s view on merits was plausible, and held that the tribunal’s application of the ‘business efficacy’ principle was a misapplication, and the contract was deliberately amended to a fixed charge, and implying a term to make it variable amounted to rewriting the contract.

Further, the Court found the award to be internally contradictory, as the Tribunal first held that the force majeure event did not affect the obligation to pay fixed charges, but then directed a proportionate reduction of those very charges. This inconsistency was held to be a flaw that rendered the award untenable.

Section 34 of the Trade Marks Act, 1999, protects the vested rights of a prior user. Merely because fans and water purifiers fall under the same class (Class 11), they are not automatically considered cognate goods, as classification is for registration purposes and not determinative of similarity

The Delhi High Court in the case of Kent RO Systems vs Kent Cables [FAO(OS)(COMM) 141/2023] dated March 11, 2026, has clarified that an appellate court will not interfere with the exercise of discretion by a Single Judge in granting or refusing an interlocutory injunction unless the discretion is shown to have been exercised arbitrarily, capriciously, perversely, or by ignoring settled principles of law. The High Court ruled that the Kent RO Systems (appellants) were rightly denied an interim injunction against the Kent Cables (respondents) and were correctly injuncted from using the mark ‘KENT’ for fans.

The ruling was premised on the grounds that the respondents were the prior users of the mark for fans, a right protected under Section 34 of the Trade Marks Act, 1999, and the appellants, despite being aware of the respondents’ use of the mark for fans for over a decade, delayed taking action, thereby acquiescing to such use and disentitling themselves to the discretionary relief of injunction.

As the appellants had not yet launched their fans, while the respondents had an established business, the balance of convenience lay in favour of the respondents, who were the prima facie proprietors of the mark for that specific product, added the Court.

The Court observed that while Kent RO adopted the mark ‘KENT’ for oil meters in 1988, Kent Cables had adopted the same mark for wires and cables in 1986. Therefore, Kent Cables was the first adopter of the mark, albeit for different products, and their adoption could not be considered mala fide.

The Court analysed Kent RO’s claim of infringement under Section 29(2)(a) of the Trade Marks Act, 1999, and noted that Kent RO’s trademark registrations in Class 11 were specifically for ‘water purifiers’ and related goods, not for ‘fans’. It held that merely because fans and water purifiers fall under the same class (Class 11), they are not automatically considered cognate goods, as classification is for registration purposes and not determinative of similarity.

The Court considered that the expansion by Kent Cables from electric wires and cables into fans could be seen as a natural progression of their business. Since Kent Cables started using the mark for fans in 2009, when Kent RO was admittedly not in the fan business, their use could not be said to be taking unfair advantage of Kent RO’s trademark.

Further, the Court found that Kent RO was aware of Kent Cables’ use of the mark for fans since at least 2011, when it issued a cease-and-desist notice, and had opposed their trademark application in 2007. By not taking legal action for over a decade and allowing Kent Cables to grow its business, Kent RO had acquiesced to the use of the mark by Kent Cables. This delay and acquiescence disentitled Kent RO from the discretionary relief of an interim injunction.

The Court also observed that Section 34 of the Trade Marks Act, 1999, protects the vested rights of a prior user. The prior use of the mark ‘KENT’ for fans by Kent Cables was found to be sufficient to disentitle Kent RO from obtaining an injunctive relief against them at the interim stage.

As far as propriety of injunction against Kent RO is concerned, the Court upheld the injunction restraining Kent RO from launching fans. It reasoned that Kent RO had not used the mark for fans until the suit was filed. Ordinarily, there can only be one proprietor of a mark for a specific product, and prima facie, for fans, that proprietor is Kent Cables.

The losses suffered by a bank due to fraudulent ATM withdrawals using debit cards issued by other banks are not covered under a Banker’s Indemnity Insurance Policy when the policy expressly excludes losses arising from the use of ATMs

While setting aside the Trial Court decree that had directed the insurance company (New India Assurance – Appellant) to indemnify the bank (Federal bank) for losses caused by ATM fraud, the Kerala High Court in the case of New India Assurance vs Federal bank [RFA NO. 202 OF 2017] dated March 02, 2026, has ruled that what is covered under the insurance policy is, a theft occurring in the premises of the ATM counter and malicious damage of the ATM; it does not extend to a fraudulent use of the ATM.

The High Court explained that under insurance law, repudiation of a claim is the rejection of claim by the insurer, which could be on various grounds including, lack of coverage under the policy, breach of policy conditions, exclusion clauses. An “excess”, which is the proportion of the loss that the insured has to bear, could not be strictly said to be a repudiation, under which, the very liability is disputed. It is essentially a limitation on the quantum payable and not a denial of the very liability.

The Court clarified that in a case where the excess clause is applicable, there is no repudiation of the liability as such, it only deals with the mode of computation of the quantum payable by the insurance company, and such a question would arise only when the insurance company is found liable. Therefore, generally, the Court pointed out that it may not be possible to say that the excess clause operates as repudiation of liability and hence, such ground ought to have been taken in the repudiation letter issued by the insurance company.

However, in the case at hand, the Court found that the insurance company relies upon the excess clause to contend that no amounts are payable to the plaintiff under the policy, the loss being within the limit of excess. Such a contention essentially amounts to denial of the claim in its entirety and practically amounts to repudiation. Such contention was available to the insurance company even at the time when they issued the repudiation letter, however, not taken.

The Court observed that the instances in question are a form of ‘theft’ or ‘malicious damage’ under clause ‘A’ of the policy. But the exception clause specifically excludes losses arising out of the use of ATMs. Therefore, losses occurring due to any direct or indirect use of ATMs are excluded under the clause.

Also, the Court found that the incidents in question, upon which damage resulted to the respondent have arisen out of the fraudulent use of the ATMs, which is covered by the exclusion clause. The fact that fraudulent use of the plaintiff Bank’s debit cards are specifically included in the Add-on cover taken under the additional/extended policy, implies that, there is no coverage with regard to fraudulent use of other debit cards.

The Court noted that under the original policy, losses arising out of any use of ATMs, whether direct or indirect have been excluded. However, in the additional policy, protection is given to the debit card holders of the respondent bank alone, against fraudulent transactions. This is specifically included as an add-on cover under the head “ADD ON COVERS”.

‘Deposit’ under Section 2(4) of the Banning of Unregulated Deposit Schemes Act, 2019, is not confined to transactions involving physical currency but extends to arrangements clothed as sales of commodities like digital gold; Absence of express regulation by SEBI/ RBI over purchase or storage of digital gold does not confer it sanctuary

The Karnataka High Court in the case of Nishchay Babu Arkalgud vs State of Karnataka [Writ Petition No.5968 of 2026 (GM – RES)] dated March 04, 2026, has held that the definition of ‘deposit’ under Section 2(4) of the Banning of Unregulated Deposit Schemes Act, 2019, is to be interpreted expansively and purposively. It is not confined to transactions involving physical currency but extends to arrangements clothed as sales of commodities like digital gold, where the intrinsic character and economic substance of the transaction resemble a deposit scheme designed to circumvent regulatory oversight.

The High Court said that its inherent power to quash an FIR under Section 528 of the BNSS should not be exercised when the case involves serious and triable allegations, sharply contested questions of fact, and requires a thorough investigation. Essentially, an FIR is only a trigger for investigation, and the court should not stifle a legitimate inquiry by delving into the merits of the evidence at a preliminary stage.

The Court observed that rejected the petitioners’ primary contention that their business involves the sale of gold and does not constitute a ‘deposit’ under Section 2(4) of the Banning of Unregulated Deposit Schemes Act, 2019 (BUDS Act), noting that the definition of the term ‘deposit’ is expansive. It added that the argument to construe the statute narrowly to exclude digital or gold-backed arrangements must be repelled.

Further, the Court emphasized that the law is concerned with the ‘intrinsic character and its economic substance of a transaction, not the ‘cosmetic garb’ it is clothed in. Further, in the modern landscape of financial frauds, deception assumes subtle forms like commodities and digital assets to circumvent regulatory vigilance.

The Court also addressed the petitioners’ submission that the transactions are in gold, not currency or cash, and opined that confining the expression ‘money’ to only physical currency would be a pedantic and myopic construction. Such a narrow interpretation would render the BUDS Act, a remedial and protective legislation, ineffective against evolving financial stratagems and would defeat the very purpose for which it was enacted.

Further, the Court observed that it must refrain from appreciating disputed facts or evaluating the probative worth of material at the investigation stage. It noted that an FIR is not an encyclopaedia of all facts and that the police must be permitted to complete the investigation, especially when the allegations disclose serious and triable issues.

Also, the Court noted that serious allegations have surfaced, including assertions that physical gold could not be traced when demanded by customers, and that searches allegedly yielded gold with the Company’s branding at the premises of its office bearers. Given these sharply contested questions of fact, the Court found that it could not lend its protective hands to the petitioners to obliterate the crime at its incipient stage. It concluded that an investigation is imperative as investors have already raised concerns about not receiving their gold or money.

Foreign award requires a positive affirmation and validation by an Indian court to be treated as a decree, unlike a domestic award which is statutorily treated as a decree upon the expiry of the challenge period or the rejection of a challenge

The Bombay High Court in the case of Osterreichischer Lloyd Seereederei (Cyprus) Ltd vs Victore Ships Pvt Ltd [Commercial Arbitration Petition No. 398 of 2025] dated March 10, 2026, has clarified that the jurisdiction of a court to grant interim measures under Section 9 of the Arbitration and Conciliation Act, 1996, is not ousted by the mere filing of a petition for recognition and enforcement of a foreign award under Part II of the 1996 Act. The remedy under Section 9 remains available at least until the stage where the Part II Court is satisfied that the foreign award is enforceable and deems it to be a decree of that Court under Section 49 of the 1996 Act.

The High Court ruled that a foreign award requires a positive affirmation and validation by an Indian court to be treated as a decree, unlike a domestic award which is statutorily treated as a decree upon the expiry of the challenge period or the rejection of a challenge. The Court explained that the temporal limitation contained in Section 9(1), i.e., “but before it is enforced in accordance with section 36”, is specific to the enforcement of domestic awards under Section 36 of the 1996 Act, and cannot be extrapolated to limit the applicability of Section 9 in relation to foreign awards, for which Parliament has not provided a similar restriction.

The Court undertook a detailed analysis comparing the enforcement mechanism for domestic awards under Part I with that for foreign awards under Part II, and noted that the proviso to Section 2(2) of the 1996 Act explicitly makes Section 9 applicable to international commercial arbitrations where the award is enforceable under Part II. The limitation in Section 9(1), i.e., “but before it is enforced in accordance with section 36”, is specifically linked to Section 36, which governs domestic awards.

The Court also draw a critical distinction between how the two types of awards become decrees, and explained that a domestic award automatically becomes a decree for enforcement under Section 36 once the time to challenge it under Section 34 expires, or a challenge is rejected. However, a foreign award becomes a decree only when the Part II Court, after being satisfied that it is enforceable, makes a positive declaration to that effect under Section 49. Until this positive affirmation, the foreign award does not have the status of a decree.

The Court observed that when Parliament amended the 1996 Act in 2015 to extend Section 9 to foreign awards, it did not introduce a corresponding time limit linked to Part II proceedings. This was deemed a conscious legislative choice, recognizing the difference in enforcement mechanisms. Therefore, the court cannot judicially infer a time limit that the legislature did not provide.

Further, the Court clarified that a petition filed under Part II is ‘first and foremost a petition for recognition’, and it only ‘translates into execution proceedings’ after the court confers the status of a decree upon the foreign award under Section 49. Until that point, the award is not being ‘enforced’ in a manner that would bar a Section 9 application.

Lastly, the Court stated that the possibility of concurrent jurisdiction between the Section 9 Court and the Part II Court was acknowledged but not considered a bar. The Court said that this is a legislative scheme, and in the absence of a statutory provision to the contrary (similar to Section 9(3) which regulates the overlap with Section 17), the court should not refuse to exercise jurisdiction.

Section 66 of the Companies Act, 2013, does not statutorily require a valuation report to be prepared or circulated to shareholders for a capital reduction scheme. Therefore, the non-attachment of such a report to the general meeting notice does not vitiate the process, provided the price offered is disclosed

The Supreme Court in the case of Pannalal Bhansali vs Bharti Telecom Limited [Civil Appeal No. 7655 of 2025] dated March 10, 2026, has clarified that the reduction of share capital is a domestic affair of a company, to be decided by a special resolution of the majority. In short, the court’s or Tribunal’s role is not to substitute its own business wisdom but to ensure the scheme is fair, just, and not egregiously wrong or prejudicial to any class of shareholders.

The Apex Court ruled that Section 66 of the Companies Act, 2013, does not statutorily require a valuation report to be prepared or circulated to shareholders for a capital reduction scheme. Therefore, the non-attachment of such a report to the general meeting notice does not vitiate the process, provided the price offered is disclosed and the underlying documents are made available for inspection.

The Court also held that the application of a Discount for Lack of Marketability (DLOM) is a valid and permissible valuation methodology under Indian Accounting Standards for determining the fair value of unlisted, illiquid shares in the context of a capital reduction, particularly when it is not a case of a court-ordered buyout due to oppression.

For a court to find a capital reduction scheme prejudicial, the objector must demonstrate more than just receiving a price lower than desired. It must be shown that the offer is ‘inherently unjust’ or that the valuation is so off-track that it offends the judicial conscience. The approval of the scheme by a majority of the affected shareholders is a strong indicator of its fairness, added the Court.

The Court further held that Section 66 of the Companies Act, 2013, unlike other sections such as Section 230 (compromise/arrangement) or Section 232 (merger), does not statutorily mandate a valuation report for a reduction of share capital. Therefore, not annexing the report to the notice did not constitute a misleading disclosure or make the notice ‘tricky’. The company had disclosed the final price and made the reports available for inspection for over a month, which was deemed sufficient.

Regarding the valuer’s independence, the Court stated that bias must be demonstrably real and present and cannot be assumed merely because the valuer was an affiliate of the internal auditor. This was further supported by the fact that a separate fairness report was obtained and two other independent agencies later affirmed the valuation.

Mere dominant position in the relevant market and seat reservation, differential data sharing, and varied revenue sharing from convenience fees, cannot be termed as unfair or discriminatory, and violative to the provisions of Sections 4(2)(a)(i), 4(2)(b)(i), and 4(2)(c) of the Competition Act, 2002, if the entities being compared were not ‘similarly-situated’ and/or the practices were supported by legitimate business justifications

The Competition Commission of India (CCI) in the case of Showtyme vs Big Tree Entertainment [Case No. 46 of 2021] dated March 12, 2026, has held that although Big Tree Entertainment Pvt Ltd. (BookMyShow) enjoys a dominant position in the relevant market of ‘market for online intermediation services for booking of movie tickets in India’, no case of contravention of the provisions of Sections 4(2)(a)(i), 4(2)(b)(i), and 4(2)(c) of the Competition Act, 2002, is made out against it.

The CCI noted that the alleged abusive practices, including seat reservation, differential data sharing, and varied revenue sharing from convenience fees, were not found to be unfair or discriminatory, primarily because the entities being compared (single-screen cinemas and multiplexes) were not considered ‘similarly-situated’ and/or the practices were supported by legitimate business justifications.

Further, the exclusive agreements, coupled with lock-in periods and security deposits, were not found to cause a denial of market access. The Commission concluded that there was no evidence of substantial market foreclosure, the practices were supported by legitimate business reasons (such as recovering financial advances), and the market remained contestable for new and existing competitors.

The Commission concurred with the Director General’s (DG) finding that the relevant market is the ‘market for online intermediation services for booking of movie tickets in India’. It observed that booking tickets through online platforms is not substitutable with purchasing them at a cinema’s box office, given the clear distinctions in service characteristics, price, and consumer preferences.

The geographic market was determined to be the whole of ‘India’ due to the pan-India presence of BMS and the homogenous nature of its services across the nation, added the Bench.

The Competition Commission also agreed with the DG’s conclusion that BMS holds a dominant position in the delineated relevant market. This was based on a cumulative assessment of factors under Section 19(4) of the 2002 Act, including BMS’s substantial and sustained market share, large scale of operations, significant economic strength, and the presence of network effects. However, the Commission also noted that this dominance is ‘tempered’ by the dynamic nature of the market, the presence of other competitors, and the reciprocal commercial dependence between BMS and cinema operators.

The Commission disagreed with the DG’s finding that reserving seats was an unfair condition. It accepted BMS’s justification that in Tier-2 and Tier-3 cities where cinemas lack real-time integration technology, reserving a portion of inventory is necessary to prevent overlapping bookings between the online platform and the box office. The Commission noted that un-booked tickets from the reserved quota are released for sale at the box office before the show begins.

Further, the Commission did not find the varied revenue sharing arrangements to be discriminatory or in contravention of Section 4(2)(a)(i). It reiterated that it cannot act as a price regulator. Similar to the data ownership issue, the Commission observed that single-screen cinemas and multiplexes are not on the same footing and do not form a homogenous class. It also noted that the data showed instances of single-screen cinemas receiving a high share of the convenience fee and some multiplexes receiving a lower share, which contradicted a simple discriminatory pattern.

Lastly, the Commission concluded that the exclusive and restrictive agreements did not result in a denial of market access in violation of Section 4(2)(c). It found that without clarity on the exact number of exclusive screens, it was not feasible to establish substantial market foreclosure. The Commission accepted the operational justification for lock-in periods, which are calibrated to the quantum of security deposits advanced to cinemas, allowing BMS a reasonable opportunity to recoup its investment. It observed no evidence that these agreements created entry barriers, highlighting the continued presence of competitors like Paytm and Justickets, and the fact that cinemas with expiring agreements would always be available for new entrants to partner with.

‘Reasons to believe’ required for an arrest under Section 19(1) of the PMLA can be founded upon tangible material gathered during an investigation, such as the seizure of disproportionate assets and incriminating statements. The sufficiency or adequacy of such material is not to be scrutinized in-depth by a court at the initial stage of the investigation

The Bombay High Court in the case of Y. Shiva Reddy vs Directorate of Enforcement [Criminal Writ Petition No. 5843 of 2025] dated March 09, 2026, has clarified that the power of judicial review in a writ petition challenging an arrest under the Prevention of Money Laundering Act, 2002 (PMLA) must be exercised with caution, and a court will not interfere unless there is manifest arbitrariness or gross non-compliance with the statutory safeguards provided under Section 19 of the PMLA.

The Court explained that the offence of money laundering under Section 3 of the PMLA is an independent offence concerning the process or activity connected with the proceeds of crime. It is not a prerequisite for a person to be arraigned as an accused in the predicate scheduled offence to be prosecuted under the PMLA.

Accordingly, the High Court held that the ‘reasons to believe’ required for an arrest under Section 19(1) of the PMLA can be founded upon tangible material gathered during an investigation, such as the seizure of disproportionate assets and incriminating statements. The sufficiency or adequacy of such material is not to be scrutinized in-depth by a court at the initial stage of the investigation.

When the statutory procedure for arrest has been duly followed and the accused has been remanded to custody by a competent court, a belated challenge to the arrest in a writ petition may be construed as an attempt to circumvent the specific and stringent provisions for bail laid down in Section 45 of the PMLA, added the Court.

The Court observed that reiterated that the power of judicial review over an arrest under special statutes like the PMLA must be exercised cautiously and only in cases of manifest arbitrariness or gross non-compliance with statutory safeguards. The Court found that the material gathered during the investigation was shared with the jurisdictional police under Section 66(2) of the PMLA, leading to the registration of the predicate offence, before the petitioner’s arrest. Also, upon arrest, the petitioner was informed of the grounds of arrest and reasons to believe under Section 19 of the PMLA, and was produced before the Special Court which remanded him to custody.

The Court rejected the petitioner’s contention that the first four FIRs were unconnected to him and the fifth FIR under the Prevention of Corruption Act, 1988 (PC Act) was distinct. It observed that the investigation into the illegal constructions, related to the first four FIRs, revealed the petitioner’s role, leading to the search and seizure operations. Further, the recovery of unaccounted cash and jewellery provided a sufficient foundation for the Arresting Officer to believe the petitioner was prima facie guilty of money laundering.

The definition of ‘proceeds of crime’ under Section 2(1)(u) of the PMLA is expansive and includes property derived from any criminal activity relatable to a scheduled offence, which would cover the alleged bribes, added the Court.

The Court also dismissed the argument that the petitioner needed to be named as an accused in the first four FIRs for the PMLA to apply. It reiterated that the offence of money laundering under Section 3 of the PMLA is an independent offence. It is not linked to the date of the scheduled offence but to the date on which a person indulges in a process or activity connected with the proceeds of crime.

Moving ahead, the Court found that the Directorate of Enforcement (ED) had sufficient tangible material to arrest the petitioner. The seizure of disproportionate assets, along with statements recorded under Section 50 of the PMLA, provided a credible basis for the ‘reasons to believe’ that the petitioner was involved in money laundering. Further, the fact that the petitioner cooperated with the investigation on twelve occasions was not a sufficient ground to declare the arrest illegal.

REGULATORY UPDATES

Ministry of Corporate Affairs announces a One-Time Relief for delayed annual returns & financial statements, and also reduced additional fees to 10%

The Ministry of Corporate Affairs (MCA) vide its General Circular No. 01/2026 has notified the Companies Compliance Facilitation Scheme, 2026 (CCFS-2026), stating that the companies that have defaulted on filing annual returns and financial statements will get a limited window to regularise their records. This Scheme will be in force from April 15 to July 15, 2026.

Under existing provisions, companies are required to pay an additional fee of Rs.100 per day for delay in filing annual returns and financial statements, without any upper limit. The MCA said it had received representations from stakeholders, including MSMEs and private companies, stating that delays in completing annual compliances had resulted in additional financial burden.

Under the Scheme, companies can complete pending annual filings by paying 10% of the additional fees otherwise payable under the Companies (Registration Offices and Fees) Rules, 2014. Inactive companies may apply for dormant status by filing the prescribed form and paying one-half of the normal filing fee. Companies seeking strike-off may file the prescribed form during the Scheme period on payment of 25% of the applicable filing fee.

The circular states that the number of active companies in India has crossed the 20-lakh mark, reflecting growth in formalisation of the economy, including MSMEs, producer companies, OPCs and new-age enterprises. It states that the Scheme is aimed at improving compliance levels and ensuring that the corporate registry reflects accurate and up-to-date information.

The scheme provides that, in specified cases, no penalty shall be levied if filings are made before issuance of notice by the adjudicating officer or within 30 days of such notice. The circular states that Registrars of Companies shall take necessary action under the Act against companies that do not avail themselves of the Scheme and remain in default after its conclusion.

IBBI introduces Electronic Forms to monitor insolvency processes of Personal Guarantors

The Insolvency and Bankruptcy Board of India (IBBI) vide its Circular No. IBBI/II/92/2026 dated March 06, 2026, has introduced a set of electronic forms to monitor insolvency resolution processes involving personal guarantors to corporate debtors under the Insolvency and Bankruptcy Code, 2016.

As per the circular, resolution professionals currently submit periodic updates regarding such processes through emails which, the Board noted is “time-consuming and inefficient”. To address this, the IBBI has developed a set of electronic forms which, according to the Board, will facilitate systematic and transparent record-keeping and seamless reporting.

The key benefits of these forms include allowing resolution professionals to easily access and submit forms online, reducing delays and improving efficiency and minimizing the likelihood of errors and omissions, ensuring more accurate and reliable information.

The forms, PGIRP-1 to PGIRP-6, will collect information at different stages of the insolvency process, including admission of the application, public announcement, submission and approval of repayment plans and quarterly progress reports.

The forms are available on the Board’s official website. Resolution professionals will be required to access the platform using a unique username and password and submit the forms along with relevant information and records after affixing a digital signature or e-sign. The Board clarified that filing accurate and timely information is the sole responsibility of the insolvency professional.

The circular also states that failure to file the forms or submission of incomplete or inaccurate information may attract regulatory action under the Code.

Click here to read/ download the original circular

SEBI cautions against fraudsters offering to manage trading accounts for profit share

The Securities and Exchange Board of India (SEBI) vide its Press Release No: 14/2026 dated February 26, 2026, has warned investors against stock market scams carried out through “account handling” services.

SEBI stated that certain individuals, portraying themselves as experts, are offering account handling services to help investors invest in the securities market. These persons claim to generate risk free profits in investors’ trading accounts. They typically specify a minimum capital requirement and charge a percentage share of the investor’s profits.

According to SEBI, such fraudsters require investors to share their trading account credentials and operate the accounts by executing trades on their behalf. The profits or losses are directly credited or debited to the investor’s account, while the fraudster expects a share in profits, if any. Any losses incurred are not shared by the fraudster.

The regulator clarified that such entities are not registered with SEBI and do not fall under its regulatory purview. Investors have been advised not to trust such claims and to refrain from sharing their account credentials with anyone.

SEBI further urged investors to verify the registration status of intermediaries on its official website before investing and to deal with only SEBI-registered intermediaries.

Click here to read/ download the original press release

SEBI introduces Voluntary Debit Freeze Facility for Mutual Fund Folios

The Securities and Exchange Board of India (SEBI) vide its Circular No: HO/24/12/12(5)2026-IMD-SEC-1/I/6373/2026 dated March 06, 2026, has introduced a voluntary lock-in / debit freeze facility for mutual fund folios across demat and non-demat folios. As per the circular, the facility will enable investors to freeze debit transactions in their mutual fund folios.

According to SEBI, this will ensure that no units are debited from the folio until the investor unlocks it. In the first phase, the facility will be made available through the inter-operable Registrar and Transfer Agents (RTA) platform, MF Central. SEBI clarified that in the first phase, RTAs shall enable investors to lock their folios through MF Central.

The facility will be available only to KYC complied (Registered/Validated) investors having a valid email ID and mobile number.

SEBI has directed the Association of Mutual Funds in India (AMFI) to prescribe the detailed process for locking and unlocking of folios for all Asset Management Companies and RTAs, and the processes to be followed by different types of investors, in consultation with SEBI. AMFI shall also specify the list of financial and non-financial transactions that may be permitted while the folio remains under lock.

Further, SEBI has mandated that the detailed procedure for opting for this facility and its impact on various transactions be disclosed by all AMCs and RTAs on their websites and in the Statement of Additional Information. The circular shall come into effect from April 30, 2026.

Click here to read/ download the original circular

SEBI issues new comprehensive guidelines for Custodians and mandates segregation of activities

The Securities and Exchange Board of India (SEBI) vide its Circular No: HO/19/(1)2025-AFD-FPICELL/I/5928/2026 dated March 04, 2026, has set out comprehensive guidelines for custodians, pursuant to amendments to the SEBI (Custodian) Regulations, 1996 notified on 18 September 2025.

The circular prescribes detailed norms on the segregation of activities, permitting custodians to carry out other financial services through Strategic Business Units, subject to safeguards such as maintaining separate accounts and compliance with net-worth criteria. Custodians providing unregulated financial services are required to make appropriate disclosures to clients.

SEBI has also clarified that while non-core activities may be outsourced, core business and compliance functions cannot be outsourced. Custodians holding physical securities must comply with the requirement of maintaining a vault, while those that do not hold such securities are not required to do so.

SEBI has also clarified that while non-core activities may be outsourced, core business and compliance functions cannot be outsourced. Custodians holding physical securities must comply with the requirement of maintaining a vault, while those that do not hold such securities are not required to do so.

Significantly, the circular introduces enhanced governance and compliance requirements, including the constitution of board committees such as the Audit Committee, Nomination and Remuneration Committee, and Risk Management Committee; the formulation of a well-documented risk management policy; the designation of a senior-level officer for overall risk management; and the maintenance of scalable infrastructure capable of handling increased transaction loads.

As per the circular, custodians are also required to put in place a framework for the orderly winding down of their business. They must further implement a comprehensive Business Continuity Plan (BCP) and Disaster Recovery (DR) mechanism. To reduce the compliance burden, SEBI has discontinued certain periodic reporting requirements.

The provisions, except for specific clauses relating to the wind-down framework and Disaster Recovery Site infrastructure, will come into force on 24 March 2026.

Click here to read/ download the original circular

SEBI mandates Twice Peak Load Capacity for Commodity Derivatives Exchanges and Clearing Corporations

The Securities and Exchange Board of India (SEBI) vide its Circular No. HO/47/13/14(1)2026-MRD-TPD1/I/4755/2026 dated February 11, 2026, has directed stock exchanges and clearing corporations in the commodity derivatives segment to maintain installed system capacity at least twice their projected peak load. This effectively requires exchanges in the segment to prepare their systems for traffic levels well above expected peak volumes.

SEBI said that Clause 16.1.2 of Chapter 16 of its Master Circular for Commodity Derivatives Segment dated August 4, 2023, requires stock exchanges to maintain arrangements, procedures and system capability to manage trading load in a manner that ensures consistent response time for members. The clause had stipulated that the capacity of the trading system should be at least four times the peak order load encountered.

The regulator stated that based on representations received from stock exchanges with commodity derivatives segments, the capacity planning framework was reviewed in consultation with SEBI’s Technical Advisory Committee and pursuant to a public consultation paper dated June 30, 2025.

SEBI has now directed that specified provisions of its December 10, 2024 circular on Revised Guidelines for Capacity Planning and Real Time Performance Monitoring framework of Market Infrastructure Institutions shall apply mutatis mutandis to the commodity derivatives segment, with certain modifications.

Under the revised framework, the installed capacity shall be at least two times the projected peak load. Further, if actual capacity utilisation of any component of stock exchanges and clearing corporations in the commodity derivatives segment exceeds 75 percent of the installed capacity, immediate action shall be taken by the market infrastructure institution. Such action may include fine tuning of applications or systems or enhancement of capacity. The Standing Committee on Technology shall oversee such action.

The framework for handling instances where utilisation exceeds 75 percent, including cases necessitating augmentation of installed capacity, must be incorporated in the Capacity Planning and Real Time Performance Monitoring Policy.

SEBI has also directed stock exchanges and clearing corporations to prepare and submit their Capacity Planning and Real Time Performance Monitoring Policy document for the commodity derivatives segment within three months from the date of the circular, after obtaining approval from their Standing Committee on Technology and the Governing Board.

The circular clarifies that the provisions shall come into effect three months from the date of issuance and that it supersedes the Master Circular insofar as it applies to the commodity derivatives segment.

Click here to read/ download the original circular

SEBI tightens norms for Green Debt Securities and mandates Independent Reviewers

The Securities and Exchange Board of India (SEBI) vide its Circular No: HO/17/11/24(1)2026-DDHS-POD1/I/5967/2026 dated February 27, 2026, has revised the norms governing the appointment of independent third-party reviewers or certifiers for green debt securities.

Green debt securities are bonds or similar instruments issued to raise funds specifically for environmentally sustainable projects, such as renewable energy, clean transportation, or energy efficiency initiatives.

The move aligns the requirements for green debt instruments with the framework applicable to other ESG (Environment, Social, and Governance) debt instruments, including social and sustainability bonds.

SEBI has removed the earlier provision under Chapter IX of the Non-Convertible Securities Master Circular and introduced a revised framework specifying the eligibility and independence criteria for such reviewers.

Under the revised norms, issuers are required to appoint an independent third-party reviewer or certifier to ensure that the issuance of green debt securities complies with regulatory definitions and disclosure requirements.

The reviewer must be independent of the issuer, its directors, and senior management, free from conflicts of interest, and possess expertise in assessing ESG debt securities. Additionally, the scope of the review must be disclosed in the offer document. The circular takes immediate effect.

Click here to read/ download the original circular

SEBI warns public against fake STT notices seeking outstanding payments

The Securities and Exchange Board of India (SEBI) vide its Press Release PR No: 15/2026 dated February 26, 2026, has warned the public against fake Securities Transaction Tax notices. SEBI stated that fraudsters are circulating fake notices falsely claiming to have been issued under the SEBI Act, 1992, seeking compliance with STT under the Finance Act, 2004.

According to SEBI, these fake notices use forged SEBI letterheads and request for payments for outstanding STT amounts. The regulator said that no such notices have been issued by it.

The regulator explained that STT is levied on purchase and sale transactions of securities executed on stock exchanges and is collected by brokers. It further clarified that SEBI does not issue notices for remittance of STT amounts, nor does it coordinate with RBI in this regard.

SEBI also noted instances of fraudsters impersonating the identities of its officials and using fake email IDs. They are also sending communication to entities using the letter head, logo and seal of SEBI.

As per the Press Release, the gullible investors are losing their hard-earned money by believing these fraudsters and transferring money to these fraudulent accounts. Accordingly, it has advised investors to check its official website for enforcement actions and to ensure that emails claiming to be from SEBI end with “@sebi.gov.in”.

The press release has been issued to caution investors to remain vigilant and verify the authenticity of any communication demanding payment on behalf of SEBI.

Click here to read/ download the original press release

Legal Updates (March 02 – March 07, 2026)

A complete discharge of the surety does not occur unless the conditions of Section 139 of the Indian Contract Act, 1872 are met, which requires that the creditor’s act or omission impairs the surety’s eventual remedy against the principal debtor. However, sureties are not liable for excess amounts permitted to be withdrawn from cash credit facility of the bank by the principal debtor

The Supreme Court in the case of Bhagyalaxmi Cooperative Bank vs Babaldas Amtharam Patel [Civil Appeal No. 3200 of 2016] dated February 27, 2026, has held that the sureties are not liable for excess amounts permitted to be withdrawn from cash credit facility of the bank by the principal debtor. Essentially, the Court said that under Section 133 of the Indian Contract Act, 1872, when a variance is made in the terms of a contract between a creditor and a principal debtor without the surety’s consent, the surety is discharged from liability only for transactions that are subsequent to such variance. However, the surety remains liable for the original obligation as per the terms of the guarantee contract, they entered into.

The Apex Court held that a complete discharge of the surety does not occur unless the conditions of Section 139 are met, which requires that the creditor’s act or omission impairs the surety’s eventual remedy against the principal debtor. Therefore, a bifurcation of the surety’s liability is not only permissible but statutorily required to separate the original guaranteed liability from the liability arising from subsequent, unconsented variations.

The Court observed that the primary issue was whether the sureties were entitled to a complete discharge under Section 139 or were liable to a limited extent under Section 133 of the Indian Contract Act, 1872. It noted that Section 133 provides that any variance in the terms of the contract between the principal debtor and the creditor, made without the surety’s consent, discharges the surety as to transactions subsequent to the variance.

This principle ensures a surety is not bound to something for which they have not contracted, and the Court affirmed that while a material alteration can discharge a surety, the discharge under Section 133 applies only to transactions post-variance, meaning the surety remains liable for the original obligation.

The Court distinguished this from Section 139, which requires two conditions for a surety’s discharge: (i) the creditor must do an act inconsistent with the surety’s rights or omit a duty owed to the surety, and (ii) this act or omission must impair the surety’s eventual remedy against the principal debtor. In the present case, while the bank’s act of allowing overdrafts was inconsistent with the sureties’ rights, it did not impair their eventual remedy against the principal debtor. The Court also reiterated the established principle that a creditor is not required to exhaust remedies against the principal debtor before proceeding against the surety.

The Court found the High Court’s reasoning that the sureties must be liable for the entire amount or not at all to be erroneous and contrary to the plain reading of Section 133. It observed that the bifurcation of liability, which the High Court deemed impermissible, is in fact mandated by Section 133 to correctly determine the extent of the surety’s liability.

An application under Section 7 of the Insolvency and Bankruptcy Code, 2016 (IBC), is not barred by limitation if its filing is within a fresh limitation period triggered by the issuance of a Recovery Certificate by the Debt Recovery Tribunal (DRT)

The National Company Law Appellate Tribunal (NCLAT) at Principal Bench, New Delhi, in the case of D.N.V Srinivasa Raju Vs IDBI Bank Ltd [Company Appeal (AT) (Insolvency) No.1189 of 2025] dated February 25, 2026, has clarified that an application under Section 7 of the Insolvency and Bankruptcy Code, 2016 (IBC), is not barred by limitation if its filing is within a fresh limitation period triggered by the issuance of a Recovery Certificate by the Debt Recovery Tribunal (DRT), which grants a fresh three-year period of limitation from the date of the certificate.

The NCLAT held that the limitation period also gets extended by an acknowledgment of the debt in the corporate debtor’s audited financial statements. An entry reflecting a contingent liability, such as a corporate guarantee, can be construed as an unequivocal acknowledgment of the underlying jural relationship of debtor and creditor, thereby extending limitation under Section 18 of the Limitation Act, 1963.

Further, the Tribunal explained that a written communication from the corporate debtor, such as a letter responding to a settlement offer, which acknowledges the debt, if made before the expiry of the then-subsisting limitation period, gives rise to a fresh period of limitation from the date of the acknowledgment. The computation of the limitation period must also account for the exclusion of the period from March 15, 2020 to February 28, 2022, as directed by the Supreme Court in its suo moto orders concerning the COVID-19 pandemic.

The NCLAT focused on whether the Section 7 application was barred by time. It observed that a fresh three-year limitation period commenced from the date of the DRT’s Recovery Certificate on July 26, 2018, which would ordinarily expire on July 25, 2021. However, applying the Supreme Court’s suo moto order extending limitation periods due to the COVID-19 pandemic, the NCLAT calculated that the limitation period was extended until July 12, 2023, even without considering any acknowledgments.

The Tribunal then examined the Corporate Debtor’s financial statements for FY 2019-20, 2020-21, and 2021-22, and found that Note 33 in the statements explicitly mentioned the ‘counter guarantee of Rs.2,265.00 lakhs in favour of Southern Pesticides Corporation Limited’. Thus, relying on Supreme Court precedents, including Asset Reconstruction Co. (India) Ltd. v. Bishal Jaiswal [(2021) 6 SCC 366] and IL and FS Financial Services Ltd. vs. Adhunik Meghalaya Steels P. Ltd. [2025 SCC OnLine NCLAT 569], the Tribunal held that entries in a balance sheet can constitute a valid acknowledgment under Section 18 of the Limitation Act, provided they are examined on a case-by-case basis.

The NCLAT concluded that the mention of the guarantee in the balance sheets, which were prepared within three years of the DRT decree, served as a valid acknowledgment, thereby extending the limitation period.

Further, the Tribunal considered the letters sent by the Corporate Debtor to IDBI Bank, which explicitly referred to IDBI’s settlement offer and stated, “As per your settlement offer, an amount of Rs.30,90,143.28 can be paid upto 31.03.2021. You are, therefore, requested to consider our request favourably and inform the settlement amount”. The NCLAT found this to be a clear acknowledgment of the debt. Since these letters were sent before the expiry of the limitation period, they also provided a fresh period of limitation from their respective dates. Consequently, the NCLAT upheld the NCLT’s order admitting Section 7 application.

When the decision to not classify the account as fraudulent and to remove the red flag was a collective business decision taken by the majority of lenders after due deliberations, forensic audits, and under the purview of the RBI and the Ministry of Finance, a dissent by a few banks does not by itself impute criminality

The Bombay High Court in the case of GTL Limited vs CBI [Writ Petition No. 3631 of 2024] dated February 27, 2026, has held that an offence of cheating, as defined under section 415 of the Indian Penal Code, requires a fraudulent or dishonest intention at the very beginning of the transaction. Thus, the Court ruled that a mere breach of contract or a subsequent failure to keep up a promise is not sufficient to constitute the criminal offence of cheating.

As in the present case, there was no evidence of deception at the inception or any fraudulent act by the petitioner company, the Court said that its inherent power under Section 482 of the Code of Criminal Procedure, should be exercised to quash criminal proceedings to prevent a miscarriage of justice. This power can be used when unimpeachable documents produced by the accused substantially wipe out the allegations in the FIR, even if the investigation is still in progress.

The Court went on to explain that an investigation initiated against ‘unknown’ persons after a lengthy preliminary enquiry, without identifying any specific accused, amounts to a ‘roving and fishing inquiry’. Hence, the continuance of such a criminal proceeding cannot be permitted on the ground that the investigating agency may find the culprits at some future date.

The Court added the alleged loss of public exchequer does not fall within the meaning of wrongful loss in absence of any evidence of intentional and fraudulent act on the part of the petitioner-company. The CBI could not detect any illegal act or deceit in the entire transaction played by any of the directors of the petitioner-company. Their identity is known but there is no allegation against any of them. Hence, the criminal justice system cannot be set in motion in the mere hope of discovering an offender.

The Court observed that it was of considerable importance that the FIR was lodged against ‘unknown’ directors and bank officials, despite the CBI having conducted a Preliminary Enquiry for 18 months and collected 52 documents from which their identities were ascertainable. The Court noted that even at the time of the hearing, the CBI was unable to identify a single accused, which suggested the FIR was lodged for a fishing inquiry.

The Court gave significant weight to the commercial wisdom of the consortium of banks. It noted that the decision to not classify the account as fraudulent and to remove the red flag was a collective business decision taken by the majority of lenders after due deliberations, forensic audits, and under the purview of the RBI and the Ministry of Finance. Thus, the Court stated that such a decision cannot be second-guessed by an investigating agency, and a dissent by a few banks does not by itself impute criminality.

The Court highlighted that the CBI had previously, through a communication dated 5th September 2018, ordered the closure of the matter because the JLF had not classified the account as fraud. The Court also pointed to the bar under Section 17A of the Prevention of Corruption Act, which requires prior approval to investigate public servants (bank officials), and noted that no such approval was obtained.

A creditor cannot be forced to elect its remedy or apportion its claim between the principal debtor and the guarantor. A financial creditor is entitled to initiate and maintain simultaneous CIRP under the IBC

The Supreme Court in the case of ICICI Bank Ltd vs Era Infrastructure (India) Ltd [Civil Appeal No. 6094 of 2019] dated February 26, 2026, has held that a financial creditor is entitled to initiate and maintain simultaneous Corporate Insolvency Resolution Processes (CIRPs) under the Insolvency and Bankruptcy Code, 2016, against both the principal debtor and its corporate guarantor(s) for the same debt. This right stems from the principle of co-extensive liability of the surety as enshrined in Section 128 of the Indian Contract Act, 1872, which is not contradicted by the IBC.

The Apex Court held that a creditor cannot be forced to elect its remedy or apportion its claim between the principal debtor and the guarantor. The Court affirmed that the legal framework, particularly Section 60(2) of the IBC, envisages the possibility of concurrent proceedings and that any apprehension of unjust or double enrichment is addressed by existing regulatory safeguards that mandate the updating and revision of claims by the creditor and the Resolution Professional.

The Court observed that the question of whether simultaneous proceedings can be maintained is no longer res integra and is squarely covered by the decision in BRS Ventures Investments Ltd. v. SREI Infrastructure Finance Ltd. [(2025) 1 SCC 456]. The Court noted that Section 60(2) of the IBC itself contemplates separate or simultaneous insolvency proceedings against a corporate debtor and its guarantor. This provision, which requires that an application against a guarantor be filed before the same NCLT where the debtor’s CIRP is pending, implicitly permits concurrent proceedings.

The Court reiterated that while recovery is not the primary object of the IBC, it is central to the insolvency resolution process. It observed that if an application under Section 7 or 9 meets the statutory requirements of ‘debt’ and ‘default’, its admission is inevitable, irrespective of the applicant’s motive, such as recovery. While acknowledging the discretionary power of the Adjudicating Authority under Section 7(5)(a) as held in Axis Bank Ltd. v. Vidarbha Industries Power Ltd. [(2022) 8 SCC 352], the Court clarified that this discretion cannot be exercised arbitrarily and that admission should be the ordinary course unless there are good reasons not to.

On the doctrine of election of claims, the Court found no merit in the argument that a financial creditor must be compelled to elect its claim, i.e., to claim a part of the debt from the principal debtor and the rest from the guarantor. It observed that forcing a creditor to elect would defeat the purpose of a guarantee, as the guarantor’s liability is co-extensive with the principal debtor. The Court pointed out that the IBC contains no express provision for such an election, and imposing such a restriction would be an unwarranted judicial limitation on a statutory right.

On the apprehension of double enrichment, the Court addressed the concern that allowing simultaneous proceedings could lead to a creditor recovering more than its due. It found this apprehension to be far-fetched and observed that sufficient safeguards already exist within the IBC framework to prevent such an outcome. Specifically, Regulation 12A of the CIRP Regulations, 2016, obligates a creditor to update its claim upon satisfaction from any source, and Regulation 14 requires the Resolution Professional to revise the admitted claims based on new information.

Lastly, while acknowledging the submissions urging the Court to lay down guidelines for group insolvency and simultaneous proceedings, the Court declined to do so. It observed that the IBC is a well-researched policy framework and that venturing into laying down modalities would amount to judicial exploration and encroaching upon the legislative domain.

Any unencumbered asset of the Corporate Debtor w.r.t. which no claim was lodged during CIRP, could not be interfered with after the resolution plan had been approved and implemented

Emphasising the principle of finality of an approved resolution plan and the ‘clean slate’ doctrine, as established by the Supreme Court in Ghanashyam Mishra & Sons (P) Ltd. Vs Edelweiss Asset Reconstruction Co. Ltd. [(2021) 9 SCC 657], the National Company Law Appellate Tribunal (NCLAT), Principal Bench, New Delhi, in the case of Mangalam Global Enterprise Limited vs Catalyst Trusteeship Limited [Company Appeal (AT) (Insolvency) No. 114 of 2025] dated March 02, 2026, has held that once a resolution plan is approved by the Adjudicating Authority, all claims which are not part of the plan stand extinguished. This ensures that the successful resolution applicant can start with a ‘fresh slate’ without the threat of ‘surprise claim’.

The NCLAT ruled that since the Respondent No. 1 in the present case has failed to file its claim regarding the purported lien over the Fixed Deposits (FD) during the Corporate Insolvency Resolution Process (CIRP), any such claim was extinguished upon the approval of the resolution plan. Consequently, the FD, being an unencumbered asset of the Corporate Debtor, could not be interfered with after the plan had been approved and implemented.

The NCLAT Clarified that the approved plan could not be altered based on claims that were not pursued in time. Therefore, the Successful Resolution Applicant (SRA – Mangalam Global Enterprise Limited) for the Corporate Debtor (H.M. Industrial Private Limited) was entitled to the liquidation of the FD and the transfer of its proceeds. The NCLAT therefore, directed Bank of Baroda to liquidate the FD and transfer the amount with accrued interest to the Appellant.

The Tribunal observed that while the Information Memorandum did not list the FD individually, it reflected a consolidated amount for FDRs under ‘Current Investment’ in the balance sheet. Further, an affidavit from Bank of Baroda (Respondent No. 2) confirmed the existence of the Rs. 42 lakh FD. Based on a holistic view of the Information Memorandum and the bank’s affidavit, the NCLAT concluded that the FD was indeed an asset of the Corporate Debtor.

The Tribunal gave significant weight to an affidavit filed by Bank of Baroda, which unequivocally stated that the bank had not created any lien on the said FD and was merely its custodian. Also, a physical examination of the FD receipt showed that the columns designated for ‘Lien Noted on’ and ‘Lien Cancelled on’ were left blank, indicating no lien was ever marked. The Tribunal thus concluded that Respondent No. 1 had failed to provide any document to prove that a lien or charge was created on the FD, making its claim untenable.

The NCLAT distinguished the FD from margin money, and noted that the FD was not drawn in favour of the bank but in the joint names of the Corporate Debtor and the Debenture Trustee. It was never earmarked for a specific purpose, such as security for a Letter of Credit or Bank Guarantee, and was not placed in a trust-like structure. Therefore, it remained an asset of the Corporate Debtor and could not be treated as margin money.

Payment made for legitimate and documented managerial services rendered in the ordinary course of business to maintain the company as a going concern cannot be deemed fraudulent under Section 66 without strict proof of malafide intent, especially when similar claims for other periods have been admitted

The National Company Law Appellate Tribunal (NCLAT), Principal Bench, New Delhi, in the case of Rakshit Dhirajlal Doshi vs Chirag Shah [Company Appeal (AT) (Insolvency) No. 1855 of 2025] dated March 03, 2026, has held that to classify a transaction as fraudulent or wrongful trading under Section 66 of the Insolvency and Bankruptcy Code, 2016 (IBC), there must be cogent and conclusive evidence demonstrating a deliberate intent to defraud creditors; a mere presumption or suspicion is not sufficient.

The NCLAT held that the payments made for legitimate and documented managerial services rendered in the ordinary course of business to maintain the company as a going concern cannot be deemed fraudulent under Section 66 without strict proof of malafide intent, especially when similar claims for other periods have been admitted.

However, any withdrawal made with the knowledge that the company’s insolvency is imminent or inevitable, particularly if cleared after the commencement of the CIRP, can be directed to be refunded to the corporate debtor’s account, added the Tribunal.

The Tribunal observed that establishing a case for fraudulent or wrongful trading under Section 66 of the IBC requires a high burden of proof, which must be of an unimpeachable nature and beyond reasonable doubt. Mere suspicion or presumption of fraud is insufficient to attract the provisions of Section 66 IBC.

The NCLAT noted that the Resolution Professional had admitted the appellants’ remuneration claims of Rs. 54.36 lakhs for the period FY 2020-2021, which was supported by records like the IBBI Claims Portal and the Transaction Audit Report (TAR). Further, ledger entries clearly showed that salaries for FY 2019-2020 were due and paid accordingly.

Now, since the respondent did not deny that managerial services were rendered or allege any falsification of records, the NCLAT found it unjustified to treat the remuneration for 2019-2020 as fraudulent when similar remuneration for a subsequent period was accepted as legitimate.

The Tribunal found the respondent’s argument regarding the proximity of the withdrawal date to the insolvency commencement date to be factually incorrect. Bank statements revealed that the withdrawal of Rs. 21.64 lakhs occurred on March 31, 2021, more than 15 months before the CIRP began, which negated the inference of last-minute siphoning of funds. However, regarding a separate withdrawal of Rs. 2 lakhs via a cheque (cleared after CIRP admission), the NCLAT opined that the appellant likely knew insolvency was imminent, and thus this amount should be refunded.

The NCLAT also dismissed the argument that routing funds through a sister concern was inherently fraudulent, stating it can be a standard business practice and requires specific pleading and proof of fraudulent intent. Similarly, the inability to pay statutory dues during financial distress does not automatically prove a dishonest design to defraud creditors when paying for legitimate managerial services.

Finally, the NCLAT criticized the Adjudicating Authority for interchangeably using the terms ‘preferential transaction’ and ‘fraudulent transaction’. It emphasized that these are distinct concepts under the IBC (governed by Section 43 and Section 66, respectively), each requiring different elements of proof and having different consequences.

A procedural defect, such as the failure to file a Statement of Truth as mandated by Order VI Rule 15A of the CPC in a commercial suit, is a curable irregularity. When a suit has been fully tried on its merits and a conclusive finding on the rights and liabilities of the parties has been reached based on evidence, the suit cannot be dismissed solely on account of such a rectifiable procedural defect

The Delhi High Court in the case of Shashi Garg vs Renu Garg [RFA (COMM) 17/2024] dated February 24, 2026, has held that a procedural defect, such as the failure to file a Statement of Truth as mandated by Order VI Rule 15A of the CPC in a commercial suit, is a curable irregularity. When a suit has been fully tried on its merits and a conclusive finding on the rights and liabilities of the parties has been reached based on evidence, the suit cannot be dismissed solely on account of such a rectifiable procedural defect.

This is particularly so when the defect does not affect the jurisdiction of the court or cause any prejudice to the opposing party, added the Court, while clarifying that the correct course of action is to afford the defaulting party an opportunity to rectify the defect, and thereafter, the court should proceed to pass a decree in accordance with its findings on the merits of the case.

The Court observed that the central issue was the dismissal of a suit on a procedural technicality after a full trial on merits had been concluded in the Plaintiff’s favour. The Court acknowledged that Order VI Rule 15A of the CPC is couched in mandatory terms to ensure procedural discipline in commercial disputes. However, it emphasized the legal principle that procedural law is merely a ‘handmaid of justice’ and a defect of form should not be allowed to defeat substantial rights, unless it goes to the root of jurisdiction or causes irremediable prejudice.

The Court noted that the District Judge had conducted a meticulous examination of evidence, including ledger accounts, invoices, and witness testimonies, and had arrived at a conclusive finding that the Plaintiff was entitled to recover a principal sum of Rs. 29.64 Lakh. In these circumstances, dismissing the suit for a curable defect, especially when it was originally not a commercial suit, would amount to elevating procedure over substance.

Judicial review by NCLT/ NCLAT and courts is strictly confined to the limited grounds specified in the IBC, primarily concerning procedural compliance and legality under Sections 30(2) and 61(3) of the IBC, and does not extend to the merits of a commercial decision

The Supreme Court in the case of Torrent Power vs Ashish Arjunkumar Rathi [Civil Appeal Nos. 11746-11747 of 2024] dated February 27, 2026, has held that the commercial wisdom of the Committee of Creditors (CoC) in evaluating and approving a resolution plan is paramount and non-justiciable. Essentially, judicial review by adjudicating authorities (NCLT, NCLAT) and courts is strictly confined to the limited grounds specified in the Insolvency and Bankruptcy Code, 2016 (IBC), primarily concerning procedural compliance and legality under Sections 30(2) and 61(3) of the IBC, and does not extend to the merits of a commercial decision.

The Court held that a ‘material irregularity’ under Section 61(3)(ii) of the IBC cannot be attributed to a Resolution Professional (RP) when the RP is acting solely on the express instructions of the CoC. The process of seeking clarifications from resolution applicants to remove ambiguities in their plans, without altering the fundamental commercial terms or the net present value of the offer, does not constitute an impermissible modification of the plan but is a valid exercise within the scope of the CoC’s evaluation process.

The Court cautioned that that unsuccessful bidders will always try to spin commercial decisions of the CoC as procedurally faulty in order to secure a second shot through litigation by filing applications or making representations. Thus, from an ex-post perspective, excessive judicial review in the CIRP carries significant economic costs that run counter to the objects of IBC.

Further, the Court explained that the IBC is premised on the recognition that delay and uncertainty are value-destructive in distressed situations. When commercial decisions taken by the CoC are subjected to expansive judicial scrutiny, resolution timelines lengthen, transaction costs rise, and the going-concern value of the Corporate Debtor erodes. The consequence therefore is not merely delay, but a tangible loss of economic value for all stakeholders.

The Court observed that an appeal to the Supreme Court under Section 62 of the IBC is permissible only on a question of law. The grounds for an appeal to the NCLAT against an approved resolution plan are strictly limited by Section 61(3) of the IBC. As far as the appellants’ primary ground regarding ‘material irregularity’ by the RP under Section 61(3)(ii) is concerned, the Court found this ground was not made out because the RP acted strictly on the instructions of the CoC when seeking clarifications.

The Court explained that to hold that the RP’s actions, directed by the CoC, constitute a material irregularity would be to conflate the distinct statutory roles of the RP and the CoC and indirectly subject the CoC’s decisions to judicial review, contrary to the IBC’s scheme.

The Supreme Court in the case of Union of India vs Larsen & Turbo Limited [Special Leave Petition (Civil) No. 14989 of 2023] dated February 27, 2026, has held that pre-award and post-award interest operate in distinct fields and a contractual bar applicable to the former cannot, by implication, be extended to the latter, and thus, any exclusion of post-award interest must be explicit and unambiguous. The Court explained that under the Arbitration and Conciliation Act, 1996, an arbitral tribunal’s power to grant pre-award or pendente lite interest is circumscribed by the terms of the contract between the parties, as mandated by Section 31(7)(a).

Where a contract contains an express and unambiguous clause prohibiting the payment of interest on amounts payable to the contractor, the arbitrator lacks jurisdiction to award such interest, either directly or indirectly under the guise of ‘compensation’ or ‘financing charges’, added the Court, while pointing out that an award granting such interest is contrary to the contract and is liable to be set aside.

The Apex Court emphasised that the grant of post-award interest is governed by Section 31(7)(b) of the 1996 Act and is not subject to party autonomy unless explicitly and unambiguously excluded by the contract. A contractual bar on pre-award or pendente lite interest does not, by implication, extend to post-award interest.

The arbitral tribunal is justified in awarding post-award interest in the absence of an express contractual prohibition. However, the rate of such interest is subject to judicial review and can be modified by the court if it is found to be excessive, unsubstantiated, or not in consonance with the principle of just compensation, explained the Court.

On ‘Pre-award and Pendente Lite Interest’, the Court observed that contractual bar is absolute, and analysed Clause 16(3) of the GCC, which states, ‘no interest will be payable upon the Earnest Money and Security Deposit or amounts payable to the Contractor under the Contract’, and Clause 64(5), which bars interest on an award for any period until the date the award is made. The Court further observed that Section 28(3) and Section 31(7)(a) of the 1996 Act subordinate the arbitrator’s discretion to the contractual provisions governing interest.

The Court rejected the respondent’s argument that the principle of ejusdem generis should apply to Clause 16(3), which would limit the interest bar only to sums like earnest money or security deposits. The Court clarified that the expression “amounts payable to the contractor under the contract” is independent and distinct, and the use of the word ‘or’ means it must be read disjunctively from earnest money and security deposit.

The Court went on to hold that awarding interest under the guise of ‘compensation’ or ‘financing charges’ is an attempt to circumvent the express contractual bar. Since the parties are governed by the contract, the Arbitral Tribunal, being a creature of the contract, cannot go beyond its terms. The Court noted that the Tribunal itself rejected a direct claim for interest but then proceeded to award interest indirectly in Claims 1, 3, and 6, which was a serious error.

On Post-award Interest, the Court observed that post-award interest is governed by a distinct legal regime under Section 31(7)(b) of the Act, which operates independently of the principles applicable to pre-award interest. The Court emphasised that Clause 64(5) of the GCC only bars interest ‘till the date on which the award is made’ and does not prohibit interest for the period subsequent to the award. Further, the Court found no other provision in the GCC that expressly bars post-award interest. In the absence of such an explicit and unambiguous exclusion, the statutory mandate under Section 31(7)(b) must prevail.

Legal Updates (Feb 23 – Feb 28, 2026)

A contract, such as a Debenture Trust Deed (DTD), cannot be considered novated or modified through informal communications with only one of several parties, especially when the contract itself prescribes a strict and formal procedure for amendment that has not been followed

The Supreme Court in the case of Catalyst Trusteeship Ltd vs Ecstasy Realty Pvt Ltd [Civil Appeal No. 7424 of 2025] dated February 24, 2026, has held that for an application under Section 7 of the Insolvency and Bankruptcy Code, 2016 (IBC) to be admitted, the adjudicating authority (NCLT) is only required to ascertain the existence of a financial debt and a default in its payment. The concept of a pre-existing dispute, which is a defence against an application by an operational creditor under Section 9, is not applicable to an application by a financial creditor under Section 7 of the IBC.

The Apex Court held that a contract, such as a Debenture Trust Deed (DTD), cannot be considered novated or modified through informal communications with only one of several parties, especially when the contract itself prescribes a strict and formal procedure for amendment that has not been followed. For a novation under Section 62 of the Contract Act, 1872, consensus among all original parties is essential.

Further, the Court emphasised that a waiver of rights under a contract cannot be implied when the agreement explicitly requires such waiver to be in writing. The duty of a debenture trustee is to the debenture holders, and acting to protect their interests as per the governing deed does not amount to collusion or unfairness.

The Court observed that the NCLT and NCLAT erred by proceeding on the assumption that a moratorium was in place. The Court noted that the restructuring discussions were held with only one debenture holder, ECLF, and there was no evidence that ECLF was authorized to act on behalf of all other debenture holders, who were separate legal entities.

The Court also observed that the DTD contained specific provisions for its modification (Clause 33), which required the prior written consent of the debenture trustee and a ‘Special Resolution’ passed by a three-fourths majority of the debenture holders, which procedure was admittedly not followed. Thus, any waiver of the DTD’s terms had to be express and in writing, as stipulated in Clause 37, and no such written waiver existed.

The NCLT and NCLAT had also casually brushed aside an order from the Bombay High Court, which had refused to grant an interim injunction in a commercial suit filed by the respondent because the DTD modification procedure had not been complied with, added the Court.

Thus, the Court concluded that the concurrent findings of the NCLT and NCLAT were perverse, based on surmises and conjectures, and warranted interference.

Whether the cheque was issued by way of security or in discharge of a legally enforceable debt is a matter of evidence that cannot be adjudicated in proceedings under Section 482 CrPC

The Jammu & Kashmir & Ladakh High Court in the case of Deepak Bawa Sharma vs Asif Iqbal [CRM(M) No. 323/2023] dated February 13, 2026, has held that whether the check was issued by way of security or in discharge of a legally enforceable debt is a matter of evidence that cannot be adjudicated in proceedings under Section 482 CrPC, and hence, dismissed the petition seeking quashing of proceedings under Section 138 of the Negotiable Instruments Act, 1881 (NI Act).

The case arose from a petition filed for the quashing of a complaint pending before the Trial Court under Section 138 of the NI Act. The complaint alleged the dishonour of a cheque for Rs. 35 lakhs issued by the petitioner. The record indicates that the petitioner had already appeared before the Trial Court, participated in the proceedings, and cross-examined the complainant’s witnesses. It was also noted that upon being put on notice under Section 251 CrPC, the petitioner did not raise any specific plea that the cheque had been issued merely as security or that the liability had already been discharged.

The High Court rejected the petitioner’s contention that the cheque was issued only as a security instrument and that no subsisting liability existed, and observed that proceedings under section 138 of the NI Act are governed by the statutory presumption contained in sections 118 and 139 of the NI Act. The Court held that disputed questions such as the nature of the cheque and existence of liability fall within the domain of trial and cannot be examined under inherent jurisdiction.

Since the complaint disclosed the ingredients constituting an offense under Section 138 of the NI Act and that no abuse of process was made out, the High Court declined interference and directed the trial court to proceed in accordance with law.

A contractual prohibition on the payment of interest does not bar the grant of post-award (future) interest, as the entitlement to such interest is statutory under Section 31(7)(b) of the Arbitration and Conciliation Act, 1996, and is not subject to party autonomy

The Delhi High Court in the case of Ircon International Ltd vs Cannon Engineering Construction Cannon Cottage [FAO(OS) (COMM) 16/2022] dated February 24, 2026, has held that the scope of judicial interference in an appeal under Section 37 of the Arbitration and Conciliation Act, 1996, is limited to examining whether the court exercising jurisdiction under Section 34 has acted within its prescribed legal limits, and it does not permit a re-appreciation of evidence or merits of the arbitral findings. The Court emphasised that the determination of factual issues, such as the classification of excavated material or the necessity of specific construction methods, and the interpretation of contractual terms are within the exclusive domain of the Arbitral Tribunal.

The Court, therefore, ruled that a contractual prohibition on the payment of interest does not bar the grant of post-award (future) interest, as the entitlement to such interest is statutory under Section 31(7)(b) of the 1996 Act and is not subject to party autonomy. Further, the Court stated that a party that knowingly accepts the benefit of extra work executed by a contractor without raising any objection cannot subsequently refuse payment by citing a lack of formal prior approval, as a party cannot be permitted to profit from its own inaction.

The Court observed that its appellate jurisdiction under Section 37 of the 1996 Act is extremely circumscribed and not a plenary appellate power to reappreciate evidence or reassess the merits of arbitral findings. Essentially, the interference is warranted only where the Section 34 court has failed to exercise its jurisdiction or has exceeded its bounds.

On the grant of future interest, the Court observed that the issue was no longer res integra, as the Supreme Court has settled that post-award interest under Section 31(7)(b) of the Act is statutory and cannot be contracted out, unlike pre-award interest. Finally, the Court concluded that the discretion to award costs lies with the Arbitrator under Section 31A of the Act, and since the majority of claims were allowed, the award of costs was not perverse or arbitrary.

When an efficacious statutory remedy is available before the Securities Appellate Tribunal under Section 15T of the SEBI Act, 1992, and Section 23L of the Securities Contract (Regulation) Act, 1956, a writ petition under Article 226 of the Constitution is not maintainable

The Delhi High Court in the case of KC Aggarwal vs SEBI [W.P.(C) 2167/2026] dated February 16, 2026, has held that when an efficacious statutory remedy is available before the Securities Appellate Tribunal under Section 15T of the SEBI Act, 1992, and Section 23L of the Securities Contract (Regulation) Act, 1956, a writ petition under Article 226 of the Constitution is not maintainable.

The High Court observed that the present petition appeared to have been filed solely to interdict the IPO of Respondent No. 2, and noted that if the petitioner was aggrieved by any inaction on the part of SEBI, the efficacious remedy available was to approach the Securities Appellate Tribunal (SAT) under Section 15T of the SEBI Act, 1992, and Section 23L of the Securities Contract (Regulation) Act, 1956.

The Court clarified that any person aggrieved by the NOC granted by SEBI is entitled to approach the SAT. Further, the Court observed that both Respondent Nos. 1 and 2 are based in Mumbai, the NOC was granted in Mumbai, and therefore, the Delhi High Court lacked territorial jurisdiction to entertain the petition. The Court also noted that the transactions regarding wrongful debits from the petitioner’s account were already the subject matter of three separate proceedings initiated by the petitioner.

The liability to pay the penalty imposed under Section 4A(3)(b) of the Employees’ Compensation Act, 1923, for default in paying compensation within the stipulated period, is the exclusive responsibility of the employer and cannot be fastened upon the Insurance Company

The Supreme Court in the case of New India Assurance vs Rekha Chaudhary [Civil Appeal No. 174 of 2026] dated February 23, 2026, has ruled that the liability to pay the penalty imposed under Section 4A(3)(b) of the Employees’ Compensation Act, 1923, for default in paying compensation within the stipulated period, is the exclusive responsibility of the employer and cannot be fastened upon the Insurance Company.

The Court clarified that the penalty is levied on account of the employer’s personal fault and negligence for not providing a justifiable cause for the delay, and therefore, while the insurer is contractually and statutorily bound to indemnify the employer for the principal compensation amount and interest thereon under Section 4A(3)(a), the liability for the penalty under Section 4A(3)(b) must be borne by the employer alone.

The Court observed that the EC Act, 1923, is a social welfare legislation intended to provide expeditious compensation to employees and their families, and its provisions must be given a liberal and purposive interpretation. The Court traced the legislative history of Section 4A of the EC Act, noting it was inserted in 1959 and subsequently substituted by an amendment in 1995.

The Court noted that the 1995 amendment deliberately severed the penalty component from the compensation and interest components. The substituted Section 4A(3) now deals with compensation and interest under clause (a), and the penalty for unjustified delay under a separate clause (b). The legislative intent behind this separation was to place the burden of the penalty, which arises from the employer’s default, directly on the employer to act as a deterrent.

Further, the Court observed that the statutory obligation on the employer to pay compensation within one month, as mandated by Section 4A(3), cannot be overridden by any contractual arrangement, such as an insurance policy. Thus, the Court reaffirmed the legal principle that while an insurer is liable for compensation and interest, the penalty imposed under Section 4A(3)(b) is due to the ‘personal fault’ of the insured employer and cannot be passed on to the insurer.

Insolvency and Bankruptcy Code, 2016 has an overriding effect over any inconsistent provisions in other laws, including the Companies Act, by virtue of Section 238 of the IBC. The corporate restructuring under the IBC must be prioritized over stalled and ineffective proceedings under the Companies Act to protect public funds and the larger economic interest

The Supreme Court in the case of Omkara Assets Reconstruction Private Limited vs Amit Chaturvedi [Civil Appeal No.11417 of 2025] dated February 24, 2026, has held that the Insolvency and Bankruptcy Code, 2016 (IBC), is a special statute whose provisions have an overriding effect over any inconsistent provisions in other laws, including the Companies Act, by virtue of Section 238 of the IBC. The Court emphasised that the corporate restructuring under the IBC must be prioritized over stalled and ineffective proceedings under the Companies Act to protect public funds and the larger economic interest.

Essentially, the Apex Court held that an independent proceeding initiated under Section 7 of the IBC for the revival of a corporate debtor is not affected by and shall prevail over pending proceedings under the Companies Act, such as a Scheme of Arrangement, especially when the latter has been rendered defunct and inoperable due to gross, unexplained delays and non-compliance with statutory timelines.

The Court observed that the respondent company had failed to comply with the procedural and statutory timelines mandated under the Companies Act, 1956, and the Companies (Court) Rules, 1959, for the SOA. The delay of almost ten years in getting the scheme sanctioned, which was based on dues as of 2008, rendered it redundant, inoperable, and unenforceable by 2019, especially as the debt had grown astronomically in the interim.

The Court noted that upon the coming into force of The Companies (Transfer of Pending Proceedings) Rules, 2016, the proceedings for the SOA should have been transferred to the National Company Law Tribunal (NCLT). Thus, the exception for matters ‘reserved for orders’ did not apply here, as the second motion was merely pending and had not been reserved for orders when the 2016 Rules became effective.

The Court also held that judicial discipline cannot be invoked by tardy litigators to stall proceedings under the IBC, particularly in cases with significant economic implications involving public funds and the rehabilitation of an industry. It observed that the primary goal of the IBC is the resuscitation of the corporate debtor in the larger public interest, which includes creditors, workmen, and the economy at large. The Court also clarified that a compromise or arrangement under Section 230 of the Companies Act, 2013, can be entered into even during an IBC proceeding.

The incorporation of oppressive and one-sided clauses in a standard form agreement, where the homebuyer has no option but to sign, constitutes an unfair trade practice. Hence, jurisdiction of NCDRC to award reasonable compensation for deficiency in service cannot be curtailed by unfair terms in a builder-buyer agreement

The Supreme Court in the case of Parsvnath Developers vs Mohit Khirbat [Civil Appeal No. 5289 of 2022] dated February 20, 2026, has held that the jurisdiction of consumer fora to award just and reasonable compensation for deficiency in service is statutory and cannot be curtailed or defeated by one-sided and unfair terms in a builder-buyer agreement. The Court clarified that the incorporation of oppressive and one-sided clauses in a standard form agreement, where the homebuyer has no option but to sign, constitutes an unfair trade practice. Accordingly, the Consumer fora are not bound to mechanically enforce a contractual term that stipulates nominal compensation for delay, especially when it results in manifest injustice to the consumer.

Offering possession of a flat without obtaining the mandatory Occupancy Certificate is not a valid offer of possession and amounts to a deficiency in service, asserted the Court, while emphasising that a developer cannot compel a homebuyer to take possession under such circumstances, as the Occupancy Certificate is a statutory pre-condition for lawful delivery.

The Supreme Court observed that the jurisdiction of consumer fora is statutory, not contractual, and is derived from the Consumer Protection Act, 1986. Thus, the power to adjudicate complaints and grant relief for “deficiency in service” under Sections 12, 14, and 22 of the 1986 Act is not limited by the terms of an agreement between the parties.

The Court further observed that housing construction is a “service”, and the failure to deliver possession within the stipulated period constitutes a “deficiency” under the Consumer Protection Act, and noted that the term “compensation” is of wide amplitude and includes redress for mental agony and harassment, not just pecuniary loss. The Court held that the incorporation of such one-sided and unreasonable clauses in a standard form contract, where the purchaser has little to no bargaining power, constitutes an “unfair trade practice” under Section 2(1)(r) of the 1986 Act.

Further, the Court observed that offering possession without a valid Occupancy Certificate is not a lawful offer of possession and constitutes a continuing deficiency in service. A homebuyer cannot be compelled to accept possession in such circumstances, as obtaining the certificate is a statutory pre-condition for lawful delivery. The Court took note of the appellant’s persistent non-compliance and failure to secure the Occupancy Certificate despite repeated undertakings given before the Court.

The National Company Law Tribunal (NCLT) lacks jurisdiction to entertain challenges to provisional attachment orders passed by authorities under the Benami Act, and the remedy for such challenges lies exclusively before the competent forum constituted under the Benami Act itself

The Supreme Court in the case of S. Rajendran vs Deputy Commissioner of Income Tax (Benami Prohibition) [Civil Appeal No. 7140 of 2022] dated February 24, 2026, has ruled that orders passed under the Prohibition of Benami Property Transactions Act, 1988 (Benami Act) cannot be questioned before authorities under the Insolvency and Bankruptcy Code, 2016 (IBC). The Court clarified that the National Company Law Tribunal (NCLT) lacks jurisdiction to entertain challenges to provisional attachment orders passed by authorities under the Benami Act, and the remedy for such challenges lies exclusively before the competent forum constituted under the Benami Act itself.

The Apex Court emphasised that the adjudicatory fora under the IBC must yield to the specialised mechanism created by the Benami Act for disputes pertaining to the exercise of sovereign statutory power, particularly in relation to the determination of legality of title, attachment, or confiscation of property.

The Court observed that both the Benami Act and the IBC are special legislations operating in distinct fields. The Benami Act is a complete and self-contained code for the identification, attachment, adjudication, and confiscation of benami property, with a distinct adjudicatory and appellate hierarchy. On the other hand, the IBC is an exhaustive code governing insolvency resolution and liquidation of corporate persons.

The Court explained that the jurisdiction of authorities under the IBC cannot be expansively construed to trench upon fields founded in the public law domain, as proceedings under the Benami Act are a sovereign exercise aimed at identifying and extinguishing benami transactions and fall squarely within the public law domain. Hence, permitting the NCLT to examine the correctness of an attachment under the Benami Act via Section 60(5) of the IBC would elevate it to a forum for judicial review over sovereign action, which is impermissible.

Section 36 of the IBC specifies that the liquidation estate comprises only assets beneficially owned by the corporate debtor, whereas, the property held benami is, by definition, held in a fiduciary capacity for the real owner and is excluded from the liquidation estate under Section 36(4)(a)(i), added the Court, and pointed out that once the Adjudicating Authority under the Benami Act concludes that the corporate debtor is a benamidar, the beneficial ownership is negated, and such property cannot be administered in liquidation.

The Court went on to observe that the moratorium under Section 14 of the IBC is intended to preserve the debtor’s estate from creditor actions aimed at debt recovery. It does not interdict sovereign proceedings in rem for attachment or confiscation under penal statutes like the Benami Act, which are distinct from creditor enforcement actions.

The Court also explained that the immunity provided under Section 32A of the IBC is event-based and is triggered only upon the approval of a resolution plan or the completion of a liquidation sale. This provision does not retrospectively validate a defective title or convert benami property into the assets of the corporate debtor.

Lastly, the Court concluded that in the event of a conflict between two special acts, the dominant purpose of both statutes must be analysed to ascertain which should prevail, and the primary effort must be to harmonise the statutes. The IBC, which deals with insolvency, cannot be used to dilute or override statutory proceedings undertaken in the public law sphere for the confiscation of tainted property under the Benami Act.

Where Law Officers are engaged by the State on a full-time basis, are prohibited from private practice, and their service conditions substantially mirror those of regular employees, they cannot be denied essential service benefits like Leave Travel Concession (LTC), medical reimbursement, and earned leave solely on the ground that their engagement is “contractual”

The Punjab & Haryana High Court in the case of Shruti Jain vs State of Haryana [CWP-16828-2021 (O&M)] dated February 20, 2026, has held that where Law Officers are engaged by the State on a full-time basis, are prohibited from private practice, and their service conditions substantially mirror those of regular employees, they cannot be denied essential service benefits like Leave Travel Concession (LTC), medical reimbursement, and earned leave solely on the ground that their engagement is “contractual”.

To do so without a rational basis constitutes arbitrary and selective discrimination, which is impermissible under constitutional principles of equality, fairness, and legitimate expectation, added the Court, while emphasising that the substance of the employment relationship must prevail over its form.

The Court observed that the legal profession is sui generis (unique in nature), service-oriented, and cannot be equated with any other traditional profession or commercial venture. It recognized the indispensable role of advocates in the justice delivery system, upholding the rule of law, and preserving the independence of the judiciary.

The Court said that the engagement of lawyers by the State as Law Officers acquires a constitutional dimension, and their role is not transient or ornamental but is structural to constitutional governance, and they occupy a position of trust and responsibility. It observed that the engagement cannot be dismissed as merely “contractual” to deny fair and equitable service benefits.

The Court observed to look beyond the label of “contractual engagement” to the reality of the service relationship, especially where it involves exclusivity, continuity, and institutional integration. The Court also found that the petitioners were appointed against sanctioned posts, received salaries in regular pay scales from the Consolidated Fund, and were prohibited from private practice, making their role institutional and continuous.

Moving further, the Court held that any classification of employees must be based on an intelligible differentia with a nexus to the object sought to be achieved. Since the State failed to provide any rational basis for denying benefits like LTC, earned leave, and medical reimbursement to full-time Law Officers while granting them every other attribute of regular service, the Bench termed such denial as a ‘residual relic of terminology’.

The Court pointed out that by consistently extending pay scale revisions and other allowances in line with regular government employees, the State created a legitimate expectation that the petitioners would not be selectively excluded from core service benefits. Hence, any deviation from this established practice must be reasonable, which the State failed to demonstrate.

A civil court’s jurisdiction to entertain a suit for partition and injunction is not ousted by Section 34 of the SARFAESI Act, 2002, when the suit is filed by a third party (such as a coparcener who is not a borrower or guarantor) asserting an independent civil right in the secured property

The Bombay High Court in the case of Tourism Finance Corporation of India Limited vs Aishwarya Chetan Khedkar [Writ Petition No. 3272 of 2025] dated January 24, 2026, has held that a civil court’s jurisdiction to entertain a suit for partition and injunction is not ousted by Section 34 of the SARFAESI Act, 2002, when the suit is filed by a third party (such as a coparcener who is not a borrower or guarantor) asserting an independent civil right in the secured property, as the relief of partition is beyond the statutory jurisdiction of the Debt Recovery Tribunal.

The Court observed that the jurisdiction of a civil court is plenary and its exclusion cannot be readily inferred. A Tribunal, being a creature of statute, has limited jurisdiction and cannot transgress its statutory limits. The Court rejected the Petitioner’s argument that Section 34 of the SARFAESI Act ousts the civil court’s jurisdiction.

The Court explained that the jurisdiction of the Civil Court is not barred where the civil rights of persons other than the borrower or guarantor are involved, especially when the relief claimed (such as partition) is incapable of being decided by the Debt Recovery Tribunal (DRT). Thus, a suit for partition and injunction by a coparcener falls squarely within the jurisdiction of the civil court.

Legal Updates (Feb 16 – Feb 21, 2026)

If the contract doesn’t stipulate for payment of interest on a delayed payment, a party is not entitled to the same. The object of the Interest Act, 1978 is to mandate the payment of interest to the parties in the absence of, or any vacuum in the agreement, or where the interest so fixed is contrary to law, being in the nature of an exorbitant charge

The Supreme Court in the case of Kerala Water Authority vs T I Raju [SLP(C) NO(s). 17823/2023] dated February 09, 2026, has held that when the contract doesn’t stipulate for payment of interest on a delayed payment, a party is not entitled to the same. The Court observed that the object of the Interest Act, 1978 is to mandate the payment of interest to the parties in the absence of, or any vacuum in the agreement, or where the interest so fixed is contrary to law, being in the nature of an exorbitant charge.

The case arose from a contract executed in April 2013 between the Kerala Water Authority and the Respondent-contractor for the construction of a sewage treatment plant at the Government Medical College, Calicut. The work was completed in July 2014, but the principal amount of Rs. 86.64 lakh was released only in March 2016 following a writ petition. The Respondent subsequently filed a civil suit seeking interest at 14% per annum for the delay.

The Trial Court allowed the claim and the High Court later reduced the interest to 9%, prompting the Kerala Water Authority to move to the Supreme Court, challenging the impugned finding in view of the express clause mentioned in the contract which stated that payments would be subject to availability of funds and seniority of bills, and that “no claims or interest for damages whatsoever shall be made for the belated settlement of claims.” When the matter reached the High Court, it invoked Section 3(1) of the Interest Act, 1978, to grant interest on delayed payment.

The Supreme Court, however held that the Interest Act 1978 applies only where a contract is silent on interest or leaves a vacuum. Section 3(3) of the Act expressly bars the award of interest where a contract prohibits it. It also rejected reliance on Section 34 of the Code of Civil Procedure, observing that the provision deals only with the rate of interest once entitlement is established and does not create a right to interest when barred under the contract.

An order levying damages under Section 85-B of the Employees’ State Insurance Act, 1948 (ESI Act) cannot be set aside on the grounds of being ‘mechanical’, if inspection revealed that the wage and attendance records were manipulated and did not reflect the correct employment position

The Bombay High Court in the case of Deputy Regional Director vs Aashu Engineering Works [First Appeal No. 756 of 2011] dated February 17, 2026, has held that an order levying damages under Section 85-B of the Employees’ State Insurance Act, 1948 (ESI Act) cannot be set aside on the grounds of being ‘mechanical’ if the adjudicating authority has considered the specific submissions made by the employer in response to the show cause notice. The Court clarified that the onus is on the employer to plead specific mitigating factors (such as the number of defaults, extent of delay, etc.) before the authority.

The Court emphasised that it cannot subsequently fault the authority for not considering factors that were never raised, and that the judicial power to interfere with the quantum of damages is discretionary and should not be exercised in cases where the employer has not provided compelling reasons for the default and where there is evidence of malafide intention.

The Court found the Employees State Insurance Court’s (ESI Court) observation that the order under Section 85-B was passed mechanically to be incorrect. The Court also noted that the original order had provided detailed reasons for not accepting the submissions made by the respondent.

The Court observed that the respondent had not raised factors such as the number of defaults, extent of delay, or frequency of defaults in its reply to the show cause notice. Therefore, the ESI Court could not expect the appellant to have considered these factors, and the respondent should have pleaded these points if they wanted the benefit of such considerations.

The Court noted clear evidence of malafide intention on the part of the respondent, as an inspection revealed that the wage and attendance records were manipulated and did not reflect the correct employment position. Further investigation showed that a wage registers for the year 1997 was prepared in 2001 on forms bearing a 7-digit phone number, which was only introduced in 1999.

The Court opined that the appellant had exercised its discretion judiciously, and the damages levied of Rs. 27,849 were significantly lower than the maximum permissible amount, which could be up to the amount of arrears of Rs. 96,705. Further, the appellant had already taken a liberal view by considering the due date of contribution from the date of the visit notice rather than the actual due date.

Therefore, while acknowledging that a court can interfere with the quantum of damages, the Court clarified that such discretion must be exercised based on the specific facts of the case and the reasons advanced by the employer.

A dispute arising from a purely contractual relationship, governed by the terms of an agreement, cannot be converted into a criminal proceeding for cheating or criminal breach of trust where the essential ingredients of these offences are absent

The Calcutta High Court in the case of Tata Capital Finance Ltd vs State of West Bengal [CRR 2354 of 2023] dated February 13, 2026, has held that a dispute arising from a purely contractual relationship, governed by the terms of an agreement, cannot be converted into a criminal proceeding for cheating or criminal breach of trust where the essential ingredients of these offences are absent. The Court clarified that specifically, there must be evidence of dishonest intention from the inception for cheating and a clear entrustment of property for criminal breach of trust.

Furthermore, the Court clarified that an alleged violation of regulatory guidelines (like those from the RBI) does not automatically give rise to penal consequences under the Indian Penal Code for a matter rooted in a contract. The Court also reaffirmed the legal principle that charges for cheating (Section 420 IPC) and criminal breach of trust (Section 406 IPC) cannot be sustained simultaneously for the same transaction. The Court therefore allowed the criminal revisional application and quashed the proceedings against the petitioners.

The Court observed that the subject matter of the complaint arose purely out of an alleged violation of the terms and conditions of the loan agreements between the parties. It noted that the relationship was governed by these agreements, which also contained an arbitration clause that the complainant did not invoke. Thus, the Court affirmed the principle that a contractual dispute or a mere breach of contract per se should not lead to the initiation of a criminal proceeding.

The Court held that charges under Sections 406 and 420 of the IPC cannot be maintained simultaneously in the same breath, and explained that if a complainant alleges an offence of criminal breach of trust, it cannot be said in the same breath that the accused also committed the offence of cheating. The two offences are distinct and cannot co-exist simultaneously for the same transaction.

Further, the Court stated that the distinction between a mere breach of contract and the offence of cheating is a fine one, with the decisive factor being the accused’s intention at the time of inducement. To constitute cheating, there must be a fraudulent or designed intention from the very beginning of the contract’s formation. While subsequent conduct can be a factor in inferring this initial intention, it cannot be the sole test. The Court found that the complaint failed to satisfy these basic ingredients.

For an offence of criminal breach of trust, the Court clarified that mere proof of entrustment is sufficient, where an offender is lawfully entrusted with property and then dishonestly misappropriates it. Thus, in the present case, the Court concluded that there was no entrustment of money upon the petitioners, who were merely the loan sanctioning authority. The entrustment was pursuant to the loan agreement against the property, and the onus for the same never shifted to the petitioner company.

The Court emphasised that the police report and the Magistrate’s order were based on an alleged violation of RBI/NHB guidelines prohibiting foreclosure charges. However, the loan agreements were executed in November 2013 and November 2014, which was prior to the notification in question.

More importantly, the Court held that a violation of RBI guidelines per se cannot attract penal action under the IPC, as the core allegation was about an excess payment during foreclosure which was governed by the terms of the agreement. The Court also pointed out that the investigating officer’s report about the violation of rules should have been verified with available materials, which was not done.

Section 5 of the Maharashtra Stamp Act, 1958, cannot be invoked to dissect a composite scheme sanctioned by a single NCLT order into ‘distinct matters’ or ‘transactions’ to levy separate stamp duty on each component of the merger

The Bombay High Court in the case of Schaeffler India vs Chief Controlling Revenue Authority [Writ Petition No. 7496 of 2023] dated February 18, 2026, has ruled that Section 5 of the Maharashtra Stamp Act, 1958, cannot be invoked to dissect a composite scheme sanctioned by a single NCLT order into ‘distinct matters’ or ‘transactions’ to levy separate stamp duty on each component of the merger. The ruling came while observing that the instrument chargeable to stamp duty is the order of the NCLT sanctioning a scheme of amalgamation, and not the underlying transactions of merger contained within that scheme.

The Court explained that the stamp duty is attracted to the instrument as a whole, and it is impermissible for stamp authorities to assess the underlying transactions for the purpose of levying duty. The Court clarified that the instrument is the NCLT, Mumbai order, which is a single instrument liable for stamp duty once, subject to the single statutory cap.

The Court observed that the statutory framework, through a conjoint reading of Section 2(g)(iv), Section 3, and Article 25(da) of the Maharashtra Stamp Act, 1958, clearly indicates that the instrument chargeable with stamp duty is the order of the NCLT sanctioning the scheme, and not the underlying scheme of amalgamation itself. Thus, the Court held that the impugned orders from the stamp authorities were legally unsustainable because they assessed the stamp duty payable on the underlying transactions of merger, rather than on the NCLT, Mumbai order which was the instrument lodged for adjudication.

On the application of Section 5 of the Stamp Act, 1958, the Court found the revenue authorities’ application to be erroneous. It explained that Section 5 applies where a single instrument relates to several distinct matters. Since the authorities had treated the amalgamation of INA Bearings and LuK India as two distinct matters within the NCLT Mumbai order, the Court held that applying Section 5 requires delving into the underlying transaction, which is impermissible in the case of an NCLT sanction order.

The Court agreed with the decision of the Gujarat High Court in Ambuja Cements Limited vs Chief Controlling Revenue Authority [C/SR/1/2020 decided on 10/02/2023], which held that a scheme of amalgamation sanctioned by a court cannot be brought within the sweep of Section 5 of the Stamp Act.

The Court also pointed out that the stamp authorities in Mumbai do not have the jurisdiction to assess stamp duty on the NCLT, Chennai order, as it did not originate in Maharashtra and was not ‘received’ in the state as per the Stamp Act. The mere reference to the amalgamation of LuK India in the NCLT, Mumbai order (for the purpose of confirming the fairness of the composite scheme) does not amount to bringing the NCLT, Chennai order into Maharashtra. The Court clarified that whether stamp duty was paid on the NCLT, Chennai order is a matter for the authorities in Chennai and is immaterial for assessing the duty on the NCLT, Mumbai order.

The remedy under Section 7 of the Insolvency & Bankruptcy Code (IBC) to initiate the Corporate Insolvency Resolution Process (CIRP) is not discretionary but mandatory, leaving the adjudicating authority with no option but to admit the application once the existence of a debt and a default is established

The Supreme Court in the case of Power Trust vs Bhuvan Madan [Civil Appeal No. 2211/2024] dated February 18, 2026, has held that the remedy under Section 7 of the Insolvency & Bankruptcy Code (IBC) to initiate the Corporate Insolvency Resolution Process (CIRP) is not discretionary but mandatory, leaving the adjudicating authority with no option but to admit the application once the existence of a debt and a default is established.

The Court observed that the Adjudicating Authority is not required to go into the inability of a corporate debtor to pay its debt. This is a clear departure from the scheme of winding up envisaged under Section 433(e) of the erstwhile Companies Act, 1956 which required the Adjudicating Authority to come to a finding with regard to the inability of the company to pay the debt and thereby arrive at a requisite satisfaction whether it is just and equitable to wind up the company. The Code restricts the scope of enquiry for admission of an insolvency process by a financial creditor merely to the existence of default of a debt due and payable and nothing more.

The Court further observed that when the financial creditor initiates the insolvency process for the purposes of admission, the Adjudicating Authority is only to ascertain the existence of a default from the records of the information utility or the evidence furnished by the financial creditor within fourteen days from the receipt of such application. At this stage, neither is a corporate debtor entitled nor is the Adjudicating Authority required to examine any dispute regarding the existence of such debt. This significantly reduces the scope of enquiry at the stage of a time-bound admission of an insolvency process by a financial creditor.

REGULATORY UPDATES

The RBI has amended the Foreign Exchange Management regulations for 2026, updating the external commercial borrowing (ECB) framework

The Reserve Bank of India (RBI) vide its Notification No. FEMA 3(R)(5)/2026-RB dated February 09, 2026, has notified the “Foreign Exchange Management (Borrowing and Lending) (First Amendment) Regulations, 2026” and made amendments to the Foreign Exchange Management (Borrowing and Lending) Regulations, 2018 (Notification No. FEMA 3(R)/2018-RB dated December 17, 2018).

Key Definitions (Regulation 2)

Benchmark Rate: This is defined as a widely accepted interbank rate or Alternative Reference Rate (ARR) of a 6-month tenor for foreign currency (FCY) ECBs. For Indian Rupee (INR) denominated ECBs, it is the prevailing yield of a Government of India security of corresponding maturity.
Control: For companies, ‘control’ aligns with the definition in the Companies Act, 2013. For LLPs, it means the right to appoint a majority of designated partners who have control over all LLP policies.
Cost of Borrowing: This includes the rate of interest, other fees, expenses, charges, and guarantee fees. It explicitly excludes commitment fees and statutory taxes payable in India.
Indian Entity: This is defined as a company incorporated under the Companies Act, 2013, a body corporate established under a Central/State Act, or an LLP registered under the Limited Liability Partnership Act, 2008.
Real Estate Business: The definition clarifies that this involves the purchase, sale, or lease of land with a view to earning profit. It excludes activities like the development of industrial parks, integrated townships, SEZs, infrastructure sector projects, and construction-development projects.

Restriction on End-Use of Borrowed Funds (Regulation 3A)

A new Regulation 3A has been inserted, which prohibits the use of borrowed funds for specific purposes in India, including: (i) Chit funds and Nidhi companies; (ii) Real estate business and construction of farmhouses, with specific conditions for construction-development projects and industrial parks; (iii) Agricultural and animal husbandry, with specified exceptions like floriculture, pisciculture, and services related to agro sectors under controlled conditions; (iv) Plantation activities, except for tea, coffee, rubber, cardamom, palm oil, and olive oil trees; (v) Trading in Transferrable Development Rights (TDRs); (vi) Transacting in listed or unlisted securities, except for strategic corporate actions like mergers, acquisitions, or demergers; (vii) Repayment of a domestic INR loan that was originally used for a restricted end-use or is classified as a Non-Performing Asset (NPA); and (viii) On-lending for any of the prohibited purposes.

Substitution of Schedule I – Revised External Commercial Borrowing (ECB) Framework

Eligible Borrowers – Any resident Indian entity (other than an individual) incorporated, established, or registered under a Central or State Act is eligible. Entities under restructuring or investigation can also raise ECB, subject to specific permissions or disclosures.
Recognised Lenders – An eligible borrower can raise ECB from a person resident outside India, a foreign branch of an Indian bank, or a financial institution in an IFSC.
Borrowing Limit – An eligible borrower can raise ECB up to the higher of: (a) USD 1 billion (outstanding ECB), or (b) 300% of its net worth as per the last audited standalone balance sheet. This limit does not apply to borrowers regulated by financial sector regulators.
Minimum Average Maturity Period (MAMP) – The MAMP for an ECB is three years. However, manufacturing sector entities can raise up to USD 150 million with a MAMP between one and three years. The MAMP requirement is waived for conversion to non-debt instruments, refinancing, debt waiver, and certain corporate actions.
Cost of Borrowing – The cost must align with prevailing market conditions. For ECBs with a MAMP of less than three years, the cost must comply with the ceiling specified for Trade Credits.
Security for ECB – ECBs can be secured by a charge on immovable, movable, financial, and intangible assets, or by a guarantee. The creation of such security is subject to conditions like obtaining a ‘No Objection Certificate’ from existing lenders if the asset is already encumbered.
Refinancing & Conversion – An existing ECB can be refinanced with a fresh ECB, provided the MAMP requirement of the original borrowing is not breached. ECBs can be converted into non-debt instruments subject to compliance with the Foreign Exchange Management (Non-Debt Instruments) Rules, 2019, and consent from the lender.
Reporting Requirements – Borrowers must use ‘Form ECB 1’ to obtain an LRN, ‘Revised Form ECB 1’ to report changes, and ‘Form ECB 2’ to report drawdowns and debt servicing. Failure to report for four consecutive quarters can lead to the borrower being classified as an “untraceable borrower”, which must be reported to the RBI and the Directorate of Enforcement.

Borrowing by Individuals from NRIs/OCIs (Regulation 6(B))

The amendment modifies the rules for resident individuals borrowing in INR from an NRI or a relative who is an OCI cardholder. Such borrowing is permitted subject to the conditions that: (i) The loan amount must be received via inward remittance or by debit to the lender’s NRE/NRO/FCNR(B)/SNRR account; and (ii) The borrowing must be on a non-repatriation basis, meaning both interest and principal repayment must be credited only to the lender’s NRO account.

Click here to read/ download the original notification

The SEBI has clarified obligations for Credit Rating Agencies (CRAs) when rating financial instruments fall under the purview of financial sector regulators (FSRs) other than SEBI

The Securities and Exchange Board of India (SEBI) vide its Circular No. SEBI/HO/DDHS/DDHS-PoD-2/I/4685/2026 dated February 10, 2026, while addressing to all registered Credit Rating Agencies (CRAs), Debenture Trustees, issuers of listed/proposed-to-be-listed non-convertible securities, recognized stock exchanges, and depositories, has clarified obligations for CRAs when rating financial instruments fall under the purview of financial sector regulators (FSRs) other than SEBI, as permitted by Regulation 9(f) of the SEBI (Credit Rating Agencies) Regulations, 1999.

Key updates:

Separation of Grievance Handling and Disclosures: The CRAs must use separate email IDs for grievances related to SEBI-regulated activities and those under other FSRs. Further, the CRAs must maintain distinct webpages or sections on their websites for disclosures related to SEBI-regulated activities and those under other FSRs. Additionally, while resources (manpower, IT, etc.) can be shared, the email IDs for grievances must remain separate.

Minimum Net Worth Requirements: The minimum net worth required under SEBI’s CRA Regulations must not be affected by the CRA’s activities under other FSRs. Also, any net worth stipulations by other FSRs are in addition to SEBI’s requirements.

Disclosure of Activities and Advertising/Marketing Material: The CRAs must disclose on their website the list of all activities carried out, along with the name of the regulator for each activity. Further, the advertising/marketing material for activities under other FSRs must be separate from that for SEBI-regulated activities. Also, for activities under other FSRs, CRAs must clearly disclose that SEBI’s investor protection and grievance/dispute redressal mechanisms are not available.

Disclosures in Rating Reports and Press Releases: The rating reports and press releases/rationales must mention the name(s) of the regulator(s) for the rated instruments. They must also clearly state that SEBI’s investor protection and grievance/dispute redressal mechanisms are not available for such ratings. Further, if a common rating report/press release is issued, there must be clear segregation and labelling of SEBI-regulated instruments and those under other FSRs.

Dealing with Clients: Before commencing activities under other FSRs, CRAs must make an upfront written disclosure to clients that the activity falls under another FSR, and include this in rating agreements/engagement letters. The CRAs must also obtain written confirmation from clients that they understand the nature of the activity, risks involved, and the non-availability of SEBI’s investor protection/grievance mechanisms. For existing clients with ongoing activities or outstanding ratings under other FSRs, CRAs must send written intimation specifying the nature of the activity, risks, and non-availability of SEBI mechanisms, and confirm compliance to SEBI after sending these intimations.

Internal Audit Report: The CRAs undertaking activities regulated by other FSRs must submit an undertaking as part of their half-yearly internal audit report, confirming compliance with CRA Regulations and relevant circulars. This undertaking must be reviewed and approved by the CRA’s Board of Directors.
As far as effective dates are concerned, the provisions under Paragraphs 2.1 (separation of grievance handling/disclosures) and 2.5.2 (intimation to existing clients) come into effect 12 months from the date of the circular. Rest, all other provisions come into effect 60 days from the date of the circular.

Click here to read/ download the original circular

The RBI has directed lenders to provide customers with written details of the recovery agents assigned to their cases, ensure that agents are not given sales-style targets that may push them toward harsh recovery practices, and refrain from engaging recovery agents in cases where the customer has already lodged a grievance with the bank

The Reserve Bank of India (RBI) vide its Press Release: 2025-2026/2099 dated February 12, 2026, has issued draft amendment directions on the Conduct of Regulated Entities (REs) in Recovery of Loans and Engagement of Recovery Agents. The draft seeks to strengthen governance, transparency, and customer protection in loan recovery practices adopted by banks.

The comments / feedback on the draft Amendment Directions may be submitted by the regulated entities and members of public / other stakeholders on or before March 6, 2026.

Under the draft directions, banks must put in place a comprehensive policy covering: (i) Recovery of loans; (ii) Engagement of recovery agents; and (iii) Taking possession of security. This policy must be structured, documented, and aligned with RBI’s regulatory expectations.

Key updates:

As far as eligibility and due diligence of recovery agents are concerned, the draft inculcates the criteria for selection and engagement, due diligence requirements prior to empanelment, verification of antecedents of recovery agents and their employees, and ongoing verification at defined periodic intervals.

As far as scope of activities and code of conduct is concerned, the draft mandates a clearly defined permitted activities of recovery agents, a formal Code of Conduct for recovery agents and their employees, as well as the behavioural and ethical standards to prevent harassment or misconduct.

As far as performance monitoring and control mechanisms are concerned, the draft has called for a performance evaluation standard for recovery agents, inspection and audit mechanisms, and internal control systems to ensure compliance with statutory and regulatory requirements.

As regards non-compliance and penal measures, the draft has streamlined the procedures to be followed in case of violations, penal actions against non-compliant recovery agents, and suspension or termination protocols.

Further, as far as recovery in case of death of ‘Borrower or Guarantor’ is concerned, to ensure fair and respectful treatment of legal heirs and stakeholders, the draft directions specifically address procedures for: (a) Recovery of dues upon the death of borrowers or guarantors; (b) Appropriate and sensitive handling of such cases; and (c) Compliance with legal and regulatory provisions.

The draft regulations also proposed that banks engaging recovery agents must establish a robust due diligence process in line with RBI instructions, and ensure recovery agencies verify antecedents of their representatives and employees involved in recovery.

The draft regulations also mandated that the banks are required to establish mechanisms to identify borrowers facing repayment difficulties, engage proactively with such borrowers, and provide guidance on available resolution or recourse options. This reflects a shift toward customer-centric and resolution-oriented recovery practices.

Click here to read/ download the original press release

Legal Updates (Feb 09 – Feb 14 2026)

Legal Updates (Feb 09 – Feb 14 , 2026)

A bank’s internal classification of a loan as a non-performing asset for accounting or provisioning purposes does not by itself determine the commencement of limitation under the Insolvency and Bankruptcy Code, especially where the debt has subsequently been restructured and acknowledged through fresh agreements

The Supreme Court in the case of B Prashanth Hegde v. State Bank of India [Civil Appeal No. 477 of 2022] dated February 12, 2026, has held that a bank’s internal classification of a loan as a non-performing asset for accounting or provisioning purposes does not by itself determine the commencement of limitation under the Insolvency and Bankruptcy Code, especially where the debt has subsequently been restructured and acknowledged through fresh agreements.

The Court observed that the manner in which a bank reflects a debt in its balance sheet is not decisive for computing limitation. Where restructuring takes place and fresh working capital consortium agreements are executed acknowledging subsisting liabilities, such agreements effectively give the debt a “fresh lease of life”. In such circumstances, the later Non-Performing Asset (NPA) dates arising from restructuring become relevant for calculating limitation.

The Court noted that the restructuring exercise involved execution of fresh agreements acknowledging existing dues, and that these acknowledgments revived the enforceability of the debt for limitation purposes. Disclosure of subsequent NPA dates, along with written acknowledgment in the balance sheets, sufficiently demonstrated that the claim was within limitation when the application was filed on April 25, 2018. On the evidentiary value of balance sheets, the Court reiterated that a written acknowledgment of liability signed by the party against whom the right is claimed attracts Section 18 of the Limitation Act and gives rise to a fresh period of limitation. It held that a director acts as an agent of the company for the purposes of Section 18, and therefore a balance sheet signed by a director can amount to a valid acknowledgment.

The Court observed that since the balance sheets were signed by a director and were relied upon by the company itself in proceedings before the Debt Recovery Tribunal, they were sufficient to extend limitation. The Court also reaffirmed that once the Adjudicating Authority is satisfied that a financial debt exists and that default above the statutory threshold has occurred, there is little discretion to refuse admission of a Section 7 application under the IBC.

State-appointed authorities under the Payment of Gratuity Act, 1972 lack jurisdiction to adjudicate gratuity claims where the establishment has branches in more than one State, as in such cases the Central Government is the “appropriate government” under the Act

The Delhi High Court in the case of M/S CSAT System (P) Ltd v. Appellant Authority Under The Payment Of Gratuity Act [W.P.(C) 11251/2015] dated February 10, 2026, has held that State-appointed authorities under the Payment of Gratuity Act, 1972 lack jurisdiction to adjudicate gratuity claims where the establishment has branches in more than one State, as in such cases the Central Government is the “appropriate government” under the Act. The Court held so, while dealing with an employer’s plea questioning the jurisdiction of the Controlling Authority (CA) appointed by the Delhi government under Payment of Gratuity Act, 1972, to decide its employee’s claim for gratuity.

The Court referred to Section 2(a) which defines ‘appropriate Government’ and held that it vests such authority in the Central Government in cases where the establishment or factory belongs to or is under its control, where an establishment has branches in more than one State, or where the undertaking relates to specified sectors such as major ports, mines, oilfields, or railway companies. In all remaining cases, where none of these conditions are attracted, the State Government is designated as the appropriate Government to exercise jurisdiction under the Act.

While executing a decree passed by a foreign court in a reciprocating territory under Section 44A of the Code of Civil Procedure, 1908, it is not mandatory for the District Court to frame issues and direct the parties to lead evidence while examining whether the decree falls within any of the exceptions under clauses (a) to (f) of Section 13 CPC

The Bombay High Court in the case of Elis Jane Quinlan v. Naveen Kumar Seth [Writ Petition No. 14283 of 2023] dated February 10, 2026, has held that while executing a decree passed by a foreign court in a reciprocating territory under Section 44A of the Code of Civil Procedure, 1908, it is not mandatory for the District Court to frame issues and direct the parties to lead evidence while examining whether the decree falls within any of the exceptions under clauses (a) to (f) of Section 13 CPC. The Court clarified that the inquiry contemplated under Section 44A(3) read with Section 13 is ordinarily summary in nature and not equivalent to a full-fledged trial as in a suit filed on a foreign judgment from a non-reciprocating territory.

In this case, a writ petition was filed by foreign decree holders challenging the order of the District Judge, who had allowed an application by the judgment debtor for framing issues and granting liberty to lead evidence in execution proceedings arising out of a decree passed by the Fujairah Civil Court, UAE. After the UAE was notified as a reciprocating territory under Section 44A CPC, the decree holders had filed execution proceedings in India. The executing court framed multiple issues concerning fraud, natural justice, suppression of material facts, limitation and maintainability, and permitted evidence to be led on those issues.

The High Court examined the scheme of Sections 13, 14 and 44A CPC and observed the fundamental distinction between decrees from reciprocating and non-reciprocating territories. In the former case, the decree is executable as if it were a domestic decree, subject only to the limited exceptions under Section 13. The burden to establish that the decree falls within any of the exceptions under clauses (a) to (f) lies on the judgment debtor. The Court held that if framing of issues and leading of oral evidence were to be treated as mandatory in every case, the special legislative object behind Section 44A, swift and effective execution, would be defeated.

The Court observed that it is not necessary in every case that issues are framed and evidence is led for conduct of inquiry into circumstances enumerated under clauses (a) to (f) of Section 13 of the Code. This is because the legislative object is to ensure swifter and faster execution of the decree passed by the foreign court in reciprocating territory. The Court also held that the existence of exceptions under Section 13 must ordinarily be gathered from the pleadings, the foreign judgment, and the proceedings before the foreign court. It is not necessary to conduct a de novo trial. The Court further observed that recording of evidence in execution proceedings should be permitted only in exceptional and rare cases where the factual controversy cannot be resolved through other expeditious methods.

Dropping the cheque signatory from the array of accused does not invalidate prosecution against the company and its directors under the Negotiable Instruments Act

The Delhi High Court in the case of GBL Chemicals Limited v. State of NCT of Delhi [CRL.M.C. 2155/2025] dated January 29, 2026, has refused to quash criminal proceedings in a cheque dishonour case, holding that dropping the cheque signatory from the array of accused does not invalidate prosecution against the company and its directors under the Negotiable Instruments Act, 1881. The Court explained that dropping of the signatory of Cheques from proceedings, does not result in the automatic collapse of the Complaint against the Petitioner Companies and the other Directors. The statutory presumptions and the principles of corporate vicarious liability necessitate that the matter proceed to trial.

The Court dismissed a batch of petitions challenging summoning orders passed in multiple complaints involving dishonour of cheques amounting to over ₹21 crore, observing that the company is the principal offender under Section 138 of the NI Act, and the liability of directors under Section 141 is vicarious but independent of the continuance of proceedings against the cheque signatory.

The Court further observed that the liability under Section 138 is not restricted to the moment of signing. The offence under Section 138 is a “composite offence” that is completed only when the drawer fails to make payment within 15 days of the receipt of the legal demand Notice of the amount of dishonored Cheque. If a Director, who is the signatory, resigns before the cheque is presented, the Trial Court may, in its discretion, find that he was no longer “in charge of the affairs” at the time the offence (dishonor and nonpayment) was committed. However, this resignation does not grant amnesty to the Company or the Continuing Directors. The debt remains a corporate liability.

The Court further held that at the summoning stage, the Magistrate is not required to conduct a roving inquiry into the internal dynamics of the Board or the individual knowledge of each Director. If the Complaint contains the basic factual foundation that the Directors were in charge of the business, and the Company is also arrayed as an accused, the requirement of Section 141 is satisfied.

A transferee who purchases property from a judgment-debtor during the pendency of proceedings has no locus to resist or object to the decree passed in favour of the judgment-creditor

The Supreme Court in the case of R. Savithri vs Cotton Corporation of India [Special Leave Petition (Civil) No. 19779 of 2024] dated February 12, 2026, has held that a transferee who purchases property from a judgment-debtor during the pendency of proceedings has no locus to resist or object to the decree passed in favour of the judgment-creditor. In this case, the Court held so, after finding that the appellant, having purchased the property from Respondent No. 2 (the judgment-debtor) after an arbitral award had been passed in favour of Respondent No. 1, sought to resist the enforcement of that award.

The issue before the Court was whether a post-award purchaser could resist execution of a money decree, and whether the doctrines of lis pendens and Order XXI Rule 102 CPC apply only to property-specific decrees or also to money decrees. Thus, disposing off the issue, the Court said that if the argument of the appellant is accepted allowing pendente lite purchasers or third parties to bypass these strict procedural safeguards and institute separate suits or raise belated objections long after the execution processes (like attachment and sale) have advanced, it would completely derail the statutory machinery. Judgment-debtors would be incentivized to systematically defeat decrees by transferring properties or planting surrogate objectors to initiate endless collateral litigation.

The Court observed that the appellant was bound by the doctrine of lis pendens embodied in Section 52 of the Transfer of Property Act, 1882. Consequently, the property purchased by the appellant from Respondent No. 2 after the arbitral award had been passed against the latter was squarely hit by Section 52, preventing the appellant from acquiring absolute ownership so as to justify her attempt to resist the attachment of the property.

The Court further observed that the Appellant is a purchaser post-arbitral award for recovery of the amount. The execution proceeding was pending when the sale deed was entered into between Respondent No. 2 and the Appellant. Moreover, the Appellant failed to discharge the onus on the sale being without notice of the existing claim. The arbitral award remains unrealised till date. Accordingly, the appeal was dismissed.

Recognition of spectrum licensing rights as an intangible asset in the balance sheet is not determinative of recognition/transfer of ownership of the spectrum to Telecom Service Providers. Hence, the ownership and control of telecom spectrum cannot be determined by the Insolvency and Bankruptcy Code (IBC)

The Supreme Court in the case of State Bank of India v. Union of India [Civil Appeal No. 1810/2021] dated February 13, 2026, has held that the ownership and control of telecom spectrum cannot be determined by the Insolvency and Bankruptcy Code (IBC), since it is a common good. The Court explained that the spectrum is a material resource of the community in the Constitutional sense. Hence, the spectrum must benefit the common good, so its control has to be secured for the citizens.

The issue before the Court was whether telecom service providers, called upon to pay license dues by the Department of Telecommunications, can invoke a moratorium on the basis of a voluntary corporate insolvency resolution process under the IBC. Hence, while disposing the issue, the Court observed that IBC cannot be the guiding principle for restructuring the ownership and control of spectrum.

The Court went on to observe that Spectrum allocated to Telecom Service Providers (TSPs) and shown in their books of account as an “asset” cannot be subjected to proceedings under Insolvency and Bankruptcy Code, 2016. Interpreting Section 4 of the Indian Telegraph Act, 1885, the Court held that the Central Government has exclusive privilege to establish, maintain and work telegraphs and may grant licences on such terms and consideration as it thinks fit. It observed that a licence granted under Section 4 is contractual in form but emanates from sovereign statutory power and remains subject to constitutional limitations.

The Court noted that the grant of a telecom licence does not transfer ownership of spectrum. It confers only a limited, conditional and revocable right to use spectrum for a defined purpose and duration. The licence remains subject to strict compliance with statutory requirements, licence conditions and public interest considerations. The Court held that the insolvency framework cannot be used to rewrite the statutory regime governing natural resources.

As far as the argument that spectrum is treated as an intangible asset in company balance sheets, the Court observed that accounting recognition under Indian Accounting Standards is based on control over economic benefits and reliable measurement of cost. This recognition does not determine legal ownership of Spectrum. Essentially, recognition of spectrum licensing rights as an intangible asset in the balance sheet is not determinative of recognition/transfer of ownership of the spectrum to Telecom Service Providers. It only indicates control over the future economic benefits flowing from the grant of the right to use the spectrum.

The Court further held that the resolution professional cannot assume control or custody over spectrum under Section 18 of the IBC, as spectrum is neither owned by the corporate debtor nor transferable as property. It rejected the contention that spectrum usage rights can be treated as a security interest in favour of lenders in view of the Tripartite Agreement and the statutory framework. The Court noted that while the agreement facilitates conditional transfer or assignment in the event of default, such transfer remains subject to the licensor’s approval and regulatory control. It emphasised that the licence remains a regulated privilege rather than freely alienable asset.

Legal Updates (Feb 02 – Feb 07 2026)

Legal Updates (Feb 02 - Feb 07 , 2026)

In real estate projects, a single insolvency petition under Section 7 of the Insolvency & Bankruptcy Code is maintainable against more than one corporate entity if they are intrinsically connected in the execution and marketing of the project

The Supreme Court in the case of Satinder Singh Bhasin vs Col. Gautam Mullick [Civil Appeal No. 13628 of 2025] dated January 02, 2026, has granted relief to the homebuyers and held that in real estate projects, a single insolvency petition under Section 7 of the Insolvency & Bankruptcy Code is maintainable against more than one corporate entity if they are intrinsically connected in the execution and marketing of the project.

The Court applied the group of companies’ doctrine to invoke a joint CIRP against corporate debtors whose business operations are intertwined, and noted that since the developer (Bhasin Ltd.) and marketing company (Grand Venezia Ltd) had common directors, issued interchangeable communications to allottees, and were operationally intertwined, both companies were intrinsically connected in the execution and marketing of the project.

The Court observed that if two corporate debtors collaborate for developing land and allotting premises to allottees, the application under Section 7 of the Code would be maintainable against both of them jointly and not individually against one or the other. The Court, therefore, upheld the NCLAT’s ruling, which has permitted a joint Corporate Insolvency Resolution Process (CIRP) against two corporate entities that were intrinsically connected to the real estate project.

Unsecured money brought into a company by its promoters to meet a bank’s lending condition does not qualify as a deposit under the Companies Act, 2013

The National Company Law Tribunal (NCLT) Mumbai Bench, in the case of Vimla T Dedhia vs Ansumera Realty & Infra Pvt Ltd [Company Application 370 of 2022 In Company Petition 412 of 2021] dated January 21, 2026, has held that unsecured money brought into a company by its promoters to meet a bank’s lending condition does not qualify as a deposit under the Companies Act, and that repayment proceedings under the deposit provisions cannot be maintained.

The NCLT observed that once the transaction is covered by the statutory exclusion, the amount so received cannot be treated as a ‘deposit’ within the meaning of Section 2(31) of the Companies Act, 2013. The Tribunal said that Section 73 of the Companies Act, 2013, which regulate acceptance and repayment of deposits, are not attracted, and the transaction in question is, therefore, an exempted transaction under the Companies Act, 2013.

The NCLT noted that promoter funds brought in pursuant to a stipulation imposed by a lending bank fall within the prescribed exclusion under the deposit rules and therefore cease to be deposits. In absence of amount being ‘deposit’, the invocation of Section 73(4) and 76(2) of the Companies Act, 2013 is wholly unsustainable. The Tribunal also noted that the transactions related to a period prior to 2015, while the petition was filed only in 2021. There was nothing on record to show any acknowledgment of liability or a continuing cause of action.

Determination by a competent authority on the adequacy of stamp duty on an instrument attains legal finality if it is not challenged through the prescribed statutory procedures and within the limitation period specified in the Maharashtra Stamp Act, 1958

The Bombay High Court in the case of Kolte Patil Developers vs State of Maharashtra [Writ Petition No. 11145 of 2014] dated February 03, 2026, has held that a determination by a competent authority on the adequacy of stamp duty on an instrument attains legal finality if it is not challenged through the prescribed statutory procedures and within the limitation period specified in the Maharashtra Stamp Act, 1958. Any subsequent action to reopen such a concluded matter, including exercising revisional powers under Section 53A of the 1958 Act must be initiated and completed within the six-year limitation period from the date of the original certification.

Furthermore, the Court explained that the statutory powers granted to a specifically designated authority, such as the “Registering Officer” under Section 33A of the 1958 Act, must be exercised by that authority alone and cannot be assumed by a different, albeit superior, officer. An order passed by an authority lacking such specific statutory competence is without jurisdiction and void.

The Court observed that the order which rejected the audit objection, constituted a final adjudication that the instrument was properly stamped, and this order attained finality in law. While the State could reopen the matter, it had to act strictly within the statutory framework. The revisional power under Section 53A of the Maharashtra Stamp Act, which allows for the correction of such orders, is subject to a six-year limitation period from the date of certification.

In this case, the Court found that the six-year period expired in August 2012, but the impugned recovery order was passed on 26 April 2014, well beyond this deadline. Furthermore, the Court analysed Section 33A and noted that the power to impound a registered instrument is explicitly vested in the “Registering Officer”. The instrument was registered by the Sub-Registrar, whereas the impugned order was passed by the Joint District Registrar, who was not the “Registering Officer” for that specific document.

The Court concluded that supervisory control does not confer the statutory power of a designated authority, and therefore, the action taken by the Joint District Registrar under Section 33A was without jurisdiction. The Court also dismissed the respondents’ argument regarding an alternative remedy, stating that the writ jurisdiction can be exercised when the challenge is to the fundamental jurisdiction of the authority and is based on an action barred by limitation.

The Court therefore quashed the order passed by the Joint District Registrar, considering that same was issued without jurisdiction and was barred by limitation. The Court directed that the amount deposited by the petitioner be refunded with any accrued interest.

Revenue authorities acting under Sections 149 and 150 of the Maharashtra Land Revenue Code, 1966, are not vested with the jurisdiction to adjudicate complex questions of title, the validity of testamentary succession, or the enforceability of civil court decrees, as these matters fall exclusively within the domain of competent civil courts

The Bombay High Court in the case of Meena A. Rizvi vs State of Maharashtra [Writ Petition No. 1365 of 2012] dated February 04, 2026, has held that the power of revenue authorities under Sections 149 and 150 of the Maharashtra Land Revenue Code, 1966, is strictly limited to updating revenue records for fiscal and administrative purposes based on the acquisition of rights. These authorities are not empowered to adjudicate upon the title or substantive rights of the parties to immovable properties, as this jurisdiction is vested exclusively in the civil courts.

Consequently, the Court held that when a claim for mutation is founded upon a registered Consent Decree passed by a competent civil court, which has attained finality, the revenue authorities are duty-bound to give effect to it for the limited purpose of mutation. The Court said that Revenue Authorities cannot sit in appeal over the decree, question its legality, re-examine the underlying transaction, or refuse to act upon it by delving into issues such as testamentary succession, the authority of vendors, or the validity of the decree’s registration, as these are matters beyond their statutory competence.

The Court observed that the legal position governing mutation entries in revenue records is well-settled; they are maintained primarily for fiscal and administrative purposes and do not, by themselves, create, confer, or extinguish title to the property. The Court clarified that revenue authorities acting under Sections 149 and 150 of the Maharashtra Land Revenue Code, 1966, are not vested with the jurisdiction to adjudicate complex questions of title, the validity of testamentary succession, or the enforceability of civil court decrees, as these matters fall exclusively within the domain of competent civil courts.

The Court pointed out that the revenue authorities had travelled far beyond their limited jurisdiction by entering into an elaborate examination of the Petitioner’s title, the authority of her vendors, the effect of prohibitory orders, and the legality of the registration of the Consent Decree, which the Court deemed an impermissible exercise amounting to sitting in appeal over a judicial decree.

The Court therefore quashed all three impugned orders, and directed that Mutation Entry No. 2248 in the Property Register Card for the subject property in favour of the Petitioner shall be restored. It clarified that this restoration is purely for fiscal and administrative purposes and does not confer, declare, or extinguish title, nor does it prejudice the right of any party to seek appropriate relief before a competent civil court. The City Survey Officer, was also directed to implement this order by making the necessary entries within four weeks.

A suit seeking specific performance of an agreement to sell shops that were already being used for business cannot be tried by a regular civil court and must be placed before a Commercial Court

The Rajasthan High Court in the case of Mohsin Samdani vs. Sajjad Hussain Damami [S.B. Civil Misc. Appeal No. 1555/2025] dated January 29, 2026, has held that a suit seeking specific performance of an agreement to sell shops that were already being used for business cannot be tried by a regular civil court and must be placed before a Commercial Court. The Court observed that once a dispute falls within the Commercial Courts Act, the civil court lacks jurisdiction to try the suit.

The Court observed that when facts establish that the suit property is being used for trade and business purposes at the time of the dispute, the jurisdiction of regular Civil Court is strictly ousted. Moreover, when a commercial dispute is filed in a civil court, the suit must be returned in exercise of the powers under Order 7 Rule 10 CPC.

The Court found that the proposed buyers themselves had admitted in the plaint that they were using the shops for their trade for more than a decade, including when the agreement was signed. A perusal of the record shows that appellants have admitted in the plaint that they have been using the suit premises for the purposes of their trade and commerce for the last more than 10 years.

Thus, the Court concluded that the dispute concerning the specific performance of the agreement relating to sale of the suit premises is a commercial dispute and must be adjudicated by competent Commercial Court.

A complaint under Section 138 of the Negotiable Instruments Act, 1881, is not maintainable by a third party even if the transaction affects him and that the same must be filed either by the payee or the holder in due course of the cheque

The Allahabad High Court in the case of Rajesh Kukreja vs State of UP [Criminal Revision No. 2776 of 2013] dated January 28, 2026, has held that a complaint under Section 138 of the Negotiable Instruments Act, 1881, is not maintainable by a third party even if the transaction affects him and that the same must be filed either by the payee or the holder in due course of the cheque. The Court observed that an authorised representative of the payee or holder of the cheque can initiate proceedings, being the power of attorney holder or the authorised signatory of the company, but the complaint is still to be in the name of the payee or holder of the cheque.

The Court perused Section 142 of the NI Act, which governs the cognizance of offences and noted that the Act explicitly mandates that “no court shall take cognizance of any offence punishable under section 138 except upon a complaint, in writing, made by the payee or, as the case may be, the holder in due course of the cheque”. The Court explained that, under Sections 7 and 9 of the Act, a Payee is the person named in the instrument to whom the money is directed to be paid, and a Holder in Due Course is a person who lawfully possesses the cheque for consideration and is entitled to the amount.

Thus, the Court concluded that a complaint under Section 138 NI Act is not maintainable by a third party and that it must be filed by the payee or the holder in due course of the cheque. The Court further clarified that even if a person is ‘indirectly affected’ by the transaction, they remain a stranger to the legal requirements of Section 138 if they do not qualify as the payee or holder in due course.

REGULATORY UPDATES

SEBI mandates enhanced compliance for pledge & invocation of securities through depository system, ensuring adherence to Indian Contract Act

The Securities & Exchange Board of India (SEBI) vide its Circular No. HO/47/14/12(1)2026-MRD-POD2/I/4229/2026 dated February 06, 2026, has addressed the framework for pledging of shares through the depository system as prescribed in paragraph 4.13 of the SEBI Master Circular for Depositories dated December 03, 2024, read with Regulation 79 of the Securities and Exchange Board of India (Depositories and Participants) Regulations, 2018 (DP Regulations). It requires depositories to make provisions in their respective bye-laws for the manner of creating and invoking a pledge in accordance with Section 12 of the Depositories Act, 1996 and the DP Regulations.

The Circular referred to Sections 176 and 177 of the Indian Contract Act, 1872, which lay down the rights of the pawnor and pawnee, and require the pawnee to give a reasonable notice of sale to the pawnor prior to selling the pledged assets. In order to ensure compliance with these provisions in the framework for pledge of securities through depositories, the Circular mandates the insertion of additional paragraphs after paragraph 4.13.2 in the Master Circular.

Specifically, the Pledge Request Forms of the depositories must provide for the pledger and pledgee to undertake that the pledgee will provide reasonable notice to the pledger and comply with the requirements of Sections 176 and 177 of the Indian Contract Act, 1872. Both parties must also undertake to abide by the provisions of the Indian Contract Act, 1872, the Depositories Act, SEBI Regulations, circulars, and bye-laws in force from time to time, as may be applicable.

The depositories are required to maintain a standardized format of the Pledge Request Form. At the time of invocation of pledge, the depositories must send an intimation or notification to both pledger and pledgee confirming that the pledge has been invoked and the pledgee has been recorded as “beneficial owner” in terms of Regulation 79(8) of the DP Regulations.

Depositories are also advised to make necessary amendments to relevant bye-laws and rules, carry out system changes if required, and bring the provisions of this circular to the notice of their participants and disseminate the same on their websites. The provisions of this circular are to be implemented on or before April 6, 2026.

Click here to read/ download the original circular

RBI integrates Voluntary Retention Route (VRR) with General Foreign Portfolio Investors (FPIs) Debt Investment Limits and enhances flexibility for Exits effective April 2026

The Reserve Bank of India (RBI) vide its Notification No. RBI/2025-26/205 dated February 06, 2026, has announced changes to the regulatory framework governing investments by Foreign Portfolio Investors (FPIs) under the Voluntary Retention Route (VRR) for debt instruments. The circular refers to the Statement on Developmental and Regulatory Policies announced as part of the Bi-monthly Monetary Policy Statement for 2025-26 and draws attention to the Foreign Exchange Management (Debt Instruments) Regulations, 2019, and the Master Direction – Reserve Bank of India (Non-resident Investment in Debt Instruments) Directions, 2025, as amended from time to time.

Key changes:

The investment limits under the VRR shall be subsumed under the investment limit for FPI investments under the General Route. Consequently, all investments through VRR in Central Government securities (including Treasury Bills), State Government Securities, and corporate debt securities shall be reckoned under the investment limit for the respective securities under the General Route.

The FPIs that have availed retention periods longer than the minimum retention period stipulated in the Directions shall have the option of liquidating their portfolio, fully or partly, and exiting the VRR after the end of the minimum retention period.
These Directions shall come into force with effect from April 01, 2026. All existing investments under VRR as on April 01, 2026, shall be transferred to the respective investment limits under the General Route. The amendments being made to the Master Direction are provided in the Annex to the circular. Authorised Dealer Category-I banks are directed to bring the contents of this circular to the notice of their constituents and customers concerned.

The Directions contained in this circular have been issued under sections 10(4) and 11(1) of the Foreign Exchange Management Act, 1999 (42 of 1999) and are without prejudice to permissions or approvals, if any, required under any other law. The Annex to the circular details the specific amendments to the Master Direction, including the subsuming of VRR investment limits under the General Route and the option for FPIs to exit after the minimum retention period if they had initially opted for a longer retention period.

Click here to read/ download the original notification

SEBI mandates Net Asset Value (NAV) reporting of Alternative Investment Fund (AIF) Units to Depositories

The Securities & Exchange Board of India (SEBI) vide its Circular No. HO/19/34/11(8)2025-AFD-POD1/I/4335/2026 dated February, 2026, has addressed the reporting of the value of units of Alternative Investment Funds (AIFs) to Depositories. It referred to Regulation 10 of the SEBI (Alternative Investment Funds) Regulations, 2012, which permits AIFs to raise funds from Indian, foreign, or non-resident Indian investors through the issuance of units. The value of these units is determined based on the valuation of the investment portfolio of the AIF or its scheme.

Specifically, Regulation 23(2) mandates that Category I and Category II AIFs must undertake valuation of their investments at least once every six months by an independent valuer appointed by the AIF, with the period extendable to one year upon approval of at least seventy-five percent of the investors by value. Regulation 23(3) requires Category III AIFs to ensure that the calculation of Net Asset Value (NAV) is independent from the fund management function and that such NAV is disclosed to investors at intervals not longer than a quarter for close-ended funds and not longer than a month for open-ended funds.

The Circular notes that, pursuant to Regulation 10(aa) and a previous SEBI circular (now subsumed in the Master Circular for AIFs dated May 07, 2024), AIFs are required to issue units in dematerialized (demat) form. In order to enhance transparency and operational efficiency by leveraging depository infrastructure, the Circular specifies that AIFs, through their Registrars and Transfer Agents (RTAs), must upload the latest available NAV corresponding to each ISIN of AIF units in the depository system before May 01, 2026, or within 30 days from the date of valuation of the investment portfolio, whichever is later.

The valuation date is defined as the date of the valuation report in cases where an independent valuer is used, or the date the valuation is documented in internal records where internal valuers are used. The manager of the AIF is made responsible for ensuring timely and accurate uploading of the NAV.

The depositories are directed to build the necessary infrastructure for uploading NAV by RTAs and for reflecting the same in the depository system. They are also required to display a disclaimer stating that the NAV shown is based on the valuation methodology and accounting practice followed by the respective AIF, and to refer investors to their fund documents for more details.

Additionally, depositories must make necessary amendments to their Bye-laws, Rules, and Regulations to implement these provisions and disseminate the circular to their members and on their websites. The trustee or sponsor of the AIF must ensure that the Compliance Test Report, as prepared by the manager in accordance with Chapter 15 of the Master Circular for AIFs, includes compliance with the provisions of this circular. The provisions of the circular come into force with immediate effect.

Click here to read/ download the original circular

Legal Updates (Jan 26 – Jan 31, 2026)

A company’s inability to pay its dues because of financial distress is a civil issue, not a criminal offense. Hence, a director cannot be prosecuted for cheating unless there is clear proof of personal fraud or personal gain

The Delhi High Court in the case of Arun Kumar Bagla v. SCJ Plastics Ltd. [W.P. (CRL) 2165/2019] dated 7 January, 2026, has held that a company’s inability to pay its dues because of financial distress is a civil issue, not a criminal offense. A director cannot be prosecuted for cheating unless there is clear proof of personal fraud or personal gain. The Court, therefore, quashed cheating charges against a former managing director that later ran into financial trouble and was declared a sick industrial company by the Board for Industrial and Financial Reconstruction (BIFR).

The Court observed that the complainant is required to show specific acts of personal fraudulent intention or personal gain, distinct from the corporate entity’s business operations. Accordingly, once proceedings against the company itself are dropped, continuing the case against its director is not legally sustainable. The Court observed that the Director cannot be held criminally liable for the Company’s financial status or its corporate debts when the Company itself is no longer being prosecuted.

The Court further observed that an assurance of payment is a normal commercial representation. It is not, by itself, fraudulent. The Court noted that the complainant continued supplies to “maintain business relations.” This showed there was no dishonest inducement. It also noted that partial payments had been made. The Court held that dishonest intention at the start of the transaction was missing, and called the criminal complaint an afterthought, filed to pressure recovery.

Thus, in the absence of any specific allegation of personal deception or misappropriation, the Court observed a cheating case could not be made out. It held that continuing the trial would be an abuse of process. The High Court accordingly discharged Arun Kumar Bagla from the offense under Section 420 (Cheating) of the IPC.

Unsecured money brought into a company by its promoters to meet a bank’s lending condition does not qualify as a deposit under the Companies Act

The Mumbai Bench of the National Company Law Tribunal (NCLT) in the case of Ansumera Realty & Infra Pvt Ltd vs Vimla Thakarashi Dedhia [Company Application 370 of 2022] dated 21 January, 2026, has held that unsecured money brought into a company by its promoters to meet a bank’s lending condition does not qualify as a deposit under the Companies Act, and that repayment proceedings under the deposit provisions cannot be maintained. The Tribunal observed that once the transaction is covered by the statutory exclusion, the amount so received cannot be treated as a ‘deposit’ within the meaning of Section 2(31) of the Companies Act, 2013.

The NCLT observed that Section 73 of the Companies Act, 2013, which regulate acceptance and repayment of deposits, are not attracted, and the transaction in question is an exempted transaction under the Companies Act, 2013. It noted that promoter funds brought in pursuant to a stipulation imposed by a lending bank fall within the prescribed exclusion under the deposit rules and therefore cease to be deposits. In absence of amount being ‘deposit’, the invocation of Section 73(4) and 76(2) of the Companies Act, 2013 is wholly unsustainable.

Mere preparation of balance sheets and audited financial statements does not establish that a company was carrying on business or was in operation. Hence, the Registrar of Companies can strike off its name from the register of companies

The Mumbai Bench of National Company Law Tribunal (NCLT) in the case of Deepak Ashutosh Bharadwaj, Suhani Deepak Bharadwaj vs The Registrar of Companies [Company Appeal No. 54/MB/ 2025] dated 6 January, 2026, has held that mere preparation of the balance sheets and the Audited Financial Statements neither prove that the Company was carrying on business or was in operation unless there are some revenue/expenses of operation are reflected in such financial statements. The preparation of the Balance Sheets / Audited Financial Statements in the case of the Applicant company on the contrary is an indication of the fact that the Company had no intention of carrying on business activities.

The NCLT examined the financial statements placed on record for the past several financial years. It found that although balance sheets and audited accounts had been prepared, there was no revenue from business operation. The Tribunal held that compliance with procedural requirements, such as preparation of accounts, audits, or filing of income tax returns, cannot by itself show that a company was carrying on business or was in operation.

The NCLT considered the lease agreement relied upon by the appellants and noted that it was conditional in nature, and found that besides it, there were no documents to demonstrate that the company, being a construction company, has undertaken any such activity in the recent past. With this, the Tribunal held that the appellants had failed to establish that the company was carrying on business or was in operation at the time its name was struck off, or that restoration was otherwise justified.

Accordingly, the NCLT upheld the Registrar of Companies’ action in striking off the name of Radiant Inn Pvt Ltd from the register of companies.

Lender’s failure to follow Reserve Bank of India Circulars on restructuring stressed MSME accounts does not, by itself, make an insolvency petition under the Insolvency and Bankruptcy Code non-maintainable

The National Company Law Tribunal (NCLT) at Guwahati in the case of Eduvanz Financing Pvt Ltd vs Abutani Mercantile Pvt Ltd [CP(IB)/9/GB/2025] dated December 04, 2025, has held that a lender’s failure to follow Reserve Bank of India circulars on restructuring stressed MSME accounts does not, by itself, make an insolvency petition under the Insolvency and Bankruptcy Code (IBC) non-maintainable.

The Tribunal observed that while the RBI circulars do mandate a structured framework for resolution of MSME distress, the non-compliance with such circulars cannot render a petition under Section 7 non-maintainable per se. Moreover, the IBC is a self-contained code, and where a financial debt and default are established, procedural non-compliance with RBI guidelines does not defeat the statutory remedy.

The Tribunal observed that according to the RBI’s guidelines, lenders should take a proactive approach when small businesses face financial trouble. Rather than moving straight to recovery, banks are expected to spot signs of stress early on and work directly with the borrower to find a solution. This typically involves developing a time-bound restructuring plan, such as adjusting repayment schedules or terms, to help the business stay afloat before the account is officially labelled as non-performing or legal action is taken.

The Tribunal also held that while RBI circulars provide a structured mechanism for resolution of MSME account, mere non-compliance with the procedures does not bar insolvency proceedings. It reiterated the Insolvency Code is a self-contained code and once the existence of a financial debt and default is established, the authority cannot conduct an inquiry into disputes and must admit the claim. The Tribunal accordingly admitted the petition.

Banks must operate within regulatory limits set by the RBI and cannot create barriers that penalize borrowers for exercising their right to repay or refinance loans

The Orissa High Court in the case of Maa Tarini Poultries Pvt Ltd. vs Indian Bank [WP (C) No. 23022 of 2025] dated November 29, 2025, has held that banks cannot impose charges that restrict a borrower’s freedom to switch lenders, ruling that such practices undermine fair banking standards and violate binding directions of the Reserve Bank of India. The Court said that banks must operate within regulatory limits set by the RBI and cannot create barriers that penalize borrowers for exercising their right to repay or refinance loans.

The Court observed that the bank cannot convert a borrower’s right to mobility into a chargeable commodity. The levy of such penalties operates as a deterrent to borrowers who intend to repay their loans ahead of schedule or shift to a competing lender. The consequences of this practice are the stifling of competition in the credit market, compelling borrowers to remain tied to a particular institution and thereby imposing an unwarranted restriction and freedom of trade and choice of consumer.

The Court rejected the bank’s contention that the RBI prohibition applied only to individual-retail borrowers for purposes other than business. It held that what matters is the effect of the charge and not the terminology used. Any similar charge which in substance operates as a foreclosure, prepayment or takeover fee on MSME credit, where regulatory prescription forbids such levy, is unlawful, arbitrary and must be quashed.

The Court held that contractual clauses inconsistent with RBI directions “stands ipso jure nullified and are rendered a legal nullity in the eyes of the law”. The court further noted that such charges deter borrowers from moving to competing lenders and “operate as a mechanism of control, curtailing consumer choice and impeding healthy competition among bank and financial institutions”. The court also found that the bank had no justification to withhold the original documents after full repayment.

The Court described the retention as based on a “tenuous, non-est, and statutorily prohibited demand” and said it was “manifestly arbitrary and antithetical to the rule of law”. Accordingly, the Court directed Indian Bank to immediately return all title deeds and allied documents without insisting on any charges and to file an affidavit of compliance within one month.

Financial creditor that participated in the liquidation process and secured its dues through a one-time settlement cannot later avoid paying its share of liquidation costs for the time it had taken part in it

The National Company Law Tribunal (NCLT) at Bengaluru in the case of Ravindranath Narayana Rao vs Jammu & Kashmir Bank Ltd [I.A. No. 397 of 2025 in C.P. (IB) No. 286/BB/2019] dated January 07, 2026, has held that a financial creditor that participated in the liquidation process and secured its dues through a one-time settlement cannot later avoid paying its share of liquidation costs for the time it had taken part in it. The Court, therefore, directed Jammu & Kashmir Bank Ltd to bear its proportionate share of liquidation expenses in the liquidation of Alpine Wineries Pvt Ltd.

The Tribunal observed that whatever were the circumstances prevalent in CIRP & liquidation, the respondent having secured its interest through OTS because of the ongoing liquidation wherein it had thoroughly participated, cannot cut corners when its turn comes for paying off its share the costs of the process till such time it had participated in it.

The Tribunal further observed that the CIRP places the obligation to pay liquidation costs on financial creditors. It said that even if the ex-promoter/suspended director had agreed to bear the costs, this would not absolve the bank of its statutory liability, especially in the absence of any binding agreement enforceable by the liquidator. Accordingly, the Tribunal directed the liquidator to recalculate the bank’s share of liquidation costs only for the period during which it participated in the process and to share the revised amount with the bank.

Stamp duty on a sale certificate issued pursuant to a court-monitored auction, including auctions conducted by the Debt Recovery Tribunal, must be levied on the auction price and not on a higher market value independently assessed by stamp authorities

The Bombay High Court in the case of Shweta Aditya Malhotra v. The Collector of Stamps, Andheri Division [Writ Petition No. 12021 of 2025] dated 28 January, 2026, has held that stamp duty on a sale certificate issued pursuant to a court-monitored auction, including auctions conducted by the Debt Recovery Tribunal, must be levied on the auction price and not on a higher market value independently assessed by stamp authorities.

The Court observed that once a property is sold through a transparent, court-supervised auction process, stamp authorities cannot reassess its value by applying independent valuation rules. Such reassessment would amount to stamp authorities sitting in appeal over a judicially supervised sale.

The Court noted that the Recovery Officer had followed a structured and transparent process, which included publication of the sale proclamation, fixation of a reserve price, and sale through an online public auction. Such a process was meant to facilitate discovery of fair market value. Thus, the Court reiterated that in a court-monitored auction, the price discovered through a transparent bidding process represents the true value of the property and cannot be reopened by stamp authorities.

The Court further observed that as the property was sold in a public auction through online bidding and the bid of the petitioner, which matched the reserve price, was accepted, it would not be permissible for the Authorities under the Stamp Act, 1958, to contend that the market value of the property would be determined in accordance with the Rule 4(6) and not on the basis of the consideration so fetched in the public auction. Therefore, the Court directed that stamp duty on the sale certificate be adjudicated on the basis of the auction sale consideration.

The central government cannot initiate prosecution and cannot issue a Look Out Circular under the Companies Act on the basis of an interim report submitted by the Serious Fraud Investigation Office

The Calcutta High Court in the case of Sunil Kumar Agarwal vs Serious Fraud Investigation Office [WPA No. 12186 of 2025] dated 15 January, 2026, has held that the central government cannot initiate prosecution under the Companies Act on the basis of an interim report submitted by the Serious Fraud Investigation Office and must wait for the final investigation report after completion of the probe. The Court, therefore, quashed a Look Out Circular issued against him during the pendency of an SFIO investigation, noting that neither an interim report nor a final investigation report had been submitted to the central government.

The Court observed that the Companies Act contemplates two distinct kinds of reports. The first kind of report is under Section 212(11) of the Companies Act, 2013, which report is an “interim report” and can be issued at any point of time during the course of investigation by SFIO. The second kind of report is an “Investigation Report” which can be issued only after completion of the investigation by SFIO”. The Court said that only the “Investigation Report” can be considered by the Central Government under Section 212(14) for the purposes of commencement of prosecution.

The Court held that under Section 212(14), the central government is required to examine only the final investigation report and apply its mind before deciding whether prosecution should be initiated. It also clarified that proceedings before the NCLT under Section 212(14-A), including applications for disgorgement of assets or fixing personal liability, stand on a different footing and may be initiated on the basis of either an interim report or the final report. On the facts, the Court recorded that neither an interim report nor a final investigation report had been submitted to the government. Thus, the Court quashed the Look Out Circular, holding that it lacked statutory backing.

Legal Updates (Jan 19 – Jan 24, 2026)

A contractual clause obligating a promoter to arrange infusion of funds into a borrower to meet financial covenants does not amount to a “contract of guarantee” under Section 126 of the Indian Contract Act, 1872

The Supreme Court in the case of UV Asset Reconstruction Company Limited vs Electrosteel Castings Limited [Civil Appeal No. 9701 of 2024] dated January 06, 2026, has held that a contractual clause obligating a promoter to arrange infusion of funds into a borrower to meet financial covenants does not amount to a “contract of guarantee” under Section 126 of the Indian Contract Act, 1872.

The Supreme Court interpreted Section 126 of the Indian Contract Act, to observe that for an obligation to be construed as a guarantee, there must be a direct and unambiguous obligation of the surety to discharge the obligation of the principal debtor to the creditor. It was explained that a “See to it” guarantee in English Common Law refers to an obligation upon the guarantor to ensure that principal debtor itself, performs its own obligation and the guarantor, therefore, is in breach as soon as principal debtor fails to perform. However, a “See to it” guarantee does not include an obligation to enable the principal debtor to perform its own obligation. Such an arrangement would not be a guarantee under Section 126 of the 1872 Act.

From the subject Clause in the Deed of Undertaking, the Supreme Court inferred that ECL was obligated to arrange for infusion of funds into ESL, so as to enable ESL to comply with the stipulated Financial Covenants. However, it was not obligated to “discharge” any debt owed by ESL. The Court observed that “The clause neither records an undertaking to discharge the debt owed to the creditor nor does it contemplate payment to the lender in the event of the default. The clause contains a promise, not to the creditor to pay the debt upon default, but to the borrower to facilitate compliance with Financial Covenants”.

The Supreme Court also observed that “An undertaking to infuse funds into a borrower, so that it may meet its obligations cannot, by itself be equated with the promise to discharge the borrower’s liability to the creditor. A mere Covenant to ensure financial discipline or infusion of funds does not satisfy the statutory requirements of Section 126 of the 1872 Act”. The Court referred to other documents as well, including the sanction letter, to note that there was no “guarantee” furnished by ECL. Ultimately, it concurred with the findings of NCLT and NCLAT that Clause 2.2 of the Deed of Undertaking did not constitute a contract of guarantee and that ECL could not be treated as guarantor for the financial facilities availed by ESL.

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National Company Law Tribunal (NCLT) has no jurisdiction to adjudicate the title disputes to the trademark, if the issue lacked any direct and proximate nexus with the Corporate Insolvency Resolution Process (CIRP)

The Supreme Court in the case of Gloster Cables Ltd vs Fort Gloster India Ltd [Civil Appeal No. 2996 of 2024] dated January 22, 2026, has held that the National Company Law Tribunal (NCLT), while exercising jurisdiction under Section 60(5) of the Insolvency and Bankruptcy Code (IBC), cannot adjudicate disputed questions of title to intellectual property if such determination goes beyond the scope of the approved resolution plan. The Court observed that NCLT cannot decide title disputes over assets, including intellectual property rights such as trademarks unless the dispute has a direct and proximate nexus with the insolvency resolution process.

The Supreme Court observed that under 60(5)(c) the IBC, the Adjudicating Authority, i.e., the NCLT had jurisdiction to adjudicate disputes, which arise solely from or which relate to the insolvency of the Corporate Debtors. In doing so, the authorities under IBC should ensure that they do not usurp the legitimate jurisdiction of other Courts, Tribunals and fora when the dispute is one which does not arise solely from or relate to the insolvency of the Corporate Debtor.

The Court observed that any grant of further rights over and above what is recognized in the plan would amount to modification or alteration of the approved plan. It should be remembered that the plan as it exists is the one duly approved by the COC and while adjudicating an application of GCL, no directions could be made by the NCLT conferring better rights. In a case like the present where the SRA has perceived clouds hovering over its title, the Court held that it is for the SRA to resort to remedies and protect its rights. On the facts of the present case, while adjudicating an application under Section 60(5) of GCL, NCLT could not have passed the direction it ultimately passed.

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Erstwhile directors of a corporate debtor cannot be held vicariously liable for an offence under Section 138 of the Negotiable Instruments Act, 1881, if, prior to the expiry of the 15-day statutory notice period for payment, a CIRP has been initiated against the corporate debtor

The Delhi High Court in the case of Ravindra Dhariwal vs Kotak Mahindra Bank [CRL.M.C. 8417/2023] dated January 15, 2026, has ruled that erstwhile directors of a corporate debtor cannot be held vicariously liable for an offence under Section 138 of the Negotiable Instruments Act, 1881 (NI Act), if, prior to the expiry of the 15-day statutory notice period for payment, a CIRP has been initiated against the corporate debtor and an IRP has been appointed.

The Court clarified that the appointment of the IRP suspends the powers of the Board of Directors and vests control over the company’s affairs and bank accounts in the IRP, making it impossible for the directors to ensure the honouring of the dishonoured cheques. The High Court, therefore, quashed the summoning order, as well as all proceedings emanating therefrom in respect of the petitioners.

The Court noted that the 15-day period for making payment, calculated from the earliest date of service expired on 07.08.2022. However, the CIRP had already commenced on 20.07.2022. Further, upon the appointment of the IRP on 20.07.2022, the powers of the company’s Board of Directors were suspended and vested in the IRP, as per Section 17 of the IBC. Therefore, during the 15-day notice period, the petitioners were not in charge of the company’s affairs and had no control over its bank accounts.

The Court also found the issue to be “no more res integra” and placed significant reliance on the Apex Court’s decision in the case of Vishnoo Mittal v. Shakti Trading Company [(2025) 9 SCC 417], where under identical circumstances, it was held that a director who was suspended due to the appointment of an IRP did not have the capacity to fulfil the demand raised in the notice and could not be held liable under Section 138 of the NI Act.

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While determining the deceptive similarity with another Trade Mark, both the Marks have to be examined as a whole by applying ‘anti-dissection rule’ rather than breaking the Marks into their component parts for comparison

The Delhi High Court in the case of Mayank Jain, Proprietor of Mahaveer Udyog vs Atulya Discs Pvt Ltd [CS(COMM) 412/2025] dated January 09, 2026, has ruled that the registration of the Device Mark is to be considered as a whole and while determining the deceptive similarity with another Trade Mark, both the Marks have to be examined as a whole by applying ‘anti-dissection rule’ rather than breaking the Marks into their component parts for comparison. The court was concerned with two brands namely “Tiger Gold Brand” owned by Plaintiff and “Tiger Premium Brand” owned by defendant.

To determine whether there is any deceptive similarity between the above two Marks, it is imperative to decide if the similarity is likely to cause any confusion or deceive, added the Court, while holding that the Plaintiff has no exclusive right over the Marks ‘TIGER’ and ‘BRAND’ as the same are generic in nature and common to the trade.

The High Court observed that the words ‘TIGER’ and ‘BRAND’ are generic in nature, common to the trade, and incapable of being registered as a trademark on a standalone basis. Further, there is widespread use of the mark ‘TIGER’ for various goods and services across India, making it publici juris.

The Court found that the Plaintiff had not produced any material to demonstrate that the mark ‘TIGER’ had acquired a secondary meaning to be uniquely associated with the Plaintiff’s goods. The Court also observed that the Impugned Mark, when considered as a whole, is wholly dissimilar to the Plaintiff’s Mark, being visually different in its hexagonal frame, the depiction of the tiger device, and its colour scheme.

Even from the perspective of the relevant consumer segment, i.e., farmers, the marks are visually distinct and would not cause confusion, added the Court, while noting that the Plaintiff failed to establish the necessary elements for a case of passing off, as there was no proof of misrepresentation by the Defendant or damages incurred by the Plaintiff.

Hence, the Court concludes that the use of the Impugned Mark does not amount to infringement of Copyright in or passing off of the Plaintiff’s Mark, as there is no deceptive similarity between the Plaintiff’s Mark and the Impugned Mark. Accordingly, no case is made out for grant of interim injunction.

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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 bench of National Company Law Appellate Tribunal (NCLAT) in the case of Ujwal Gupta v Union Bank of India [Company Appeal (AT) (Ins) No. 2001 of 2024] dated January 07, 2026, has ruled 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 Tribunal observed that the real test is not how the person is described, but what the notice actually asks for.

The NCLAT 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. The message was unambiguous, and the addressee was being asked to clear the dues arising from the loan. The Tribunal also examined the guarantee deed and found that the deed did not prescribe any special format or procedure for invocation. In such a case, a notice demanding payment within a fixed time is sufficient, as long as the liability is made clear.

The held that adding the word “Director” after the appellant’s name did not change his status as a personal guarantor. The personal guarantee, it said, had been validly invoked through the SARFAESI notice. Accordingly, the insolvency proceedings against the personal guarantor were allowed to continue.

The sine qua non for the application of Section 13(1) of the Maharashtra Money Lending (Regulation) Act, 2014, is the existence of a ‘loan’ as defined by the Act; Merely advancing money to people does not ipso facto make a party a money lender

The Bombay High Court in the case of Ashok Commercial Enterprises vs Hubtown Limited [Interim Application (L) No. 27175 of 2021] dated January 21, 2026, has ruled that the applicability of the bar on suits by unlicensed money-lenders under Section 13 of the Maharashtra Money Lending (Regulation) Act, 2014, cannot be determined at the preliminary stage of an Order VII Rule 11 CPC application.

In short, the Court clarified that whether a plaintiff is a “money lender” and whether the transaction constitutes a “loan” under the said 2014 Act are triable issues that require the examination of detailed evidence, especially when the suit is based on negotiable instruments like dishonoured cheques and promissory notes, which may fall under the exceptions to the definition of ‘loan’.

The Court held that the plaint could not be rejected at the threshold, and concluded that the question of whether the plaintiff is a money lender under the said 2014 Act, thereby attracting the bar under Section 13, cannot be decided at the stage of an Order VII Rule 11 application and warrants a trial.

The Court observed that the plaintiff’s suit is for the recovery of a liquidated sum of money, founded on dishonoured cheques and letters from the defendant that unconditionally admitted the acceptance of the loan and the liability to repay. The Court heavily relied on the decision of Deepak Raheja vs. Tikamdas & Associates [Commercial Appeal (L) No. 15455 of 2023 in COMSS No. 311 of 2020], and noted that an ‘advance’ of any sum exceeding Rs. 3 Lakhs made on the basis of a negotiable instrument (other than a promissory note) is excluded from the definition of ‘loan’ under Section 2(13)(j) of the said 2014 Act.

The sine qua non for the application of Section 13(1) is the existence of a ‘loan’ as defined by the Act. Without a ‘loan’, there is no bar on a court passing a decree, and the onus of establishing, even prima facie, that the plaintiff carries on the business of money-lending rests on the defendant. It was noted that merely advancing money to people does not ipso facto makes a party a money lender; they must fall within the specific parameters of the said Act.

At the same time, the Court explained that the allegation of engaging in the business of money-lending without a license is a question of fact that can only be dispelled by leading detailed evidence. Such an issue requires an examination of evidence and cannot be decided in a summary manner through an application under Order VII Rule 11 of the CPC.

Lastly, referring to the Supreme Court’s decision in Dahiben Vs Arvindbhai Bhanushali [(2020) 7 SCC 366], the Court emphasized that the power to reject a plaint under Order VII Rule 11 is a drastic measure that terminates a civil action at the threshold and must be exercised strictly in accordance with the enumerated conditions.

REGULATORY UPDATES

RBI notifies Foreign Exchange Management (Export and Import of Goods and Services) Regulations, 2026

The Reserve Bank of India (RBI) vide its Notification No. FEMA 23(R)/2026-RB, dated 13 January, 2026, has laid down norms relating to declaration of exports, the manner of receipt and payment, the time period for realization of exports, & set-off of export receivables against import payables. Further, it prescribes norms relating to the time period for making import payments, the import of gold and silver, & merchanting trade transactions. These regulations shall come into force with effect from October 1, 2026.

The key provisions of the regulations include the following:

A. Declaration of Exports

An exporter of goods must furnish to the specified authority a declaration in the Export Declaration Form (EDF), specifying the amount representing the full export value of the goods at the time of export. Where goods are exported through an Electronic Data Interchange (EDI) port, the Export Declaration Form (EDF) shall be deemed to have been submitted as part of the shipping bill. Further, a traveller carrying personal effects, whether accompanied or unaccompanied, from India shall not be treated as an exporter for the purposes of these Regulations.

B. Time Limit for furnishing of Export Declaration Form to the specified authority

An exporter of services must furnish to the specified authority a declaration in the Export Declaration Form (EDF), specifying the amount representing the full export value of services, within 30 days from the end of the month in which the invoice for services is raised, subject to the following conditions:

a. The exporter of services who has exported services to one or more recipients a month may submit a single EDF for all such exports.

b. The exporter of services other than software may submit an EDF on or before the date of receipt of payment;

c. The Authorised Dealer may, on a request from the exporter citing reasons for delay, extend the period for submission of EDF after satisfying itself about the reasonableness of the request.

d. In the case of a non-EDI port for export of goods, or where the specified authority for export of services is other than an Authorised Dealer, the duly authenticated EDF must be forwarded by the specified authority to the respective Authorised Dealer.

C. Manner of Receipt and Payment

The receipts and payments for export and import of goods and services must be in the manner specified in the Foreign Exchange Management (Manner of Receipt and Payment) Regulations, 2023, as amended from time to time. An authorised dealer must make a credit or debit to the account of an exporter or an importer for receipt of export proceeds or payments for import only after satisfying itself about genuineness of the transaction. Further, the AD must simultaneously close or update the relevant entry in the Export Data Processing and Monitoring System (EDPMS) or the Import Data Processing and Monitoring System (IDPMS).

D. Time Period for realisation of export proceeds

Under the extant norms, it is obligatory on the part of the exporter to realise and repatriate the full value of goods/software/services to India within 15 months from the date of export. Under these Regulations, the amount representing the full export value (or reduced export value) of goods and services must be realised and repatriated by the exporter within the period as specified below:

a. 15 months from the date of shipment in case of goods (other than goods exported to a warehouse outside India) and from the date of invoice in case of services;

b. 15 months from the date of sale of goods from the warehouse in case of goods exported to a warehouse outside India;

c. As per the payment terms of the contract, in case of project exports.

Click here to read/ download the Original Notification

SEBI introduces closing auction session in Equity Segment

The Securities and Exchange Board of India (SEBI) vide its Circular No. HO/47/11/11(3)2025-MRD-POD2/I/2765/2026, dated 16 January, 2026, has introduced a Closing Auction Session (CAS) in the equity cash segment to improve fairness, transparency, and efficiency in the discovery of closing prices in the securities market.

The CAS is aimed at ensuring a more robust and manipulation-resistant closing price discovery mechanism. By aggregating buy and sell orders at the close of trading, the session seeks to reflect true market demand and supply.

Under the new framework, the closing price for derivative-linked stocks will be determined through the Closing Auction Session. This marks a shift from the existing Volume Weighted Average Price (VWAP)-based methodology, aligning the closing price more closely with actual market consensus.

Alongside the introduction of CAS, SEBI has aligned and modified the framework governing the pre-open auction session. These changes aim to harmonise auction mechanisms at both the opening and closing of the trading day, enhancing overall market efficiency.

The introduction of the Closing Auction Session represents a significant reform in India’s equity market structure. To be implemented in a phased manner from August 3, 2026, the new framework is expected to strengthen price discovery, reduce volatility at market close, and enhance investor confidence.

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Trusted Foreign Investors get Single-Window access under New Market Framework (SWAGAT-FI)

The Securities and Exchange Board of India (SEBI) vide its Circular No. HO/19/34/14(5)2025-AFD-POD2/I/2703/2026, dated 16 January 2026, has introduced the Single Window Automatic and Generalised Access for Trusted Foreign Investors (SWAGAT-FI) framework, amending the FPI Master Circular in line with the SEBI (Foreign Portfolio Investors) (Second Amendment) Regulations, 2025.

The framework aims to simplify onboarding and ongoing compliance for low-risk, well-regulated foreign investors such as sovereign entities, regulated retail mutual funds, insurance companies, and pension funds from identified jurisdictions.

The key relaxations include a longer registration validity of 10 years (instead of three), whereas, the KYC review periodicity extended to 10 years, and streamlined renewal requirements. SWAGAT-FI investors are also granted unified accounting and investment access across FPI, FVCI, and other foreign investment routes.

Certain contribution restrictions are relaxed, subject to safeguards such as routing resident Indian investments through LRS and limiting India exposure. The framework becomes effective from 1 June 2026, with intermediaries directed to update systems accordingly.

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Legal Updates (Jan 12 – Jan 17, 2026)

The lifting of the corporate veil is an exceptional measure, and directors/promoters cannot be exposed to personal liability through execution, in the absence of a prior and reasoned determination justifying disregard of the corporate personality

The Supreme Court in the case of Ansal Crown Heights Flat Buyers Association vs Ansal crown Infrabuild [Civil Appeal No. 8465-8466 of 2024] dated January 12, 2026] has held that lifting of the corporate veil is an exceptional measure, and can be resorted to only upon a clear finding that the corporate personality was abused for fraudulent or dishonest purposes. Such a finding must be preceded by specific pleadings and a determination on merits.

Essentially, the Court held that the persons who were initially named as respondents in consumer complaints, but against whom the complaints did not ultimately proceed, could not be made subject to execution proceedings on the basis that they were the directors or promoters of the judgment-debtor company.

Finding that no such allegation of fraud or misuse of the corporate form was either pleaded or established before the adjudicatory forum, the Apex Court ruled that the directors/promoters cannot be exposed to personal liability through execution, in the absence of a prior and reasoned determination justifying disregard of the corporate personality.

The Court clarified that execution proceedings must strictly conform to the decree passed by the adjudicatory body, and no liability can be imposed during execution on individuals who were not parties to the original proceedings. The Court said that an order against a company cannot be enforced against its directors personally in the absence of a specific adjudication against them.

The Court observed that the National Consumer Disputes Redressal Commission (NCDRC) committed no error in declining to execute the order against the directors/promoters, as they were not parties to the final complaints and the order was binding only on ACIPL (Respondent). The Court clarified that this dismissal does not prevent the appellant from pursuing other available legal remedies against the promoters/directors under different statutes like the Companies Act, the IBC, or civil law, should the necessary conditions be met.

The court emphasised that the NCDRC had consciously decided to proceed only against ACIPL, and the appellant’s failure to challenge this order meant it became final. Since no pleadings were directed against the directors, no issues were framed concerning their liability, and no findings were recorded against them, the Bench said that these are not mere procedural formalities but substantive safeguards, and their absence meant the essential foundation for fastening liability was lacking.

It is settled law that an executing court cannot go beyond the decree. The decree must be executed as it is, and the court cannot shift or enlarge liability to bind individuals who were not parties to the decree, added the Court, while observing that its previous order of January 17, 2024 was limited to the issue of the moratorium under the IBC, and it did not fasten any liability on the directors but merely removed the procedural bar of the moratorium and allowed the NCDRC to decide the question of the directors’ liability in accordance with the law.

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Where a contract contains an express and widely worded clause prohibiting the payment of interest on “any moneys due to the contractor”, it acts as a complete bar on the arbitrator’s power to award pre-reference and pendente lite interest

The Delhi High Court in the case of Bharat Heavy Electricals Limited vs Delkon India Pvt Ltd [FAO (COMM) 109/2023] dated January 08, 2026] has held that when the fact of a loss is established but precise evidence for its quantification is lacking, then an arbitrator is justified in employing a “rough and ready method” or “honest guesswork” to award reasonable compensation. Thus, essentially, the Court’s role is not to re-assess the measure of damages but to ensure that the arbitrator’s approach is not perverse or based on no evidence.

The High Court, however, ruled that where a contract contains an express and widely worded clause prohibiting the payment of interest on “any moneys due to the contractor”, it acts as a complete bar on the arbitrator’s power to award pre-reference and pendente lite interest. This bar applies not only to payments for work done under the contract but also to claims for damages arising out of a breach or illegal termination of the contract.

The High Court observed that the amounts awarded for transportation, pre-assembly, and erection work were ‘meagre’, and the Arbitrator’s approach of using a pro-rata contract rate and taking a “mean approach” for disputed quantities to be a reasonable way to quantify costs, especially since the fact that the work was performed was not in dispute.

The Court rejected the Arbitrator’s distinction between claims arising “as per the terms of the contract” and those arising from the “illegal termination of the contract”. It analysed Clause 17 of the contract, which stated, “No interest shall be payable by BHEL on any moneys due to the contractor”. Accordingly, the Court concluded that the phrase “any moneys due to the contractor” is wide enough to include claims for damages, compensation, or any other claim arising from a breach or illegal termination of the contract.

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Pursuit of parallel recovery proceedings under the SARFAESI Act or before the DRT does not bar a financial creditor from initiating CIRP. Such actions do not automatically constitute a malicious invocation under Section 65 of the IBC unless specific abuse of process is proven

The Supreme Court in the case of Elegna Co-operative Housing and Commercial Society Ltd vs Edelweiss Asset Reconstruction Company Ltd [Civil Appeal No. 10261 of 2025] dated January 15, 2026] has ruled that a society or association of homebuyers, which is not a creditor itself, lacks the locus standi to intervene in proceedings under Section 7 of the IBC at the pre-admission or appellate stage. The right to be heard at this stage is limited to the applicant creditor and the corporate debtor, as the proceedings are in personam, and therefore, unrelated third parties, including other creditors or societies, have no inherent right of audience.

The Court explained that the right to participate in insolvency proceedings is statutory, not equitable. Further, the status of “financial creditor” is granted to individual allottees under Section 5(8)(f) of the IBC, but this status does not extend to a society they are members of, as the society is a distinct juristic entity.

The Court also clarified that the inherent powers of the NCLAT under Rule 11 cannot be used to override the statutory structure of the IBC or to create substantive participatory rights where the statute deliberately excludes them. Hence, no prejudice was caused to homebuyers, as their interests are adequately protected under the IBC framework through mechanisms like participation in the Committee of Creditors (CoC) via an Authorised Representative post-admission.

Therefore, the Court upheld the NCLAT’s order to admit the Corporate Debtor into CIRP and affirmed the rejection of the Society’s intervention application. Further, to enhance transparency and protect homebuyer interests within the CIRP, the Court directed that the Information Memorandum must disclose complete details of all allottees, and if the CoC decides not to approve the handover of possession under Regulation 4E of the CIRP Regulations, it must record specific and cogent reasons in writing.

The Court observed that the Adjudicating Authority’s (NCLT) role under Section 7(5) of the IBC is limited to ascertaining the existence of a financial debt and default. Once established, admission of the CIRP application is mandatory, and considerations of project viability, stakeholder prejudice, or the creditor’s motives are irrelevant at this stage.

The Court clarified that the discretion indicated by the word “may” in Section 7(5)(a) of the IBC, as interpreted in Vidarbha Industries Power Ltd. v. Axis Bank Ltd [(2022) 8 SCC 352], is a narrow exception applicable only in peculiar factual circumstances, such as the corporate debtor having an adjudicated and realisable claim exceeding the debt owed. This position was authoritatively clarified in M. Suresh Kumar Reddy v. Canara Bank [2023 SCC OnLine SC 608].

Lastly, the Court concluded that the pursuit of parallel recovery proceedings under the SARFAESI Act or before the DRT does not bar a financial creditor from initiating CIRP. Such actions do not automatically constitute a malicious invocation under Section 65 of the IBC unless specific abuse of process is proven.

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Dishonour of different cheques issued on different dates, even if arising from the same transaction, can give rise to separate prosecutions under Section 138 of the Negotiable Instruments Act, 1881, and quashing such complaints at the threshold is impermissible

The Supreme Court in the case of Sumit Bansal vs MGI Developers and Promoters [Criminal Appeal No. 141 of 2026] dated January 08, 2026, has held that dishonour of different cheques issued on different dates, even if arising from the same transaction, can give rise to separate cause of actions under Section 138 of the Negotiable Instruments Act, 1881 (NI Act), and that quashing such complaints at the threshold is impermissible where disputed questions of fact are involved.

The case arose from an agreement to sell commercial units in Ghaziabad, Uttar Pradesh, under which the complainant paid Rs. 1.72 crore to the developer. Upon failure to execute the sale deeds within the stipulated time, cheques towards refund of the principal amount and an agreed appreciation amount were issued from the firm’s account, along with personal cheques issued by the proprietor as a guarantee. All the cheques were dishonoured on different dates, resulting in the filing of multiple complaints under Section 138 of the NI Act. The Delhi High Court partly quashed one of the complaints on the ground that multiple proceedings arising from the same liability would amount to an abuse of process, while permitting the remaining complaints to continue.

The Supreme Court held that each dishonoured cheque gives rise to a distinct cause of action once the statutory requirements under Section 138 are satisfied. The Court observed that whether the cheques were issued as alternatives, substitutions, or additional securities was a disputed question of fact which could not be adjudicated in proceedings under Section 482 CrPC. It accordingly restored the quashed complaint, holding that the High Court had exceeded its jurisdiction by conducting a premature evaluation of facts.

The Supreme Court further held that the remaining complaints prima facie disclosed the ingredients of an offence under Section 138 of the NI Act, clarifying that defences relating to absence of liability or prior repayment can only be examined during trial. Accordingly, the Supreme Court restored the quashed complaint and directed that all proceedings be tried independently on their own merits, in accordance with law.

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REGULATORY UPDATES

Foreign Exchange Management (Guarantees) Regulations, 2026 outline prohibitions, exemptions, conditions for acting as surety or principal debtor, and reporting requirements

The Foreign Exchange Management (Guarantees) Regulations, 2026 govern guarantees issued by persons resident in India to or for non-residents. They prohibit participation in such guarantees unless explicitly permitted under the regulations or with prior approval from the Reserve Bank of India. On January 06, 2026, the Reserve Bank of India (RBI) vide its Notification No. FEMA 8(R)/2026-RB, issued the Foreign Exchange Management (Guarantees) Regulations, 2026 to regulate cross-border guarantees by Indian residents, which shall supersede the Foreign Exchange Management (Guarantees) Regulations, 2000.

Key Provisions:

No person who is a resident of India can be a party, either a Principal Debtor or a Creditor, to a guarantee where any of the other parties to the guarantee is a person who is not a resident of India.

The Regulation exempts the guarantee undertaken by a branch of an authorized dealer bank outside India or in an International Financial Services Centre, unless any of the other party to the guarantee is a person resident in India.

The Regulation also exempts an Irrevocable Payment Commitment issued by an authorized dealer in its capacity of a custodian bank, where the principal debtor is a registered Foreign Portfolio Investor and the creditor is an authorized central counterparty in India.

Additionally, the Regulation exempts a guarantee given in accordance with the Foreign Exchange Management (Overseas Investment) Regulations, 2022.

The Regulation permitted a person who is a resident of India to act as a Surety or a Principal Debtor for a guarantee, if: (i) the underlying transaction for which the guarantee is being given or arranged is not prohibited under the Act or rules or regulations or directions issued under the Act; and (ii) the surety and the principal debtor are eligible to lend to and borrow from each other, respectively, under the Foreign Exchange Management (Borrowing and Lending) Regulations, 2018.

The Regulation, however, clarifies that the permission to act as a Surety or a Principal debtor, will not be applicable if the guarantee is: (i) by an authorised dealer bank, backed by a counter-guarantee or 100% collateral from a non-resident; (ii) by an Indian agent of a foreign shipping or airline company, for obligations to any statutory or government authority in India; and (iii) where both the surety and the principal debtor are residents of India.

The Regulation permits an Indian resident who is creditor, to arrange or obtain a guarantee in his favour, subject to the condition that if both the principal debtor and the surety are outside India, the creditor have to make sure the underlying transaction is not prohibited under Foreign Exchange Management Act, 1999 or any related rules, regulations, or directions.

As far as reporting requirements are concerned, the Regulation mandates that the guarantees will have to be reported: (i) by the surety where he is a person resident in India; (ii) by the principal debtor who has arranged the guarantee and where the surety is a person resident outside India; and (iii) by the creditor where the surety and the principal debtor both are persons resident outside India or where the creditor has arranged the guarantee.

The Regulation also mandates that reporting will be done to an authorized dealer bank on a quarterly basis within 15 calendar days from the end of the respective quarter for onward submission to the RBI. Additionally, the authorized dealer bank will have to submit the returns received to the RBI within 15 calendar days from the end of the respective quarter.

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All liquidation-related filings must now be made only on the IBBI’s electronic platform, within prescribed timelines and using a digital signature or e-signing, as required under the amended IBBI (Liquidation Process) Regulations, 2016

The Insolvency and Bankruptcy Board of India (IBBI) has introduced a simplified framework for reporting liquidation updates to the board. To facilitate the same, the Board has introduced four new online forms that track a company’s liquidation from start to finish. By way of the Circular No. IBBI/LIQ/91/2026, dated January 05, 2026, the IBBI said the revised system applies from January 1, 2026, and replaces the existing liquidation reporting framework.

Key updates:

All liquidation-related filings must now be made only on the IBBI’s electronic platform, within prescribed timelines and using a digital signature or e-signing, as required under the amended IBBI (Liquidation Process) Regulations, 2016.

Instead of repeating the same information at every stage, insolvency professionals will now report only what is relevant to where the liquidation stands.

The first form, LIQ-1, is filed at the start of liquidation. It records basic details of the corporate debtor and confirms that the public announcement has been made. It is to be filed by the 10th of the month following the public announcement.

LIQ-2 is a periodic filing appraise the adjudicating authority about the quarterly progress of the liquidation. It reflects how the liquidation is progressing, including valuation, realisation of assets, receipts and payments, and the overall status of the process. It is to be filed by the 10th of the subsequent month after the submission of the Progress report.

LIQ-3 is filed once the liquidator applies for dissolution of the corporate debtor or closure of the liquidation process. It is to be filed by the 10th of the subsequent month following the final closure or dissolution.

The last form, LIQ-4, is filed after the adjudicating authority passes the order for dissolution or closure of the liquidation process. This last form is to be filed within 7 days of the dissolution order.

The IBBI said the revised forms have been designed to eliminate duplication and rationalise data requirements, with information already available on the portal being carried forward automatically. To help insolvency professionals transition to the new system, the Board said no penalty will be levied for the delayed filing of forms during the initial quarter from January to March 2026.

The IBBI has also introduced a form-modification utility on its electronic platform. Where an insolvency professional identifies an error or omission in a submitted form, it can be corrected online through an OTP-based authentication process. No fee will be charged if the form is filed and modified before the due date.
At the same time, the IBBI clarified that insolvency professionals remain responsible for compliance. Failure to file forms or submission of inaccurate or incomplete information will continue to attract liability under the IBC. Forms LIQ-1, LIQ-3 and LIQ-4 are already available on the IBBI website. Form LIQ-2 will be made available from February 1, 2026.

Click here to read/ download the original circular

Legal Updates (Jan 05 – Jan 03, 2026)

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.