Legal Updates (Oct 13 – Oct 17, 2025)

Legal Updates (Oct 13– Oct 17, 2025)

Rule 68B of the Second Schedule to the Income Tax Act has no mandatory application to recoveries under the RDDB Act, and any irregularity in timing does not nullify the auction sale

The Kerala High Court in the case of Binu Vincent vs Federal Bank [Writ Petition (C) No. 19544 of 2025] dated October 09, 2025, has held that Rule 68B of the Second Schedule to the Income Tax Act, which provides that no sale of immovable property attached towards the recovery of tax, penalty, etc., shall be made after the expiry of three years from the end of the financial year in which the order giving rise to a demand of any tax, interest, fine, penalty or any other sum, for the recovery of which the immovable property has been attached, has become conclusive under relevant provisions of the Income Tax Act, does not mandatorily apply to recovery proceedings under the Recovery of Debts Due to Banks and Financial Institutions Act, 1993 (RDDB Act). Since the RDDB Act is a self-contained code enacted to secure speedy recovery of bank debts, the Court found that importing the time bar in Rule 68B would frustrate the statutory object.

The Court further held that even if there were procedural irregularities relating to timing, those do not render a sale, or consequent orders, void unless the adjudicating authority lacked inherent jurisdiction. The Court examined Rule 68B and observed that its references to “financial year,” “finality under Section 245-I,” and “Chapter XX” are specific to the Income Tax regime.

The RDDB Act itself provides a complete framework for recovery under Sections 19(22) and 25 without prescribing any time limit. Whereas, Section 29 of the RDDB Act adopts provisions of the Income Tax Rules only “as far as possible” and “with necessary modifications.” Therefore, only procedural parts that aid recovery may apply, not substantive restrictions that impede it. The provision is thus directory, not mandatory.

The Court observed that the legislative intent of the RDDB Act is to ensure the speedy recovery of debts due to banks and financial institutions, and subjecting recovery to a rigid limitation would defeat this purpose. Unlike the Income Tax regime, which involves recovery by the State, proceedings under the RDDB Act are adversarial, conducted by an independent Tribunal. Delays could arise due to administrative or procedural reasons beyond a bank’s control, such as transfer of officers, tribunal vacancies, or obstruction by debtors. Therefore, penalising banks for such delays would contradict the legislative purpose.

A charge created under the SARFAESI Act prior in time to the charge under the GST Act would prevail over the GST Act, and vice versa

The Karnataka High Court in the case of Canara Bank vs State of Karnataka [Writ Petition No. 103730 of 2025] dated September 23, 2025, has held that the charge created under the SARFAESI Act prior in time to the charge under the GST Act would prevail over the GST Act and vice versa. The ruling came after noting that the transaction under the GST Act is not reflected in public records, and the GST order in the present case was passed on April 16, 2019, and the entry was made on November 06, 2019, while the charge in favour of the petitioner bank under the SARFAESI Act was created on July 15, 2017 and was already entered into the property card.

The Court clarified that the decision of the Apex Court in the case of State Tax Officer vs Rainbow Papers Limited [Civil Appeal No. 1661 of 2020], which talks of the precedence of taxing authorities over the claims of secured creditors, including financial institutions, under the IBC, still holds the field; however, the said precedent would be applied only after considering the date of creation of the charge. Accordingly, the Court ruled that in the present case, the bank’s charge takes precedence over that of the GST authorities.

The Court further observed that the claim under the GST Act is not directly enforceable until the tax authorities have made an assessment and an entry is made on public records, like the encumbrance certificate or property card. In contrast, a secured creditor’s claim under the SARFAESI Act is based on a charge on the property, which is usually available in the public domain and can be acted upon by third parties.

The Court also pointed out that the dispute arises when two or more of these enactments are invoked concerning the same property or security, and then it becomes necessary to determine the priority of charges and the order of recovery under the conflicting enactments. The Bench therefore concluded that the priority of the charge must be determined based on the order in which the charges were created.

Approval of a resolution plan can’t be interfered with merely on the grievance of a single financial creditor regarding improper asset valuation of the corporate debtor

The NCLAT, New Delhi, in the case of Central Bank of India vs. Bijendra Kumar Jha [Company Appeal (AT) (Insolvency) No. 713 of 2025] dated August 18, 2025, has held that approval of a resolution plan cannot be interfered with merely on the grievance of a single financial creditor regarding improper asset valuation of the corporate debtor, when the valuer has, in fact, duly considered all assets and submitted its report.

The NCLAT found it evident from the third valuer’s report that the MoU and the allotment letter for 66 units were considered, and that these flats were given to the contractors against outstanding dues; hence, they were rightly excluded from the valuation of the corporate debtor. The Tribunal held that the valuers appointed in the CIRP process are the registered valuers who are experts in the job, and valuations given by them are not to be lightly interfered with by the Adjudicating Authority in the exercise of judicial review.

The NCLAT further observed that in the present case, the CoC, in its commercial wisdom, has approved the Resolution Plan. The valuation report, as required by Regulation 35 of the CIRP Regulations, is shared with all members of the CoC, and all members of the CoC have deliberated on the valuation report and approved the plan. It also held that the Appellant, as a dissenting financial creditor, cannot achieve what was not secured through voting.

Auction purchasers are liable to discharge outstanding property tax dues, including those that are accrued before the sale, if the sale was explicitly on an “as is where is, whatever there is and without recourse” basis, requiring bidders to undertake independent due diligence

The Calcutta High Court in the case of Cotton Casuals India Pvt Ltd. vs State of West Bengal [WPO 1235 of 2024] dated September 25, 2025, has held that the auction purchasers are liable to discharge outstanding property tax dues, including those that are accrued before the sale. The Court ruled so after referring to Section 232 of the Kolkata Municipal Corporation Act, 1980 (KMC), which states that property tax is a first charge on the property and thus constitutes a statutory encumbrance running with the land.

The Court observed that the sale was explicitly on an “as is where is, whatever there is and without recourse” basis, requiring bidders to undertake independent due diligence. Thus, an “as is where is” sale transfers both assets and liabilities unless expressly excluded. The Court also negated the applicability of the overriding clause of Section 238 of the Insolvency & Bankruptcy Code, 2016 (IBC), citing no conflict between the IBC and the KMC Act. Accordingly, KMC’s refusal to mutate the property until arrears were cleared was lawful under Sections 183(5) and 232 of the KMC Act.

The Court referred to Section 183(5) of the KMC Act and explained the 1997 amendment, which permitted the Corporation to refuse mutation where there are arrears of dues of the transferor/predecessor, and empowers the KMC to withhold mutation. The Court added that auction purchasers are subject to caveat emptor; however, the burden to fasten a pre-sale liability on a purchaser depends on whether the purchaser was put on sufficient notice of the liability. If the sale documents give appropriate notice, the purchaser cannot later disavow the liability.

On the interplay between IBC and municipal law, the Court explained the IBC/ liquidation regime (claims to be lodged with Liquidator under Regulations/Section 53 waterfall) but distinguishes that where a statutory first charge attaches to property (e.g., property tax under Section 232 KMC Act), the municipal authority may enforce that charge independently; and hence an overriding effect under Section 238 of IBC does not displace a statutory charge that runs with the property.

A bank cannot retain a fixed deposit belonging to one company to recover dues from another, even if they are part of the same group

The NCLAT, New Delhi, in the case of Industrial and Commercial Bank of China Limited vs Anish Niranjan Nanavaty [Company Appeal (AT) (Insolvency) No.69 of 2024] dated September 25, 2025, has held that the Industrial and Commercial Bank of China Limited (ICBC) was not entitled to retain a fixed deposit of Rs. 27.60 crore belonging to Reliance Communication Infrastructure Limited (RCIL), as no dues were owed by the corporate debtor and the lien letter did not extend to the liabilities of other group companies.

The Tribunal observed that the wording of the lien letter referred only to “us,” which clearly meant RCIL, and explained that the lien could apply only to dues owed by RCIL and not to debts of any other group company. Further, RCIL had never availed any credit facility from ICBC and was not jointly liable with any other entity.

The Tribunal also pointed out that under Section 171 of the Contract Act, a general lien can only be exercised for the customer’s own debts, and not for those of third parties. The NCLAT, therefore, upheld the NCLT’s order directing the release of the fixed deposit with interest, holding that ICBC could not retain the amount as RCIL owed no dues to it.

Guarantees and the Loan Agreement operate together, and the arbitration clause in the Loan Agreement applies to guarantors. The arbitration clause in the Loan Agreement incorporated into the contemporaneous Deeds of Guarantee executed by the respondents binds them to arbitration

The Delhi High Court in the case of Intec Capital Ltd vs Shekhar Chand Jain [ARB. A. (COMM.) 25/2024] dated September 04, 2025, has held that Clause 4 of the Deeds of Guarantee, which records that the guarantor “has read and understood the terms and conditions governing the LOAN, agrees to be bound by the same” and that the “Guarantee shall form an integral part of the Agreement”, manifests an intention to incorporate the Loan Agreement in its entirety into the Guarantees. Therefore, Section 7(5) of the Arbitration Act applies, and the arbitration clause is incorporated.

The High Court treated the Loan Agreement and Guarantees as part of a single composite transaction, and added that the arbitrator erred in treating the reference as a mere general reference, and the respondents remain bound by the arbitration clause and must remain parties to the arbitration.

The Court framed the issue that the respondents did not sign the Loan Agreement but executed contemporaneous Deeds of Guarantee, and held that the test is whether there is a clear intention to import the other document’s terms into the contract. The Court found the phrase “integral part” and the explicit acknowledgement that the guarantor “agrees to be bound by the same” go beyond a mere general reference. On its construction, Clause 4 of the agreement demonstrates the intention to incorporate the Loan Agreement in its entirety into the Guarantees, and this satisfies Section 7(5) threshold for incorporation of an arbitration clause.

The Court observed that where standard form documents or contemporaneous documents form part of a single commercial relationship, a general reference to such standard form may be sufficient to incorporate its arbitration clause. The Loan Agreement and Guarantees, though separate in form, are part of a single composite transaction executed on the same date and intended to govern the same commercial arrangement; this brings the case within a ‘single contract’ principle.

The Court observed that contemporaneous documents forming part of a single transaction must be read together to give effect to the parties’ intention, and the Guarantees and Loan Agreement operate together, and that the arbitration clause applies to guarantors.

Money laundering is a continuing offence, and even if the accused continues to possess or deal with the proceeds of crime, liability under PMLA persists regardless of when the predicate offence occurred or was notified

The Kerala High Court in the case of P.R. Sandhya vs Directorate of Enforcement [Criminal MC No. 4107 of 2022] dated October 09, 2025, has held that the complaint under Section 3 read with Section 4 of the Prevention of Money Laundering Act, 2002 (PMLA) shall be maintainable, as money laundering is a continuing offence, and even if the criminal activities may have been committed before the same had been notified as a scheduled offence for the purpose of the PML Act, 2002, if a person has indulged in or continues to indulge directly or indirectly in dealing with proceeds of crime, derived or obtained from such criminal activity even after it has been notified as scheduled offence, is liable to prosecuted be even if the criminal activities may have been committed before the same had been notified as a scheduled offence for the purpose of the PML Act, 2002, if a person has indulged in or continues to indulge directly or indirectly in dealing with proceeds of crime, derived or obtained from such criminal activity even after it has been notified as scheduled offence, is liable to be

The Court observed that the possession of tainted property after the PMLA came into force constitutes an actionable offence, even if the predicate acts predate its inclusion, and the petitioner’s claim of lack of knowledge or intent (mens rea) to be treated as a matter of evidence has to be determined only at trial. The Court noted that whether the petitioner possessed the proceeds of crime with or without knowledge was a question of fact requiring evidence. Since the properties were admittedly bought from funds alleged to be bribe money, continuing possession itself raised a prima facie inference of knowledge sufficient to attract Section 3 of the PMLA.

Thus, the Court concluded that if a person continues to possess or use property derived from illegal gain after its notification as a scheduled offence, prosecution under Section 3 of PMLA is maintainable.

In circumstances where the arbitrator has recused, need not be compelled to institute a fresh petition under Section 11 of the Arbitration Act. Instead, recourse may appropriately be taken under Section 15 of the Arbitration Act, which specifically provides for the substitution of an arbitrator

The Delhi High Court in the case of PM Projects and Services Private Limited vs. Ben and Gaws Private Limited [O.M.P. (T) (COMM.) 71/2025] dated September 03, 2025, has held that the once an arbitrator has been appointed by the Court under Section 11(6), the parties forfeit their original contractual right to appoint the arbitrator. Therefore, the substitution of the recused arbitrator must be effected by the same authority, the Court under Section 15(2) of the Arbitration Act, which specifically provides for substitution when an arbitrator withdraws from office. Compelling the parties to institute a fresh Section 11 petition would defeat the legislative intent, especially considering the parties’ original intent for expeditious resolution under the Section 29B fast-track procedure.

The Court held that the parties’ intent, as manifested in Clause 6 of the Indemnity Bond, was to secure a quick and efficient resolution by consciously electing to adopt the fast-track procedure under Section 29B of the Arbitration Act. Recourse must, therefore, be appropriately taken under Section 15 for substitution to preserve the continuity of proceedings and the expeditious resolution intended by the parties.

The Court drew a clear distinction between cases where arbitration is initiated under the mechanism stipulated in the agreement itself, and the cases where the Court exercised its power under Section 11 to make the appointment because the parties forfeited their contractual right. In the latter case, the arbitrator must be substituted in exercise of the Court’s power under Section 15(2) of the Act, and the substitute arbitrator would be appointed in the same manner by the Court.

The NCLAT, New Delhi, in the case of Shobhana Thakkar vs Monitoring Committee of Ashiana Landcraft Realty Pvt Ltd. [Company Appeal (AT) (Insolvency) No. 2156 of 2024] dated August 20, 2025, has held that once an investor of the Corporate Debtor has received an amount under the Settlement Agreement and has given an unconditional undertaking to forgo all claims under the Resolution Plan, they are barred from claiming the same amount under the Resolution Plan, as such dual recovery is impermissible.

The NCLAT observed that the investors were given the choice to opt either for the settlement and file an undertaking to forgo all the claims under the Resolution Plan or forfeit rights under the Settlement Agreement and claim rights under the Resolution Plan, but not both. Since the Appellants are trying to claim the amount both under the settlement agreement and the resolution plan, they having received their dues under the settlement agreement and given an unconditional undertaking to forgo all the claims under the Resolution Plan, such dual recovery is impermissible.

Attachment of assets by the Enforcement Directorate (ED) under the Prevention of Money Laundering Act (PMLA) ceases to have effect once a resolution plan is approved under the Insolvency and Bankruptcy Code (IBC)

The NCLAT, New Delhi, in the case of Vantage Point Asset Management P Ltd vs Gaurav Misra, Resolution Professional of Alchemist Infra Reality Ltd. [Company Appeal (AT) (Ins) No. 1495 of 2024] dated October 14, 2025, has held that any attachment of assets by the Enforcement Directorate (ED) under the Prevention of Money Laundering Act (PMLA) ceases to have effect once a resolution plan is approved under the Insolvency and Bankruptcy Code (IBC).

The Tribunal observed that Section 32A of the IBC, extinguishing all prior criminal liabilities of the Corporate Debtor, will come into force once a resolution plan is approved. Thus, there is no need to obtain any order from the PMLA authority for the release of the same, and the Provisional Attachment Order shall cease to operate after the resolution plan is approved, bringing into effect Section 32A.

The Tribunal emphasised the supremacy of Section 32A post approval of the resolution plan, and clarified that there is no exception in the scheme of Section 32A of the IBC that where Provisional Attachment Orders have been passed before initiation of CIRP or before approval of the resolution plan, assets have to be kept out of the resolution. It further observed that there is no impropriety in including the attached assets in the information memorandum.

The Court also observed that by the attachment of the assets, the ownership rights of the corporate debtor are not divested, nor can it be said that the corporate debtor does not continue to be the owner of the asset. The scheme under the PMLA itself clarifies that, despite attachment, the corporate debtor is entitled to enjoy the property.

Legal Updates (Oct 6 – Oct 11, 2025)

Legal Updates (Oct 6– Oct 11, 2025)

A cheque dishonour complaint would be maintainable against a trustee who has signed a cheque on the Trust’s behalf, without arraying the Trust as an accused

The Supreme Court in the case of Sankar Padam Thapa vs Vijaykumar Dineshchandra Agarwal [SLP (Criminal No. 4459 of 2023] dated October 09, 2025, has held that when a cause of action arises due to an alleged dishonour of a cheque and a complaint is initiated under the Negotiable Instruments Act (NI Act), the same is maintainable against the Trustee who has signed the cheque, without the requirement to array the Trust also as an accused.

The Court clarified that a cheque dishonour complaint would be maintainable against a trustee who has signed a cheque on the Trust’s behalf, without arraying the Trust as an accused. This is so because a Trust is not a juristic person, can neither sue nor be sued; therefore, trustees responsible for the day-to-day affairs of the Trust would be held liable, particularly the one who signed the cheque.

The Court therefore concluded that the person who signs the cheque is clearly responsible for the act and can be prosecuted without the trust being separately arraigned. Since the Respondent was the Chairman and Authorised Signatory of the Trust who personally signed the cheque, he was prima facie responsible for the act of issuing the cheque. making him liable without the need for the Trust to be arraigned as an accused. Reference was made to the decisions in the case of SMS Pharmaceuticals Ltd. vs. Neeta Bhalla [(2005) 8 SCC 89] and KK Ahuja vs. VK Vora [(2009) 10 SCC 48].

Approval of the resolution plan under IBC does not extinguish the criminal liability of the directors under Section 138 of the NI Act

The Bombay High Court in the case of Ortho Relief Hospital and Research vs Anand Distilleries [Criminal Petition No. 251 of 2025] dated October 01, 2025, has restored the proceedings under Section 138 of the Negotiable Instruments Act, 1881, holding that the directors being natural person are to be distinguished from the company being an artificial person, and therefore, they cannot escape their liability merely because insolvency proceedings were initiated earlier against the company.

The Court reiterated that Directors or Signatories remain personally liable under Section 138 of the NI Act, and even if the company’s debt is resolved or liquidation is completed, the personal penal liability continues to remain. Reference was made to the decisions in the case of Rakesh Bhanot vs Gurdas Agro Private Limited [(2025) 6 SCC 781], P. Mohanraj and others vs Shah Brothers Ispat Pvt Ltd. [(2021) 6 SCC 258], and Ajay Kumar Radheyshyam Goenka vs Tourism Finance Corporation of India Ltd. [(2023) 10 SCC 545].

The Court explained that the NI Act proceedings are penal, not recovery proceedings, whereas Section 138 aims to uphold the integrity of commercial transactions, and not to recover debt. The IBC and NI Act operate in different spheres, wherein the IBC provides financial resolution for companies, and the NI Act imposes penal liability for cheque dishonour. Further, the moratorium under Section 14 of the IBC applies only to the corporate debtor, not to natural persons, i.e., the directors, and Section 32A of the IBC protects only the corporate debtor (post-resolution), not the directors responsible for the conduct of the company.

The Court observed that Section 138 NI Act proceedings are not meant for the recovery of money, and directors and signatories of a company remain personally liable even if the company’s debt is resolved under the IBC. Further, approval of a resolution plan does not extinguish or discharge their criminal liability, and such proceedings aim to preserve the integrity of commercial transactions rather than merely compensate the complainant. The Court also concluded that while Section 32A of the IBC, which protects the corporate debtor, does not extend that protection to individuals who were in charge of or responsible for the conduct of the company’s business. Also, the moratorium under Section 14 IBC does not cover criminal proceedings under the NI Act.

The limitation period for filing a written statement under Order VIII Rule 1 of the CPC begins from the date of service of summons along with a copy of the plaint, and not from the date of filing of the Vakalatnama by the defendant. Filing of Vakalatnama by Defendant’s counsel is not deemed service of summons.

The Bombay High Court in the case of Gautam Dham Co-operative Housing Society Ltd. vs. Funds and Properties of Parsi Panchayat, Bombay [Interim Application No. 4761 of 2025 in Suit No. 393 of 2022] dated September 20, 2025, has held that the limitation period for filing a written statement under Order VIII Rule 1 of the Civil Procedure Code, 1908 (CPC) begins from the date of service of summons along with a copy of the plaint, and not from the date of filing of the Vakalatnama by the defendant.

The Court emphasised that the responsibility to serve the plaint rests upon the plaintiff and that the defendant cannot be expected to apply to the court office to obtain a copy of the plaint merely because a Vakalatnama has been filed earlier. The Court therefore held that Rule 84 of the Bombay High Court (Original Side) Rules, 1980, merely prescribes a method of proving service where the fact of service is in dispute, and cannot be read to mean that filing of a Vakalatnama amounts to deemed service of summons with plaint.

The Court observed that the filing of Vakalatnama can be after the service of the summons; however, if a Vakalatnama is filed before the service of the writ of summons, the same cannot go against the Defendant for computing the starting period of limitation for the purpose of Order VIII Rule 1. The Court further held that the 75-day delay caused by inadvertence in the office of the advocate constituted “sufficient cause”, and remarked that litigants should not be penalised for inadvertent mistakes of their advocates, especially where the delay is not inordinate and no prejudice is caused.

Mere allegations of fraud and lodging of an FIR shall not bar reference of the dispute to arbitration, if no chargesheet is filed and criminal proceedings have not started

The Bombay High Court in the case of Mangal Credit and Fincorp Limited vs Ulka Chandrshekhar Nair [Arbitration Application (L) No. 29984 of 2023] dated October 01, 2025, has held that the disputes are still arbitrable under the Arbitration and Conciliation Act, 1996 (Arbitration Act) even though allegations of fraud and forgery were raised, if there was no progress in the criminal case.

The court observed that it is an admitted position that an FIR was lodged, but no chargesheet has been filed to date, and criminal proceedings have also not been started. Therefore, under such circumstances, it would be imprudent and speculative to accept the contention that merely because the FIR was registered, the parties must not be referred to the arbitration, especially when the said criminal case was filed against the partner of the Applicant, not directly against the Applicant.

The Court further held that merely because the Respondent has chosen to attack the Mortgage Deeds, which contain the arbitration clause inter alia on the ground of criminality, forgery, fraud, and pending FIR since 2023, the contractual obligations flowing from the said Mortgage Deeds cannot be disowned by the Respondent and discarded at this juncture. The Respondent’s allegation of not being a signatory or being unaware of these deeds squarely falls within the scope of arbitrability under the Arbitration Act.

The court also observed that mere pendency of proceedings before the Debt Recovery Tribunal does not ipso facto bar the reference of a dispute to arbitration under section 11 of the Arbitration Act. It further observed that there is no legal bar preventing an arbitrator from deciding such questions, including challenges to the very arbitrability of the dispute.

Mere attainment of a dominant position does not amount to abuse of such position and hence not a violation of Section 4 of the Competition Act, in the absence of discriminatory conduct

The Competition Commission of India (CCI) in the case of Liberty Infospace Pvt Ltd. v Alphabet Inc. [Case No. 07 of 2025] dated October 06, 2025, has ruled that Google did not abuse its dominant position by terminating the developer account of Liberty Infospace on the Google Play Store, after finding no prima facie violation under Section 4 of the Competition Act, 2002 relating of abuse of dominant position or indulgence in discriminatory conduct.

The CCI found that the termination essentially removed Liberty’s HRMS app, EasyDo Tasks-HRMS Payroll AI, from the Play Store, where it had over 16,000 downloads, citing prior violations by associated previously terminated Google Play Developer Accounts. This was opposed by the informant, alleging discrimination, citing additional redressal mechanisms available to EU developers under the Digital Services Act.

The CCI reaffirmed that Google holds a dominant position in this market but did not abuse this dominance. The Commission also accepted Google’s rationale for not disclosing detailed enforcement mechanisms, noting that transparency must be balanced against the risk of bad actors gaming the system, and stated that Google’s explanation in respect of its ‘relational ban policy’, reasons behind not giving detailed disclosures, rationale for termination, and lack of incentive to terminate authentic apps appear to be reasonable.

The terms of the Google Play Developer Distribution Agreement (GPDDA), which Liberty had challenged as one-sided and unfair, were found to be standard-form contracts applied uniformly across developers. The Commission noted that Clause 10.3 of the agreement permits immediate termination in cases of serious violations, including those involving associated accounts, and therefore, dismissed the case under Section 26(2) of the Competition Act, 2002.

A transactional audit report alone cannot be conclusive proof of fraudulent trading under Section 66 of the IBC

The NCLAT, New Delhi, in the case of Nalinesh Kumar Paurush v. Shree Vishvamurte Tradinvest Pvt Ltd. [Company Appeal (AT) (Insolvency) No. 346 of 2024] dated September 25, 2025, has held that a transactional audit report alone cannot be conclusive proof of fraudulent trading under section 66 of the Insolvency and Bankruptcy Code, 2016 (IBC). The Tribunal observed that every commercial transaction that results in ‘loss’ may not be labelled as fraudulent, and the failure to exercise due diligence may not be sufficient to label a transaction fraudulent for the purpose of section 66 IBC.

The NCLAT also observed from a combined reading of the clauses that at the time of making the transaction, the suspended director must know that there is no reasonable prospect of avoiding the CIRP process, and they failed in exercising due diligence to minimize the potential loss. The Tribunal further observed that in the absence of any direct evidence, the purchase of shares of unlisted companies cannot be considered to be an act of fraud.

Legal Updates (Sep 29 – Oct 4, 2025)

Legal Updates (Sept 29 – Oct 4, 2025)

Case Updates:

Cash loans above ₹20,000, though attracting a penalty under Section 269SS of the Income Tax Act, remain legally enforceable under the Negotiable Instruments Act

The Supreme Court in the case of Sanjabij Tari vs Kishore S. Borcar [Criminal Appeal No. 1755 of 2010] dated September 25, 2025, has held that once the execution of a cheque is admitted, presumptions under Sections 118 and 139 of the Negotiable Instruments Act, 1881, arise that it was issued for consideration and in discharge of a debt. These presumptions can be rebutted only by credible evidence, not mere conjecture. The accused had neither replied to the statutory notice nor produced independent material to support his defence, and the complainant had sufficiently explained the source of funds.

The Apex Court clarified that cash loans above ₹20,000, though attracting a penalty under Section 269SS of the Income Tax Act, remain legally enforceable under the Negotiable Instruments Act, rejecting the contrary view taken by the Kerala High Court in P.C. Hari v. Shine Varghese [2025 SCC OnLine Ker 5535], and described that the defence that a blank cheque was given only to secure a bank loan, was absurd.

The Apex Court also revisited its guidelines for compounding offences under the Negotiable Instruments Act, originally framed in the case of Damodar S. Prabhu vs. Sayed Babalal [(2010) 5 SCC 663], to account for the large backlog of cheque-bouncing cases and reduced interest rates. The Court also held that if the accused pays the cheque amount before recording of defence evidence, compounding may be allowed without costs.

Further, taking judicial notice of the staggering pendency of over 6.5 lakh cheque cases in Delhi alone, the Apex Court framed comprehensive directions effective November 1, 2025, to expedite Section 138 proceedings, which are as follows:

Multi-mode service of summons, including dasti service and electronic means (email/WhatsApp), with affidavit verification.
Mandatory affidavit of service by the complainant, with penalties for false statements.
QR code/UPI payment links to be provided in summons, enabling direct online payment of cheque amounts to facilitate early settlement.
Every complaint is to include a synopsis detailing parties, cheque particulars, cause of action, statutory notice, relief sought, and details of pending cases between the same parties.
No requirement of pre-cognisance summons under Section 223 of the Bharatiya Nagarik Suraksha Sanhita (BNSS) for NI Act complaints.
Proceedings ordinarily to remain summary trials, with courts required to record reasons for conversion to summons trials.
Trial courts to exercise power under Section 143A NI Act for early interim deposit of the cheque amount.
Post-summons hearings to be held in physical courts to encourage settlement; digital courts may handle pre-summons stages.

No offence of cheating can be attributed to an intermediary/ facilitator, who is not responsible for the actions of subscribers on the platform, like matrimony websites

The Allahabad High Court in the case of Anupam Mittal vs State of UP [Criminal Miscellaneous Writ Petition No. 8702 of 2023] dated September 26, 2025, has held that Shaadi.com functions as an intermediary under the Information Technology Act, 2000, and its CEO cannot be held liable for the independent actions of users. The High Court found that the FIR stemmed from a complaint where a subscriber was allegedly blackmailed by another user, but no dishonest intention or active role was attributed to the CEO. Hence, the Court quashed the FIR lodged by a customer against Shaadi.com CEO, Anupam Mittal, in an alleged cheating case on the grounds that he did not commit any offence in his personal capacity.

In this case, the informant, a lawyer, had paid for services on shaadi.com. It is his case that he was being harassed and blackmailed by one Monika Gupta, who had allegedly recorded the informant’s obscene videos. In the FIR, he stated that despite complaints on the customer care and in personal capacity to the CEO, no action was being taken to remove profiles of those who were indulging in obscenity, no action was being taken.

The High Court, however, observed that the CEO of the matrimonial company could not be alleged to have committed any offence in his personal capacity. Also, the informant who was aggrieved by the acts of the participants on the platform was not harassed on his personal social media pages. Relying on Section 79 of the Information Technology Act and the judgment of the Apex Court in Google India Private Limited vs. Visaka Industries [(2020) 4 SCC 162], the Court held that the petitioner was an intermediary/ facilitator, who was not responsible for the actions of third parties on the platform, and no liability could be imposed on him.

After the date of commencement of insolvency, claims that are not made a part of the Resolution Plan are not arbitrable

The Delhi High Court in the case of JSW Ispat Special Products Limited v Bharat Petroresources Limited [O.M.P. (COMM) 533/2024] dated September 11, 2025, has held that claims that are not a part of the Resolution Plan on the date of approval shall stand extinguished and no person will be entitled to arbitrate such claims. Essentially, post-insolvency commencement date claims that are not made a part of the Resolution Plan are not arbitrable.

The High Court considered the issue of incorrect disclosure by the Arbitrator and noted that the requirement of disclosure in writing in the format specified in the Sixth Schedule was mandatory. Referring to the judgment of HRD Corporation v GAIL (India) Limited (2018) 12 SCC 471, the Court reiterated that merely because an Arbitrator has rendered an award in a previous arbitration between the same parties, per se will not be a ground of ineligibility, in the absence of something more which makes the person inherently ineligible to be an Arbitrator, in the subsequent arbitration.

The Court also observed that it was an undisputed fact that all claims related to the period post-insolvency commencement date were not collated by the resolution professional. Since in the instant case, the claims which were referred to arbitration were not part of the approved Resolution Plan and stood extinguished and were thus not arbitrable.

NCLT lacks the authority to adjudicate upon an order issued by the adjudicating authority under PMLA or to direct the Enforcement Directorate to release the attachment

The NCLT, New Delhi, in the case of Vikram Kumar vs Directorate of Enforcement [I.A. NO. 4373 OF 202 & I.A. 5680 OF 2023] dated September 02, 2025, has held that the NCLT lacks the authority to adjudicate upon an order issued by the adjudicating authority under PMLA or to direct the Enforcement Directorate (ED) to release the attachment.

The Adjudicating Authority observed that the object of the PMLA is to prevent money laundering and to confiscate “proceeds of crime,” and the de-attachment, if allowed, would trench upon the jurisdiction of the PMLA. Therefore, the NCLT lacks jurisdiction to interfere with this.

The NCLT discussed the rulings of Embassy Property Developments Pvt Ltd [(2019) 11 SCC 1] and Kiran Shah vs. Enforcement Directorate [2022 SCC OnLine NCLAT 2], wherein it was held that the NCLT cannot adjudicate upon matters falling outside the scope of IBC and within the exclusive domain of authorities constituted under any other legislation. Therefore, the appellant can only approach the adjudicating authority under the PMLA, before whom the matter is pending.

Moratorium u/s 14 of the IBC doesn’t prevent the reversal of funds mistakenly transferred to the corporate debtor’s account

The NCLT, New Delhi, in the case of B. A. Chandrasherkara Setty vs Intec India Limited [IA 625/2024 IN Company Petition No. (IB) – 2432/(PB)/2019] dated September 04, 2025, has held that the moratorium under section 14 of the IBC doesn’t prevent reversal of funds mistakenly transferred to the corporate debtor’s account. The adjudicating authority held so, while allowing the claim of the applicant that it had mistakenly transferred the ‘relevant funds’ through RTGS, and had sent an email to the bank officials seeking reversal of the funds transferred.

The NCLT observed that the amount was wrongfully credited into the account of the corporate debtor and could not be considered as the asset of the corporate debtor. Essentially, it was held that it cannot be the intention of the legislature to impose a blanket ban on any type of operation of the bank account of the corporate debtor just because a moratorium has been imposed.

The NCLT further observed that neither the corporate debtor nor any other person can claim the amount inadvertently credited to the respondent’s account, and the moratorium cannot be said to have any effect on the money that belongs to an outsider and not to the financial creditor or any other stakeholder. Thus, the question of lifting the moratorium does not arise. Accordingly, it directed that the ‘relevant funds’ should immediately be recredited to the account of the rightful beneficiary or to the transferor.

Institution of criminal proceedings or allegations of fraud against officials of the financial creditor do not bar an application under section 7 of the IBC

The NCLT, Cuttack, in the case of Canara Bank vs S.S. Aluminium Pvt Ltd [CP (IB) No 18/CB/2O24] dated September 09, 2025, has held that institution of criminal proceedings or allegations of fraud against officials of the financial creditor do not bar an application under section 7 of the IBC. The Tribunal therefore rejected the arguments of the Respondent regarding fraud and held that the institution of criminal proceedings or fraud allegations against the officials of the Financial Creditor cannot bar an application under section 7 of the IBC.

The NCLT further observed that, unlike an application under section 9 of the IBC, the petition under section 7 cannot be rejected over a pre-existing dispute. In the present case, acknowledgements of debt through one-time settlement (OTS) proposals, restructuring agreements, and the balance sheet of the corporate debtor extended the period of limitation under section 18 of the Limitation Act. Further, the defaults in the present case occurred subsequent to the period of prohibition under Section 10A of the IBC, as evidenced by loan account statements and NeSL records.

Inadequate stamping of loan documents does not bar the admission of a petition under Section 7 of the IBC

The NCLT, Mumbai, in the case of Pegasus Assets Reconstruction Pvt Ltd vs Dee Plone Polyster Pvt Ltd [CP (IB) No. 141/MB/2024] dated September 02, 2025, has held that inadequate stamping of loan documents does not bar the admission of a petition under section 7 of the IBC.

The NCLT rejected the submission with respect to inadequate stamping and non-furnishing of electronic certificates under section 65B on the ground that these defects were curable in nature and did not affect the maintainability of the petition under section 7 of the IBC.

Relying on the Supreme Court’s decision in the case of judgment in N.N. Global Mercantile vs Indo Unique Flame [Civil Appeal No(S). 3802-3803 of 2020], where it was held that inadequate stamping is a curable defect, the NCLT held that the corporate debtor’s acknowledgement in the financial statements and communications extended the limitation period under section 18 of the Limitation Act.

Regulatory Updates: SEBI & RBI

SEBI Announces Digital Accessibility Rules for Regulated Entities to Foster a More Equitable Digital Ecosystem

The Securities and Exchange Board of India (SEBI) vide its Circular No. SEBI/HO/ITD-1/ITD_VIAP/P/CIR/2025/131 dated September 25, 2025, has released Compliance Guidelines for Digital Accessibility in continuation of its circular dated July 31, 2025. These guidelines are framed under the provisions of the Rights of Persons with Disabilities (RPwD) Act, 2016, and the rules made thereunder. The initiative marks a significant step towards making digital platforms inclusive and accessible for all, especially persons with disabilities.

Under the new framework, all Regulated Entities (REs) are required to identify and report the list of their digital platforms being used to deliver services or provide disclosures. This includes websites, mobile applications, portals, and any other digital interfaces used to engage with investors or the public.

Further, to oversee compliance, entities must appoint IAAP-certified accessibility professionals as auditors. These professionals are responsible for conducting independent accessibility audits of digital platforms to ensure that they adhere to global best practices in accessibility and user experience.

As far as audit, remediation, and reporting are concerned, the SEBI guidelines mandate that regulated entities conduct regular accessibility audits, identify shortcomings, and implement remediation measures to address audit findings. Entities are also required to provide annual compliance reports to SEBI within the prescribed timelines, using the specified reporting mechanism.

Click here to read the original circular

RBI Eases EDPMS/IDPMS Rules for Small-Value Trade Bills

The Reserve Bank of India (RBI) vide its A.P. (DIR Series) Circular RBI/2025-26/89 A.P. (DIR Series) Circular No. 12 dated October 01, 2025, has simplified the closure of entries in the Export Data Processing and Monitoring System (EDPMS) and Import Data Processing and Monitoring System (IDPMS), specifically targeting small-value transactions.

Effective immediately, the new procedure allows Authorised Dealer (AD) Category-I Banks to reconcile and close export and import entries valued at ₹10 lakh per entry/bill or less based solely on a declaration provided by the concerned exporter or importer. The exporter must declare that the amount has been realized, and the importer must declare that the amount has been paid.

The RBI also permits banks to accept any reduction in the declared or invoice value for these bills based on the same self-declaration. To facilitate bulk reconciliation, these declarations can be received quarterly in a consolidated manner.

Furthermore, the RBI has instructed AD banks to review the charges levied for handling these small-value transactions, ensuring they are commensurate with the reduced services required under the new, relaxed procedure. Critically, banks are prohibited from levying any penal charges for delays in adhering to regulatory guidelines.

Click here to read the original circular

SEBI Extends Algo Trading Implementation Timeline till April 2026

The Securities and Exchange Board of India (SEBI) vide its Circular No. SEBI/HO/MIRSD/MIRSD-PoD/P/CIR/2025/132 dated September 30, 2025, has further extended the timeline for the complete implementation of its framework for the safer participation of retail investors in algorithmic (Algo) trading, originally mandated by the February 2025 circular.

While stock brokers ready with the necessary systems may proceed with implementation starting October 1, 2025, a glide path has been introduced for those needing more time due to recent clarifications in operational modalities.

This path sets out three key milestones: (i) registration applications for retail algo products and at least one strategy must be submitted by October 31, 2025 (Milestone 1); (ii) registration completion by November 30, 2025 (Milestone 2); and (iii) mandatory participation in a mock session with the new functionality by January 3, 2026 (Milestone 3).

Stock brokers failing to meet these milestones will be barred from onboarding new retail clients for API-based algo trading from January 5, 2026. The full implementation of the new algo framework will be mandatory for all stock brokers starting April 1, 2026.

Click here to read the original notification

Non-residents allowed to invest in corporate debt from Special Rupee Vostro Accounts

The Reserve Bank of India vide its Circular No. RBI/2025-26/90 dated October 03, 2025, has allowed persons resident outside India holding Special Rupee Vostro Accounts (SRVAs) to invest their surplus rupee balances in corporate debt instruments. Previously, such investments were restricted to government securities

SRVA holders can now invest in non-convertible debentures (NCDs), bonds, and commercial papers issued by Indian companies, RBI said in a circular issued to Authorised Dealer Category-I banks.

The move will increase participation in the corporate bond market and make SRVAs attractive, as they could fetch higher returns. The SRVA mechanism was introduced by the RBI in July 2022 to facilitate the settlement of international trade transactions in Indian rupees.

Under the revised norms, Investments in corporate debt will be counted under the General Route limit for foreign portfolio investors (FPIs). Minimum residual maturity and issue-wise limits applicable to FPIs will not apply to SRVA-based investments.

Click here to read the original notification

Legal Updates (Sep 22-27, 2025)

Legal Updates (Sept 22 – 27, 2025)

Case Updates:

NCDRC cannot overstep its power & jurisdiction to travel beyond the pleadings in the complaint case and build up a new case on its own

The Supreme Court in the case of Deep Nursing Home vs Manmeet Singh Mattewal [2025 INSC 1094] dated September 09, 2025, has held that the National Consumer Dispute Redressal Commission (NCDRC) had wrongly awarded the compensation of Rs. 10 lacs by inventing a case of ‘antenatal negligence’ against the doctors, even though the original complaint was confined to ‘post-delivery negligence’. Accordingly, the Apex Court ordered the complainant to refund Rs. 10 lacs received by him as compensation.

The Apex Court reiterated that it would be impermissible to build a new case which was never pleaded in the pleadings/complaint. Since the NCDRC had gone beyond its jurisdiction when it faulted the doctor for alleged “antenatal negligence” despite the complainant’s case being restricted to “post-delivery negligence”, the Apex Court held that NCDRC exceeded its jurisdiction in awarding compensation for “antenatal negligence”.

The Apex Court also observed that the NCDRC clearly erred in building up a new case on his behalf and in pinning negligence and liability upon Dr. Kanwarjit Kochhar in the context of antenatal care and management of the patient, which was never the subject matter of the complaint case. In doing so, the NCDRC overstepped its power and jurisdiction as it was not for it to travel beyond the pleadings in the complaint case and build up a new case on its own.

The Court observed that once the NCDRC had held there was no negligence in the delivery or post-delivery treatment of the complainant’s wife, the matter had attained finality, especially since the complainants did not file a separate appeal, thereby closing the case.

Click on the link to read the original judgment

Thirty days’ timeline prescribed u/s 142(b) of the Negotiable Instruments Act, 1881 for filing a complaint is mandatory, unless there is a formal application seeking condonation of delay and a judicial order allowing it

The Supreme Court in the case of H. S. Oberoi Buildtech vs MSN Woodtech [SLP(Criminal) No. 2002 of 2025] dated September 09, 2025, quashed a cheque bounce complaint which was filed beyond the statutory 30-day limitation period, and held that the 30 days’ timeline prescribed under Section 142(b) of the Negotiable Instruments Act, 1881 (NI Act) for filing a complaint is mandatory, unless there is a formal application seeking condonation of delay and a judicial order allowing it.

The Apex Court observed that once the statute prescribes a mandatory time limit for filing a complaint, there cannot be any deviation from the same except when an application accompanying the complaint is filed seeking condonation disclosing reasons for the delay and even then it is obligatory on the part of the Court to take note of such filing beyond limitation and to consider the reasons disclosed independently and to come to a judicious conclusion that in the facts and circumstances of that case condonation is justified.

The Apex Court also observed that neither a delay condonation application was filed along with the complaint nor was there a judicial recording justifying the condonation, and held that there cannot be an automatic or presumed condonation when the complaint was filed beyond the time prescribed under the statute.

The Apex Court also held that even if for the sake of argument, it is assumed that the power under Section 142 of the NI Act exists for the Court to condone delay, the first requirement is that the Court has to take note of the fact that there is a delay and thereafter it had to go on the point whether the reasons which have been furnished by the complainant are sufficient to condone such delay and only then move on to take cognizance and proceed for issuing of summons.

Click on the link to read the original judgment

When the government is a party to arbitration, then delivery of an arbitral award to an official who is not aware of the proceedings is not a valid service for commencing the limitation period to challenge the award

The Supreme Court in the case of Motilal Agarwala vs State of West Bengal [2025 INSC 1062] dated August 28, 2025, has held that the delivery of the copy of the arbitral award should be made to the “party to the proceedings”, and if government is part to the proceedings than the delivery should be made to an individual who has the knowledge and is the best person to understand and appreciate an award and more particularly, to decide for its challenge.

The Apex Court has clarified that when the government or one of its departments is a party to arbitration, delivery of an arbitral award to an official who is not connected with or aware of the proceedings cannot be treated as valid service for commencing the limitation period to challenge the award.

The Apex Court said that the collection of the award’s copy by the Assistant Engineer was not proper delivery of a copy as mandated under the Arbitration and Conciliation Act, 1996, and the same cannot be treated as proper service for commencing the limitation for challenging the award. The Court added that the award should be received in the context of huge organisations by the person who has knowledge of the proceedings and who would be the best person to understand and appreciate the arbitral award.

Click on the link to read the original judgment

The filing of a counter-claim between co-defendants is not permitted under Order VIII Rule 6-A of the Civil Procedure Code

The Supreme Court in the case of Rajul Manoj Shah vs Kiranbhai Shakrabhai Patel [2025 INSC 1109] dated September 12, 2025, has held that a counter-claim under Order VIII Rule 6-A of the Civil Procedure Code, 1908 (CPC) can be filed only against the plaintiff, and the filing of a counter-claim between co-defendants is impermissible.

The Apex Court found that in the present case, the defendant no. 2 sought to raise a counter-claim primarily for the relief of specific performance of agreement executed in his favour by deceased original defendant no. 1 with respect to her undivided share in the suit property, by a direction to the Nazir, the substituted representative of defendant no. 1, to execute a sale deed in pursuance of the agreement to sell.

The Apex Court therefore observed that the relief of specific performance as sought to be raised by defendant no. 2 cannot be set up by way of a counter-claim since the same is not directed against the appellant/plaintiff, but is instead directed solely against the co-defendant. Essentially, the defendant no. 2 is disentitled to raise a prayer of specific performance by way of counter-claim.

Click on the link to read the original judgment

The offences of cheating and criminal breach of trust are mutually exclusive and cannot co-exist on the same set of facts

The Supreme Court in the case of Arshad Neyaz Khan vs State of Jharkhand [Special Leave Petition (Criminal) No.3606 of 2024] dated September 24, 2025, has held that criminal law cannot be used to settle personal scores or vendettas, and the criminal proceedings deserves to be quashed if the ingredients of cheating and criminal breach of trust were not made out.

The Apex Court held that the offence of cheating under Section 420 of the IPC/ Section 318 of BNS requires fraudulent or dishonest intention at the inception of the agreement, and mere failure to perform a promise does not constitute cheating. Further, the offence of criminal breach of trust under Section 406 of the IPC/ Section 316 of BNS requires proof of entrustment and dishonest misappropriation, which the complaint failed to establish.

Relying on the decision of Delhi Race Club (1940) Ltd. vs. State of U.P. (2024) 10 SCC 690, the Apex Court observed that the cheating and criminal breach of trust are mutually exclusive offences and cannot co-exist on the same set of facts. Thus, every act of breach of trust may not result in a penal offence unless there is evidence of a manipulative act of fraudulent misappropriation of property entrusted to him.

The case involved a simple transaction, i.e., an Agreement for Sale of property, where the appellant-accused received an advance payment but did not execute the sale or return the money for eight years. The complainant filed a case alleging both cheating and criminal breach of trust; however, the High Court refused to quash the criminal cases.

Click on the link to read the original judgment

Dual recovery is not permitted once an investor of the Corporate Debtor has received an amount under the Settlement Agreement and has given an unconditional undertaking to forgo all claims under the Resolution Plan

The NCLAT, New Delhi, in the case of Shobhana Thakkar vs Monitoring Committee of Ashiana Landcraft Realty Pvt Ltd. [Company Appeal (AT) (Insolvency) No. 2156 of 2024] dated August 20, 2025, has held that once an investor of the Corporate Debtor has received an amount under the Settlement Agreement and has given an unconditional undertaking to forgo all claims under the Resolution Plan, they are barred from claiming the same amount under the Resolution Plan, as such dual recovery is impermissible.

Approval of a resolution plan can’t be interfered with merely on the grievance of a single financial creditor regarding improper asset valuation of the corporate debtor

The NCLAT, New Delhi, in the case of Central Bank of India vs. Bijendra Kumar Jha [Company Appeal (AT) (Insolvency) No. 713 of 2025] dated August 18, 2025, has held that approval of a resolution plan cannot be interfered with merely on the grievance of a single financial creditor regarding improper asset valuation of the corporate debtor, when the valuer has, in fact, duly considered all assets and submitted its report.

The failure of the Resolution Professional to individually inform the homebuyers about the insolvency proceedings as mandated under Regulation 6A of the CIRP Regulations, 2016, vitiates the entire proceedings

The NCLAT, New Delhi, in the case of Bharti Goyal vs. Hector Realty Venture Pvt Ltd. [Company Appeal (AT) (Ins.) No. 1545 of 2024 & I.A. No. 5594 of 2024] dated August 20, 2025, has held that the failure of the Resolution Professional (RP) to individually inform the homebuyers about the insolvency proceedings as mandated under Regulation 6A of the CIRP Regulations, 2016, so they could file their claims on time, goes against the spirit of the IBC and vitiates the entire proceedings especially during Covid Pandemic.

The NCLAT noted that both the CIRP initiation and claims invitation coincided with the onset of the COVID-19 pandemic. In such circumstances, newspaper notices were not an effective way to inform the creditors to submit their claims, and it was unreasonable to expect layperson homebuyers to trace the public announcements without personally serving each of them. The RP under Regulation 6 of the CIRP Regulations was duty-bound to identify and contact all the creditors with due diligence and ensure a fair opportunity to all of them to submit their claims.

The NCLAT further observed that Regulation 6A now mandates the RP to individually notify all the creditors via post or electronic means by using the latest corporate debtor’s records. In the present case, the ex-management of the Corporate Debtor settled dues only with those few homebuyers whose claims were filed, while leaving out others from the same class of creditors. Such selective treatment of creditors within the same class is against the basic principles of the IBC and cannot be accepted. Regulation 6A, therefore, aims to ensure that dispersed retail allottees are informed of the insolvency proceedings and not excluded for failing to submit their formal claims.

The NCLAT also held that Section 12A is not a mere procedural formality; rather, it embodies a substantive protection against unilateral withdrawal of CIRP once collective rights have crystallized. The mandatory requirement of CoC approval is the only legally sanctioned exit after CIRP commences. Any deviation from this scheme, especially one procured through misrepresentation, is per se fraudulent and liable to be set aside.

Regulatory Updates: SEBI & RBI

SEBI joins hands with CBDT to simplify Security Transfers from Nominee to Legal Heirs

The Securities and Exchange Board of India (SEBI) vide its Circular No. SEBI/HO/MIRSD/MIRSD-PoD/P/CIR/2025/130 dated September 19, 2025, has simplified the process of transferring securities from a nominee to a legal heir, effective from January 1, 2026. The change aims to address a long-standing issue where a nominee, acting as a trustee, was incorrectly assessed for capital gains tax during the transfer, despite such transmissions being exempt under the Income Tax Act, 1961.

This led to inconvenience and the need for nominees to claim tax refunds. To resolve this, an SEBI-formed working group, in coordination with the Central Board of Direct Taxes (CBDT), recommended a standardized solution. Reporting entities, including Registrars to an Issue and Share Transfer Agents (RTAs), listed issuers, and depositories, are now directed to use a specific reason code, “TLH” (Transmission to Legal Heirs), when reporting these transactions to the CBDT.

This measure is intended to ensure the correct application of tax laws and streamline the process, protecting investor interests and promoting market development.

Click here to read the original circular

SEBI updates Social Stock Exchange Framework

The Securities and Exchange Board of India (SEBI) vide its Circular No. SEBI/HO/CFD/CFD-PoD-1/P/CIR/2025/129 dated September 19, 2025, has updated its framework for the Social Stock Exchange (SSE) based on recommendations from the Social Stock Exchange Advisory Committee (SSEAC) and public feedback.

The amendments, effective immediately, modify existing regulations on capital issuance and listing requirements. The circular specifies that not-for-profit organizations (NPOs) seeking to register with the SSE must be registered in India under one of several legal forms, such as a charitable trust or a Section 8 company. It also revises the annual disclosure requirements for NPOs, mandating detailed reports on governance, financials, and social outreach.

Furthermore, social enterprises that raise funds via the SSE are now required to submit an Annual Impact Report (AIR) to the exchange, which must be assessed by certified Social Impact Assessors. These changes are intended to improve transparency, standardize reporting, and provide more comprehensive information to stakeholders.

Click here to read the original circular

RBI mandates stringent due diligence obligations for Payment Aggregators to verify merchant identities and backgrounds

The Reserve Bank of India (RBI) vide its Notification No. RBI/DPSS/2025-26/141 dated September 15, 2025, has issued the Reserve Bank of India (Regulation of Payment Aggregators) Directions, 2025, effective immediately. These directions consolidate previous guidelines for Payment Aggregators (PAs), including those handling proximity/face-to-face payments and cross-border transactions.

After incorporating feedback from stakeholders like PAs, banks, and industry associations, the new framework details the authorization process, due diligence requirements for merchants, and permissible operations in escrow accounts.

Key aspects of the Directions include a rationalized definition of various PA categories, updated authorization procedures for both bank and non-bank entities, and stringent due diligence obligations for PAs to verify merchant identities and backgrounds.

The regulations also specify capital requirements, with non-bank PAs needing to achieve a minimum net-worth of ₹25 crore by their third financial year. Furthermore, robust governance, dispute management, and cybersecurity frameworks are mandated. The new directions aim to enhance the security and efficiency of digital payment systems while ensuring customer protection and regulatory compliance.

Click here to read the original notification

Legal Updates (Sep 15-20, 2025)

Legal Updates (Sept 15 – 20, 2025)

Case Updates:

Since the prosecution of directors requires the company to be arraigned, and their conduct must directly connect to the liability, mere bald assertions of responsibility for day-to-day affairs are insufficient to impose vicarious liability

The Supreme Court in the case of Anil Khandelwal vs Phoenix India [Criminal Appeal Nos. 1159-1160 of 2011] dated August 28, 2025, held that the law does not permit automatic prosecution of directors or officers merely because of their designation or official status. Before any officer of a Bank or a body corporate can be prosecuted for an offence under the IPC on the allegation of having acted on behalf of the institution, it is incumbent upon the complainant to produce unimpeachable material indicating the precise role of the officer in the commission of the alleged offence.

On the issue of non-impleadment of the Bank, the Apex Court observed that the Bank (a body corporate) was not impleaded as an accused, making prosecution of its officers alone impermissible under vicarious liability principles. The prosecution of directors/officers requires the company to be arraigned, and their conduct must directly connect to the liability. Mere bald assertions of responsibility for day-to-day affairs are insufficient.

On the issue of Vicarious Liability under IPC, the Apex Court observed that, unlike special statutes, the IPC does not provide for vicarious liability of officers/directors. Complainants must produce unimpeachable material showing the precise role and active participation/authorization by the officer; and prosecution cannot be based solely on designation.

If parties do not raise a timely objection regarding jurisdiction and allow the proceedings to conclude, and the award is passed without challenge, then the arbitral award cannot be annulled solely on the ground of lack of jurisdiction at the execution stage

While restoring the arbitral award, the Chhattisgarh High Court in the case of Eci-Keystone vs. The Superintending Engineer National Highway Circle, PWD [WP227 No. 691 of 2024] dated July 04, 2025, held that if parties do not raise a timely objection regarding jurisdiction (e.g., at the stage of defense or during arbitral proceedings), and allow the proceedings to conclude and the award to be passed without such challenge, the arbitral award cannot be annulled or treated as a nullity solely on the ground of lack of jurisdiction at a later execution stage, especially when Section 34 proceedings under the Arbitration Act, 1996, have concluded or limitation has run out.

In this case, the respondent failed to file its defence, and the tribunal awarded a large sum to the petitioner in 2022. The respondent raised a jurisdiction objection under the Chhattisgarh Madhyasthan Adhikaran Adhiniyam, 1983, only at the execution stage, which was initially accepted by the Commercial Court.

The High Court pointed out that the respondent, despite being aware of the Chhattisgarh Madhyasthan Adhikaran Adhiniyam, 1983, and after participating in the arbitration proceedings and failing to challenge jurisdiction at all the appropriate earlier stages, could not revive the objection at the execution stage to nullify the arbitral award. The Commercial Court’s approach that lack of jurisdiction can be raised at any stage and that the award was a nullity, is contrary to the law proposed by the Supreme Court in the case of Gayatri Project Limited Versus Madhya Pradesh Road Development Corporation Limited [MANU SC 0700 2025], where it was held that the arbitral award could not have been annulled only on the ground of jurisdiction and where the execution proceedings for awards were pending, such awards be treated to have been rendered under the Chhattisgarh Madhyasthan Adhikaran Adhiniyam, 1983.

Once the Corporate Insolvency Resolution Process is admitted, proceedings are collective in nature, and withdrawal cannot be allowed solely based on bilateral settlements

The NCLAT New Delhi, in the case of Himanshu Singh vs HDFC Bank Limited [Company Appeal (AT) (Insolvency) No. 336 of 2025] dated March 05, 2025, has held that once the Corporate Insolvency Resolution Process (CIRP) is admitted, proceedings are collective in nature and withdrawal cannot be allowed solely based on bilateral settlements. The Tribunal examined the scope of Section 12A of the IBC and Regulation 30A of the CIRP Regulations, 2016, noting that withdrawal applications filed before the constitution of the Committee of Creditors (CoC) must still be adjudicated by the Adjudicating Authority after hearing all concerned parties. Relying on Swiss Ribbons Ltd. v. Union of India (2019) 4 SCC 17, the Tribunal reiterated that once a CIRP is admitted, the proceedings become “in rem,” involving all creditors, not just the applicant creditor and the corporate debtor.

The NCLAT further analyzed the case of Abhishek Singh v. Huhtamaki PPL Ltd. (2023 SCC OnLine SC 349), where the Supreme Court held that Regulation 30A permits withdrawal applications even before the CoC constitution, but such withdrawal does not extinguish the rights of other creditors to pursue independent claims. However, it emphasized that objections by stakeholders may still be relevant depending on the facts. The Tribunal also reiterated that the NCLT cannot be considered a “post office” mechanically stamping withdrawal requests, and unilateral settlements cannot override collective creditor rights under the IBC.

The NCLAT noted that HDFC Bank had filed its claim of ₹4.30 crores on 30.06.2022, within the deadline fixed in the IRP’s public announcement, and along with operational creditor claims, the admitted total stood at ₹4.58 crores, far exceeding the amount settled with SIDBI. Thus, allowing withdrawal only based on SIDBI’s settlement would violate the rights of other creditors who had duly submitted claims. Thus, the Tribunal held that HDFC, being a legitimate stakeholder, had locus standi to oppose withdrawal, and the Adjudicating Authority rightly rejected the Section 12A application. Since in the present case, the majority of claims were unsettled, while only SIDBI’s debt had been resolved, the Tribunal concluded that permitting withdrawal would undermine the collective insolvency framework, and hence, the Adjudicating Authority rightly allowed HDFC’s intervention, rejected the IRP’s withdrawal application, and protected creditors’ rights.

This decision of the NCLAT has been upheld by the Supreme Court.

As per the SARFAESI mandate, the District Magistrate or Chief Metropolitan Magistrate can take possession themselves or authorize an officer to do so; however, the appointed officer cannot sub-delegate this authority further without a statutory mandate

The Debt Recovery Appellate Tribunal (DRAT) in the case of Assistant General Manager, Corporation Bank vs. Yojaka India Pvt Ltd [M. A. (S.A):29/2019] dated August 05, 2025, has held that the possession taken by the Village Assistant was illegal and unauthorized, mandating restoration of possession to the respondent as rightly ordered by the Debts Recovery Tribunal (DRT). The crucial legal point was that possession was taken by a Village Assistant instead of the Tahsildar or Special Tahsildar authorized by the District Magistrate under Section 14 of the SARFAESI Act, even though there was no authorization that the Tahsildar had delegated his powers lawfully to the Village Assistant.

The DRAT cited the established legal maxim delegatus non potest delegare (a delegate cannot further delegate authority) and emphasized that, without express legal or statutory authorization (such as under rules or delegation orders), such sub-delegation is impermissible.

The DRAT emphasized limits on delegation and quoted the decision in the case of Sidhartha Sarawgi v. Board of Trustees for the Port of Kolkata [(2014) 16 SCC 248], which upheld that implementation of ministerial or clerical tasks may be delegated to authorized officers, but delegation requires legal sanction. Thus, the Tribunal stressed that delegation must be within the framework of rules or authorized orders. The Tribunal also drew support from the Bombay High Court in the case of Anand Rathi Global Finance Ltd. v. State of Maharashtra [WP No.218/2022], where it was held that the Tahsildar-cum-Executive Magistrate cannot delegate the task of taking possession to any subordinate officer (e.g., Nayab Tahasildar), reinforcing the non-delegable nature of possession-taking.

The DRAT noted that the District Magistrate or Chief Metropolitan Magistrate, as per the SARFAESI Act mandate, can take possession themselves or authorize an officer to do so. However, the appointed officer (like a Tahsildar) cannot sub-delegate this authority further without a statutory mandate or rules. Thus, the possession taken by the Village Assistant was declared illegal and unauthorized and therefore liable to be set aside.

Once the settlement covered an overwhelming majority, then continuation of CIRP only on account of two dissenting creditors would defeat the purpose of the resolution

The NCLT New Delhi, in the case of Dharampal Singh Rawat vs. Realanchors Developers Private Limited [CP IB NO. 225/(ND)/2022] dated August 13, 2025, has held that Section 12A of the IBC, read with Regulation 30A, permits withdrawal before constitution of the Committee of Creditors (CoC) through the Insolvency Resolution Professional (IRP). Relying on the case of Glas Trust Co. LLC v. Byju Raveendran & Ors. [Civil Appeal No. 9986 of 2024], the Tribunal reiterated that NCLT cannot act as a ‘post office’ and once CIRP is admitted, proceedings are in rem and collective.

The NCLT referred to the case of Himanshu Singh v. HDFC Bank Ltd. [CA (AT)(Ins.) No. 336 of 2025], which subsequently has been upheld by the Supreme Court in the case of Himanshu Singh v. HDFC Bank Ltd. [Civil Appeal No(s). 11109 – 11110 of 2025 decided on August 19, 2025], where it was held that mere objections cannot defeat a Section 12A withdrawal, and therefore observed that the Adjudicating Authority must consider the nature and quantum of claims, and where the majority claims are settled, minority creditors cannot stall withdrawal.

The Tribunal emphasized that post-admission, CIRP is not a matter solely between the applicant creditor and corporate debtor, but concerns all stakeholders. Since in this case the settlement covered an overwhelming majority, the Tribunal held that continuation of CIRP only on account of two dissenting creditors would defeat the purpose of resolution.

Regulatory Updates: SEBI

SEBI Eases Regulations for FPIs in Government Bonds

The Securities and Exchange Board of India (SEBI) vide its Circular No. SEBI/HO/AFD/AFD-PoD-3/P/CIR/2025/127 dated September 10, 2025, has amended its regulations to simplify the compliance process for Foreign Portfolio Investors (FPIs) who invest exclusively in Government Securities (GS-FPIs). This new circular, effective from February 8, 2026, aims to ease regulatory requirements for these specific investors.

The Key changes include exempting GS-FPIs from providing detailed investor group information and from the need to inform SEBI of certain changes in their information, except for material changes. Furthermore, the requirement for a declaration of no changes during the three-year registration renewal period will not apply to GS-FPIs.

The circular also simplifies the KYC review process, aligning its periodicity with the FPI’s bank account KYC cycle as prescribed by the Reserve Bank of India. A new mechanism is also established for FPIs to easily transition between being a regular FPI and a GS-FPI, and vice versa. Depositories, custodians, and designated depository participants are required to update their systems to implement these changes.

Click here to read the original circular

SEBI simplifies Disclosure Document for Portfolio Managers

The Securities and Exchange Board of India (SEBI) vide its Circular No. SEBI/HO/IMD/IMD-RAC-3/P/CIR/2025/125 dated September 09, 2025, has revised the format of the ‘Disclosure Document’ for Portfolio Managers to simplify compliance. Through this circular, the SEBI has removed the previous format specified in Schedule V of the SEBI (Portfolio Managers) Regulations, 2020.

The new structure divides the document into two parts: a ‘Static’ section and a ‘Dynamic’ section. The Static section includes 11 parameters that do not change frequently, such as definitions, risk factors, services offered, and expense details. The Dynamic section covers five parameters that require regular updates, including client representation, financial performance, and audit observations.

A key procedural change is that whenever information is updated, only the specific pages containing the changes need to be certified by an independent Chartered Accountant and the Portfolio Manager’s Principal Officer. These updated pages must be sent to clients, uploaded to the Portfolio Manager’s website, and filed with SEBI within seven working days of the change.

Click here to read the original circular

Framework for AIFs to make co-investment within the AIF structure under SEBI

The Securities and Exchange Board of India (SEBI) vide its Circular No. SEBI/HO/AFD/AFD-POD-1/P/CIR/2025/126 dated September 09, 2025, has introduced a framework for Alternative Investment Funds (AIFs) to provide co-investment opportunities within their structure under the SEBI (AIF) Regulations, 2012. The amendment allows Category I and II AIFs to launch co-investment schemes (CIV schemes) for accredited investors, in addition to the existing co-investment route through Portfolio Managers under SEBI (Portfolio Managers) Regulations, 2020.

Under this framework, managers of AIFs may facilitate co-investments either via the PMS route or through CIV schemes, with each CIV scheme required to maintain separate bank and demat accounts and have ring-fenced assets. Co-investments by an investor across CIV schemes are capped at three times their contribution in the main AIF scheme, except for certain exempted institutional investors such as sovereign wealth funds and development financial institutions.

Restrictions are placed on ineligible investors, leverage, indirect exposures, and regulatory compliance to ensure alignment with the AIF Regulations. CIV schemes must also adopt governance and operational standards to prevent misuse of the flexibility provided. Expenses and rights in co-investments are to be shared proportionately, while compliance reporting and investor grievance redressal mechanisms are to align with AIF regulatory requirements.

The circular further provides a template for the shelf private placement memorandum (Shelf PPM) for CIV schemes, detailing structure, governance, investment terms, expenses, reporting, conflicts of interest, and risk disclosures. The new framework, effective immediately, is aimed at easing operations for AIFs while safeguarding investor interests and ensuring regulatory oversight.

Click here to read the original circular

SEBI Revised regulatory framework for Angel Funds under AIF Regulations

The Securities and Exchange Board of India (SEBI) vide its Circular No. SEBI/HO/AFD/AFD-POD-1/P/CIR/2025/128 dated September 10, 2025, has revised its framework for Angel Funds, with new regulations taking effect immediately. The key changes require all Angel Funds, both new and existing, to raise capital from accredited investors. Existing funds have until September 8, 2026, to fully comply with this mandate, though they can’t accept new contributions from non-accredited investors after this date.

The new rules also specify that Angel Funds must declare their first close within 12 months of SEBI’s communication, and they no longer need to file separate scheme documents or term sheets with SEBI. Instead, they must maintain internal records of term sheets for each investment.

The revised framework allows for follow-on investments in existing companies, setting a cap of ₹25 crore per company and a one-year lock-in period, which is reduced to six months for third-party sales. Additionally, SEBI has reclassified all Angel Funds as a direct sub-category of Category I AIFs and has updated the requirements for annual audits and performance reporting to benchmarking agencies.

Click here to read the original circular

SEBI streamlines KYC Agencies Registration Surrender

The Securities and Exchange Board of India (SEBI) vide its Circular No. SEBI/HO/MIRSD/PODFATF/P/CIR/2025/123 dated September 05, 2025, has proposed to streamline the process for Know Your Client (KYC) Registration Agencies (KRAs) to surrender their registration.

The framework addresses both voluntary surrenders, stemming from business decisions, and involuntary ones, such as those caused by financial distress or regulatory action. A core requirement is that any surrendering KRA, designated as a ‘Transferor KRA,’ must transfer all client KYC records to a ‘Transferee KRA’ to ensure seamless continuity of critical services for investors.

The circular mandates that all KRAs must establish a board-approved Standard Operating Procedure (SOP) detailing this winding-down process, which includes secure data migration, stakeholder notification, and the settlement of statutory obligations. An Oversight Committee must be formed to monitor the transition.

The circular emphasizes compliance with relevant acts like the Prevention of Money Laundering Framework and the Insolvency and Bankruptcy Code. In cases of involuntary surrender, SEBI reserves the right to appoint a temporary administrator or nominate a Transferee KRA to safeguard market stability and investor interests.

All KRAs are required to make their SOPs publicly available on their websites within 90 days of the circular’s issuance.

Click here to read the original circular

Legal Updates (Sept 8 – 13, 2025)

Case Laws (Negotiable Instruments Act)

Once a complainant signs a compromise deed acknowledging receipt of the full settlement amount, the conviction u/s 138 of the NI Act cannot be sustained

The Supreme Court in the case of Gian Chand Garg vs Harpal Singh [Special Leave Petition (Criminal) No. 8050 of 2025] dated August 11, 2025, has ruled that once a complainant signs a compromise deed acknowledging receipt of the full settlement amount, the conviction under Section 138 of the Negotiable Instruments Act (NI Act) cannot be sustained. The Apex Court observed that although dishonour of a cheque entails criminal consequences, the legislature, by virtue of section 147 of the NI Act, has made it compoundable notwithstanding the provisions of the Code of Criminal Procedure, 1973, and the same can be compounded at any stage of the proceedings, especially when the parties have themselves arrived at a voluntary compromise.

The Apex Court further observed that since the complainant had arrived at a compromise with the appellant without any coercion and at his own will and voluntarily accepted the default sum in full and final settlement, then the proceedings under Section 138 NI Act would be of no use. Reference was made to the decision in the case of Gimpex Private Limited v. Manoj Goel [(2021) SCC OnLine SC 925], where it was held that “Once parties voluntarily entered into such an agreement and agree to abide by the consequence of non-compliance of the settlement agreement, they cannot be allowed to reverse the effects of the agreement by pursuing both the original complaint and the subsequent complaint arising from such non-compliance.”

Please click on this link to read the original judgment

Case Laws (Arbitration Act)

A contractual clause barring interest on delayed payments does not prevent an Arbitral Tribunal from awarding pendente lite interest

The Supreme Court in the case of ONGC vs G & T Beckfield Drilling Services [Civil Appeal No. 11324 of 2025] dated September 02, 2025, has held that a contractual clause barring interest on delayed payments does not prevent an Arbitral Tribunal from awarding pendente lite interest, i.e., the interest for the period during which the arbitration is pending. The Court observed that the agreement between the parties prohibiting the grant of ‘pendente lite interest’, when read as a whole, does not expressly or by necessary implication put an embargo on the grant of pendente lite interest by the Arbitral Tribunal.

The Apex Court clarified that clause 18.1 merely says that there would be no interest payable by the Corporation on any delayed payment / disputed claim; however, it did not bar the Arbitral Tribunal from awarding pendente lite interest, nor does it say that interest would not be payable in any respect.

Since post-award interest is in line with the statutory provision of clause (b) of subsection (7) of Section 31 of the Arbitration & Conciliation Act, 1996, as was in vogue then, the Apex Court observed that the clause merely barred ONGC from paying contractual interest on delayed invoices but did not expressly or by implication take away the Arbitral Tribunal’s statutory discretion under Section 31(7)(a) of the Arbitration Act to award pendente lite interest.

Please click on this link to read the original judgment

Case Laws (Companies Act, 2013)

NCLT has jurisdiction to examine allegations of fraud and the validity of documents in oppression and mismanagement cases

Finding that the Appellant was the victim of oppression and mismanagement since the circumstances surrounding the gift deed and the subsequent transfer of shares are seriously questionable, and the board meetings have been conducted in a mala fide manner and against both the statutory requirements of the Companies Act, 1956, and the internal regulations of the Company, the Supreme Court in the case of Shailja Krishna vs Satori Global Limited [Civil Appeal Nos. 6377-6378 of 2023] dated September 02, 2025, has held that the National Company Law Tribunal (NCLT) has jurisdiction to examine allegations of fraud and the validity of documents in oppression and mismanagement cases.

The Apex Court clarified that the NCLT possesses a wide jurisdiction to decide all such matters that are incidental and/or integral to the complaint alleging oppression and mismanagement. Such power is, however, subject to any other legislative enactment specifically debarring the NCLT from exercising its powers in this respect. Since the determination of whether the gift deed is valid or not is a pivotal issue, the Apex Court observed that the NCLT did have full jurisdiction to decide whether the gift deed is valid or not, or whether it is against the provisions of the 1956 Act and/or internal regulations of the Company, including but not limited to the Articles of Association (AOA) and the Memorandum of Association (MOA).

Since the Appellant, being an Executive Director and holding 98% of the shares in the company was ousted from the company based on fraudulent activities carried out by her husband and in-laws upon producing a gift deed allegedly transferring her shares to her mother-in-law, and the board resolutions approving her removal passed in meetings without proper notice to her or quorum, and records showing her resignation, the Apex Court observed that when a member who holds the majority of shares in a company is reduced to the position of minority shareholder in the company by an act of the company or by its Board of Directors in a mala fide manner, the said act must be considered as an act of oppression against the said member.

The Apex Court went on to observe that the gift deed is invalid first and foremost since it is against the AOA, specifically clause 16, which does not allow a transfer to the mother-in-law, and, therefore, the gift deed cannot be called in aid to defeat the claims of the Appellant in the Company. Further, the circumstances surrounding the gift deed are questionable since the deed specifically mentions it being purportedly executed by the Appellant to the fourth respondent out of “love and affection”. However, what paints a divergent image is that the fourth respondent had lodged an FIR alleging that the Appellant purportedly committed acts constituting breach of trust qua family jewellery on the very date when the Share Transfer Form was purportedly signed by the Appellant. Thus, any action taken that is not permitted by the AOA cannot be sustained.

Since all the actions of the Company in a serial fashion demonstrate clear oppression and mismanagement in its affairs, and the probity is lacking, which is prejudicial to the Appellant, the Apex Court restored the decision of the NCLT, whereby finding overwriting and manipulation in the share transfer form, and noting that it was executed after its validity had expired, the NCLT has directed the Company to reinstate the Appellant as a Director, and ordered the fourth respondent to return the share certificates.

Please click on this link to read the original judgment

Case Laws (Specific Relief Act)

A mere breach of an obligation or necessity to prevent the same alone is no basis to invoke mandatory injunction u/s 39 of the Specific Relief Act, unless the same is amenable to exercising discretion by the Court

The Supreme Court in the case of Estate Officer, Haryana Urban Development Authority vs Nirmala Devi [Civil Appeal No. 7707 of 2025] dated July 14, 2025, has ruled that a relief which is not amenable to exercising judicial discretion of the Court cannot be granted by way of a mandatory injunction under Section 39 of the Specific Relief Act, 1963. It should satisfy not only breach of an obligation and the necessity of its prevention, but also the availability of judicial discretion to be exercised. The ruling came while deciding on the suits instituted by the respondents (oustees) for mandatory injunction seeking allotment of plots under the scheme of 1992 floated by the State of Haryana, whereby the Haryana Urban Development Authority (HUDA) was offering a plot to the oustees whose land had been acquired.

The Apex Court explained that the specific relief is the remedy that aims at the exact fulfilment of the obligation. The term ‘obligation’ as used in the Specific Relief Act in its wider juristic sense covers duties arising either ex-construction or ex-delicto. Every duty enforceable at law is an obligation, and the definition clause of the Specific Relief Act does not allow a narrow interpretation of the word ‘obligation’ to restrict it to a contractual duty alone. At the same time, the Court observed that the acquisition of land does not violate any constitutional/ fundamental right of the displaced persons. However, the Court cautioned that the displaced persons are entitled to resettlement and rehabilitation as per the policy framed for the oustees of the project concerned.

The Supreme Court found that right from the inception, the appellant has argued that none of the oustees, or at least the respondents, had applied in the requisite format for allotment of plots with the deposit of the earnest money. If this part of the obligation would have been performed or discharged by the oustees in accordance with the scheme, then perhaps HUDA could have been called upon to perform its part of the obligation, and then only Section 39 of the Specific Relief Act, 1963, could have been invoked to compel HUDA. The Apex Court also questioned that even assuming for the moment that the advertisement was not in conformity with the Scheme of 1992, there is no explanation worth the name at the end of any of the oustees as to why the suits were instituted after a lapse of almost 14 to 20 years, more particularly, when the land of respective oustees came to be acquired in 1992.

The Supreme Court further observed that when the scheme in question specifically provides that an oustee shall apply in a specified format with the deposit of the requisite amount towards earnest money, then it is a part of the obligation on the part of the oustee to do so before he calls upon the State to allot the plot in terms of the scheme. However, the Apex Court concluded that the respondents are not entitled to claim as a matter of legal right that they should be allotted plots as oustees only at the price as determined in the 1992 policy; rather, the respondents are entitled to seek the benefit of the 2016 policy for allotment of plots as oustees. Since the respondents had no enforceable legal right, and therefore the Appellant had no corresponding legal obligation to allot the plots, the Supreme Court declined to grant a mandatory injunction. However, because a large number of oustees were left helpless due to their failure to comply with the procedural requirements to claim rehabilitation under HUDA’s 1992 policy, the Apex Court granted four weeks to all the respondents to prefer an appropriate online application with the deposit of the requisite amount in accordance with the policy of 2016, after which no application would be entertained.

Please click on this link to read the original judgment

Case Laws (Income Tax/ SEBI Act)

An Alternate Investment Fund is not taxable at the Maximum Marginal Rate in the hands of the “Representative Taxpayer” under Explanation 1 to Section 164 of the Income Tax Act, even if the original Trust Deed did not mention the name of the investor

The Delhi High Court in the case of Equity Intelligence AIF Trust vs CBDT [W.P.(C) 9972/2024] dated July 29, 2025, has ruled that once the benefits are to be shared in the proportion to the investments made, then the shares would be determinable, and once the shares were determinable, the Alternative Investment Fund (AIF) are not taxable at the Maximum Marginal Rate in the hands of the “Representative Taxpayer” under Explanation 1 to Section 164 of the Income Tax Act, for not mentioning the names of the investors or beneficiaries in the original Trust Deed.

The High Court clarified that the CBDT Circular no.13/2014 which provides that Category III AIF would be taxable at the Maximum Marginal Rate at the hands of the “Representative Assessee” under the provisions of Explanation 1 to Section 164 of the Income Tax Act, if the original Trust Deed did not mention the name of the investors or the beneficial interest of the investors, is in contravention to the Regulations 3(1), 4(c) & 6(3) of the SEBI Regulations read with Section 12 of the SEBI Act, which prohibits from mentioning the names of the investors or beneficiaries in the original Trust Deed unless they are registered.

The High Court questioned as to how and in what manner a Category III AIF entity like the petitioner would specify or mention the names of the investors or beneficiaries in the original Trust Deed at the time of registration, when the SEBI has mandated that no AIF can accept any commitment or investment from any investor or beneficiary unless and until it is first registered in terms of Regulation 4(c) of the SEBI Regulations under the provisions of Registration Act, 1908 and thereafter be granted certificate of registration under Regulation 6 of the SEBI Regulations, claiming this procedure to be contrary to the doctrine of impossibility. The court referred to the CBDT Circular No.281/1980 dated Sep 22, 1980, and the Explanation appended to amended Section 164 inserted by the Finance (No. 2) Act, 1980, to observe that the new provisions would apply in respect of all discretionary Trusts whether created before or on, or after April 01, 1980.

Thus, referring to the provisions of Regulation 3(1) & 6(3) of the SEBI Regulations read with Section 12 of the SEBI Act, the High Court observed that unless and until a Trust registers the original Trust Deed, firstly under the provisions of Registration Act, 1908 and secondly, obtains the certificate of registration under the provisions of SEBI Act and Regulations, it cannot accept any funds or investment from a beneficiary. Therefore, emphasizing that the SEBI Regulations are in contravention of the CBDT Circular, the Court allowed the petition in favour of the taxpayer.

Please click on this link to read the original judgment