Newsletter For March 2026

ARBITRATION

• M/s ABS Marine Services v. The Andaman & Nicobar Administration Civil Appeal Nos. 3658-3659 of 2022
• Nagaraj V. Mylandla v. PI Opportunities Fund-I & Ors., SLP (Civil) Nos. 31866–68 of 2025 with connected matters

CIVIL LAW

• The Management of Steel Authority of India and Others v. Shambhu Prasad Singh & Ors., Civil Appeal of 2026 (arising out of SLP (Civil) No. 025516-025517 of 2024)
• Sant Rohidas Leather Industries and Charmakar Development Corporation Ltd. v. Vijaya Bank, Civil Appeal No. 4841 of 2023

CRIMINAL LAW

• V. Ganesan v. State represented by the Sub Inspector of Police & Anr., Criminal Appeal No. 1470 of 2026

INSOLVENCY & BANKRUPTCY LAW

• Ujaas Energy Ltd. v. West Bengal Power Development Corporation Ltd., Civil Appeal of 2026 (arising out of SLP (Civil) No. 29651 of 2024)

WHITE-COLLAR CRIMES

• Ratnawali Vanshwati v. State of Madhya Pradesh & Ors., Writ Petition No. 20253 of 2022

ARBITRATION

Date: 23 March 2026

Case Name: M/s ABS Marine Services v. The Andaman & Nicobar Administration Civil Appeal Nos. 3658-3659 of 2022

Forum: Supreme Court

The dispute arose from a Manning Agreement dated 26 December 2008 between the appellant i.e., M/s ABS Marine Services and the respondent i.e., Andaman & Nicobar Administration, for manning vessels operated by the respondent. Following an incident involving the vessel M.V. Long Island in July 2009, the respondent alleged negligence on the part of the appellant and, after issuing a show cause notice, unilaterally recovered a substantial sum from the appellant's pending bills as penalty. The appellant invoked arbitration, resulting in an award in its favour directing refund of the recovered amount with interest. The respondent's challenge under Section 34 of the Arbitration and Conciliation Act, 1996 ("A&C Act") was dismissed by the District Judge, however, the High Court at Calcutta, in appeal under Section 37 of the A&C Act, set aside the arbitral award on the ground that the dispute fell within an "excepted matter" under Clause 3.20 of the contract. Aggrieved, the appellant approached the Supreme Court.

Issues:

1. Whether disputes relating to negligence and liability were excluded from arbitration under Clause 3.20?
2. Whether disputes concerning breach, negligence, and liability fell within the ambit of the arbitration clause?
3. Whether the administration could unilaterally determine liability and impose penalty?
4. Whether a contractual clause can exclude both arbitration and judicial remedies, thereby creating a vacuum in legal recourse?

Submission of the Parties:

The appellant contended that disputes relating to negligence and breach were inherently arbitrable and that Clause 3.20, properly interpreted, excluded only quantification of damages in admitted cases and not adjudication of liability. It was further argued that any clause excluding both arbitration and judicial remedies would be void and contrary to fundamental legal principles.

Per contra, the respondent argued that the arbitrator derives jurisdiction strictly from the contract and cannot adjudicate matters expressly excluded as "excepted matters". It was contended that Clause 3.20 vested final authority in the administration, thereby ousting arbitral jurisdiction over such disputes.

Observations of the Court:

The Supreme Court undertook a detailed interpretation of Clauses 3.20 and 3.22 and held that the arbitration clause was widely worded, covering all disputes arising out of the agreement. It clarified that Clause 3.20, properly construed, only excludes disputes relating to quantification of damages in cases where liability is admitted, and not disputes where liability itself is contested.

The Court emphatically held that one party to a contract cannot be the judge of whether the other party has committed breach, as such an interpretation would violate the fundamental principle that no person can be a judge in his own cause. It further observed that accepting the respondent's interpretation would lead to a situation where neither courts nor arbitral tribunals could adjudicate disputes, thereby creating a vacuum in legal remedies, which is impermissible in law.

The Court also invoked the principleubi jus ibi remedium, holding that a construction which eliminates all legal remedies cannot be sustained. It stressed that contractual clauses cannot be interpreted in a manner that undermines the rule of law or forecloses access to justice.

Further, the Court noted that the respondent had participated in the arbitral proceedings without raising jurisdictional objections at the appropriate stage, thereby acquiescing to arbitration.

Held:

The Court held that the dispute relating to alleged negligence and liability was arbitrable and did not fall within the scope of "excepted matters" under Clause 3.20. It further held that the High Court of Calcutta erred in setting aside the arbitral award on jurisdictional grounds.

The judgment is a significant reaffirmation of foundational principles of contract and arbitration law, emphasising that contractual clauses cannot be interpreted to permit one party to unilaterally adjudicate liability or to altogether exclude judicial and arbitral remedies, as such interpretations would violate the rule of law and the maxim ubi jus ibi remedium. The Court further clarifies the doctrine of "excepted matters" by limiting it to cases of admitted liability and quantification, thereby ensuring that disputes involving contested breach remain subject to independent adjudication through arbitration or courts.

Date: 25 March 2026

Case Name: Nagaraj V. Mylandla v. PI Opportunities Fund-I & Ors., SLP (Civil) Nos. 31866–68 of 2025 with connected matters

Forum: Supreme Court

The present matter pertains to enforcement of a foreign arbitral award arising out of a Share Acquisition and Shareholders Agreement ("SASHA") executed between the promoters of Financial Software and Systems Pvt. Ltd. ("FSSPL") and certain foreign investors. Under the agreement, the investors were assured an exit through a Qualified Initial Public Offering ("QIPO") or other exit mechanisms. However, the QIPO failed to materialise within the stipulated timeline, and despite repeated notices, no exit was provided. This led to invocation of arbitration seated in Singapore under SIAC Rules.

The arbitral tribunal passed a unanimous award granting damages to the investors equivalent to the "exit price" and, in the event of non-payment within 90 days, permitted enforcement through a strategic sale. The award was unsuccessfully challenged before the Singapore High Court. Thereafter, the Madras High Court enforced the award under Section 48 of the Arbitration and Conciliation Act, 1996, rejecting objections raised by the promoters i.e., the petitioner, including those based on public policy, alleged buy-back of shares, violation of the Specific Relief Act, and improper invocation of remedies. Aggrieved, the promoters approached the Supreme Court.

Issues:

1. Whether enforcement of the award would amount to an impermissible buy-back of shares in violation of the Companies Act and the fundamental policy of Indian law?
2. Whether the award grants impermissible specific performance by directing strategic sale in addition to damages?
3. Whether the investors impermissibly invoked multiple remedies simultaneously under the SASHA?
4. Whether issues decided by the Singapore Court can be re-agitated before the Indian enforcement court?
5. Whether alleged violations of Indian statutes fall within the limited scope of "public policy of India" to resist enforcement of a foreign award?

Submission of the Parties:

The petitioners contended that enforcement of the award would violate the fundamental policy of Indian law, as it effectively resulted in a buy-back of shares contrary to the Companies Act. It was further argued that the award granted both damages and specific performance, violating the Specific Relief Act, and that the investors had impermissibly exercised multiple remedies under the agreement. They also challenged the application of the doctrine of transnational issue estoppel and asserted that statutory violations linked to public interest fall within the scope of public policy under Section 48.

Per contra, the respondents i.e., the investors, argued that the award merely granted damages quantified at the contractual exit price and that the provision for strategic sale was only a mechanism to realise such damages upon non-payment. It was contended that surrender of shares does not amount to a buy-back and that enforcement was sought only against the promoters to preserve the company as a going concern. The investors further submitted that mere violation of a statutory provision does not constitute a breach of the fundamental policy of Indian law and that issues already decided by the seat court cannot be reopened at the enforcement stage.

Observations of the Court:

The Supreme Court reiterated the pro-enforcement stance of Indian courts in relation to foreign arbitral awards and emphasised that the grounds under Section 48 are narrow and do not permit a merits-based review. It held that "public policy of India" refers only to the fundamental policy of Indian law, i.e., core legal principles, and not mere statutory violations.

The Court undertook an important exposition of the doctrine of transnational issue estoppel, holding that while an enforcement court may independently examine public policy, it cannot re-adjudicate issues on merits that have already been conclusively decided by the seat court. Thus, findings of the Singapore High Court could not be reopened under the guise of a public policy challenge.

On the issue of buy-back, the Court held that the contention was misconceived, as the award did not mandate buy-back by the company. Rather, upon payment of damages, shares could be surrendered to the promoters themselves, thereby increasing their shareholding. Consequently, no violation of the Companies Act was made out.

The Court further held that the award primarily granted damages, and the provision for strategic sale was merely a contingent enforcement mechanism and not specific performance. It also rejected the contention regarding election of remedies, holding that the arbitral tribunal's interpretation of contractual clauses was plausible and could not be interfered with at the enforcement stage.

Held:

The Supreme Court held that none of the objections raised by the petitioners fell within the limited grounds available under Section 48 of the Arbitration and Conciliation Act, 1996. It upheld the enforcement of the foreign arbitral award and affirmed the judgment of the Madras High Court.

The judgment is a significant reaffirmation of India's pro-enforcement regime for foreign arbitral awards, clarifying that the "public policy" exception under Section 48 is to be construed narrowly and cannot be invoked to undertake a merits-based review or to re-agitate issues already decided by the seat court; by recognising and applying the doctrine of transnational issue estoppel, the Court has strengthened finality in international arbitration, while also clarifying that commercial arrangements such as exit mechanisms and contingent enforcement measures do not violate Indian law merely because they intersect with domestic statutes, thereby reinforcing India's position as an arbitration-friendly jurisdiction.

CIVIL LAW

Date: 18 March 2026

Case Name: The Management of Steel Authority of India and Others v. Shambhu Prasad Singh & Ors., Civil Appeal of 2026 (arising out of SLP (Civil) No. 025516-025517 of 2024)

Forum: Supreme Court

The present batch of civil appeals arose from orders passed by the High Court of Jharkhand concerning retired employees of Bokaro Steel Plant who continued to retain company-allotted staff quarters beyond the permissible period after retirement. The principal respondent and similarly placed ex-employees had made representations seeking extension of retention, which were declined by the management, followed by issuance of eviction notices. The High Court, relying upon the earlier order in Ram Naresh Singh v. Bokaro Steel Ltd. (2017), directed release of gratuity with limited deductions. Subsequently, in light of a later Supreme Court order dated 15 December 2020 taking a different view on adjustment of penal rent, the management sought review, which was dismissed. Aggrieved, the management approached the Supreme Court raising issues relating to withholding of gratuity, adjustment of penal rent, and the interplay of obligations under the SAIL Gratuity Rules, 1978.

Issues:

1. Whether the High Court was justified in treating the said order as binding under Article 141?
2. Whether SAIL is entitled to deduct penal rent from gratuity/security amounts for unauthorised occupation?
3. Whether the obligation to vacate quarters and the obligation to release gratuity operate independently or are reciprocal?
4. Whether employees are entitled to interest on gratuity withheld during unauthorised occupation?
5. Whether the Court can fix a reasonable penal rent instead of strictly applying the management's policy?

Submission of the Parties:

The appellant-management contended that gratuity, though payable, could be withheld or adjusted in accordance with the SAIL Gratuity Rules, 1978, particularly where employees failed to vacate staff quarters. It was argued that penal rent is a natural consequence of unauthorised occupation and can be adjusted against dues, and that the High Court erred in relying on a non-binding order to direct release of gratuity with limited deductions.

Per contra, the respondents argued that the High Court correctly relied on earlier precedent and that enforcement of penal rent under the management's policy would result in undue hardship, specially since many employees had retired prior to the introduction of such policy. It was further submitted that only reasonable rent should be deducted and that gratuity should be released with interest.

Observations of the Court:

The Supreme Court clarified that the order inRam Naresh Singh (2017) was rendered on equitable considerations in the peculiar facts of that case and did not constitute a binding precedent. It reiterated that an order passed on facts cannot be elevated to a precedent under Article 141 of the Constitution.

The Court further held that under Rule 3.2.1(c) of the SAIL Gratuity Rules, 1978, the management is entitled to withhold gratuity in cases of non-compliance with its rules, including failure to vacate company accommodation, and to adjust penal rent against such dues. It emphasised that the obligations of the employer and employee are reciprocal in nature, vacation of quarters and payment of gratuity must occur simultaneously, and neither obligation can be enforced in isolation.

On the issue of interest, the Court held that no interest is payable on gratuity withheld during unauthorised occupation, particularly where such withholding is authorised by rules and consented to by the employee. Granting interest in such circumstances would effectively incentivise unauthorised occupation.

However, the Court took note of equitable considerations, including the socio-economic condition of the retired employees and the timing of the policy, and exercised its jurisdiction to fix a reasonable penal rent per month.

Held:

The Court held that the High Court erred in treating Ram Naresh Singh (2017) as binding precedent and that the management is entitled to adjust penal rent from gratuity in accordance with applicable rules. It further held that the obligations of vacating accommodation and payment of gratuity are reciprocal and must be discharged simultaneously, and that no interest is payable on withheld gratuity during unauthorised occupation.

The Court directed that the gratuity amount be computed after adjusting penal rent at Rs. 1,000 per month, communicated within four weeks, and that ex-employees be granted an additional four weeks to vacate the premises, with reciprocal compliance by both parties.

The judgment reinforces the principle that equitable orders rendered on peculiar facts do not constitute binding precedent, while also clarifying the statutory entitlement of employers to withhold and adjust gratuity in cases of unauthorised retention of company accommodation; at the same time, the Court balances strict legal rights with equitable considerations by moderating the quantum of penal rent, thereby ensuring that enforcement of service rules does not lead to disproportionate hardship, though such equitable intervention is expressly confined to the facts of the present case and does not have precedential value.

Date: 19 March 2026

Case Name:Sant Rohidas Leather Industries and Charmakar Development Corporation Ltd. v. Vijaya Bank, Civil Appeal No. 4841 of 2023

Forum: Supreme Court

The appellant i.e., Sant Rohidas Leather Industries and Charmakar Development Corporation Ltd., a State undertaking of Maharashtra, invested Rs. 9 crores in a fixed deposit with the respondent Bank i.e., Vijaya Bank, for which a Fixed Deposit Receipt was issued. Subsequently, the appellant received intimation regarding sanction of an overdraft facility against the said FDR, which it alleged to be fraudulent and unauthorised.

The appellant lodged complaints with the Economic Offences Wing and sought reversal of the overdraft entries, however, the respondent Bank later adjusted the outstanding overdraft amount against the maturity proceeds of the FDR and remitted only the remaining balance. Aggrieved by the Bank's refusal to refund the full deposit, the appellant filed a consumer complaint before the National Consumer Disputes Redressal Commission ("NCDRC"), which was dismissed on the ground that the appellant was not a "consumer" under the Consumer Protection Act, 1986 ("CPA"). The present appeal was preferred against the said dismissal.

Issues:

1. Whether a body corporate depositing funds in a bank for interest can be considered a "consumer" under Section 2(1)(d) of the CPA?
2. Whether deposit of funds in a fixed deposit, particularly where linked to credit facilities, constitutes a commercial purpose?
3. Whether allegations involving fraud, forgery, and disputed factual issues can be adjudicated in summary proceedings under the CPA?

Submission of the Parties:

The appellant contended that mere deposit of funds in a bank does not amount to a commercial activity and that banking services availed for safe custody or investment cannot be treated as being for a commercial purpose. It was further argued that even a body corporate can qualify as a consumer and that the NCDRC erred in dismissing the complaint without examining deficiency in service.

Per contra, the respondent Bank submitted that the deposit was made with the intent of profit generation and was linked to business activities, including availing of credit facilities, thereby constituting a commercial purpose. It was further argued that the dispute involved serious allegations of fraud and forgery, which could not be adjudicated in summary consumer proceedings.

Observations of the Court:

The Supreme Court reiterated that the determination of "commercial purpose" depends upon the dominant intention of the transaction and not merely on the identity of the party or the earning of interest. It clarified that mere earning of interest on a bank deposit does not render the transaction commercial, as deposits may be made for safe custody or regulatory compliance. However, where deposits are used to leverage credit facilities for business purposes, such transactions may acquire a commercial character.

The Court further observed that the present case involved serious disputed questions of fact, including allegations of fraudulent pledge and forgery of documents. Such issues could not be satisfactorily adjudicated in summary proceedings under the CPA, which is intended for expeditious resolution of consumer disputes and not for adjudication of complex factual controversies involving criminality or tortious conduct.

The Court emphasised that deficiency in service must be distinguished from allegations of fraud or criminal misconduct, and that such disputes are more appropriately adjudicated in regular civil or criminal proceedings.

Held:

The Court held that although the reasoning of the NCDRC in dismissing the complaint may not have been entirely correct, the ultimate conclusion was justified, as the nature of the dispute rendered it unsuitable for adjudication under the CPA. Accordingly, the appeal was dismissed.

The Court clarified that dismissal of the consumer complaint would not preclude the appellant from pursuing appropriate remedies before competent civil or criminal forums.

The judgment underscores that while banking services such as fixed deposits do not inherently constitute commercial transactions merely because they yield interest, the determination ultimately depends on the dominant purpose and surrounding circumstances, particularly where such deposits are linked to business activities. Further, the judgment reinforces the well-settled principle that consumer fora, being summary in nature, are not equipped to adjudicate disputes involving serious allegations of fraud, forgery, or complex factual controversies, thereby necessitating recourse to appropriate civil or criminal proceedings despite the availability of consumer remedies.

CRIMINAL LAW

Date: 19 March 2026

Case Name: V. Ganesan v. State Represented by the Sub Inspector of Police & Anr., Criminal Appeal No. 1470 of 2026

Forum: Supreme Court

The present appeal arose from proceedings initiated pursuant to a final report under Section 173 of the Code of Criminal Procedure, 1973 ("CrPC"), wherein the appellant was indicted for offences under Sections 406 and 420 of the Indian Penal Code, 1860 ("IPC"). The appellant i.e., V. Ganesan, engaged in film production, had obtained financial assistance from the de-facto complainant on the assurance of sharing profits from the movie project. Initially, a 30% share in profits was promised, which was later enhanced upon further investment. Subsequently, two post-dated cheques of Rs. 24 lakhs each were issued towards repayment of the principal amount, however, the cheques were dishonoured due to insufficient funds.

Aggrieved, the complainant initiated criminal proceedings alleging cheating and criminal breach of trust. The appellant approached the Madras High Court under Section 482 CrPC seeking quashing of proceedings. The Madras High Court quashed the charge under Section 406 IPC but declined to quash the proceedings under Section 420 IPC, holding that a prima facie case of cheating was made out. Challenging this partial refusal, the appellant approached the Supreme Court.

Issues:

1. Whether the ingredients of criminal breach of trust, particularly entrustment, were satisfied?
2. Whether the allegations disclosed the offence of cheating or merely a civil dispute?
3. Whether the appellant had fraudulent or dishonest intention at the time of making the promise?
4. Whether dishonour of post-dated cheques is sufficient to infer dishonest intention?
5. Whether the transaction constituted a high-risk commercial venture or a fraudulent inducement?

Submission of the Parties:

The appellant contended that the transaction was purely commercial in nature, involving investment in a movie project with an expectation of profit-sharing, and that failure to generate profits did not amount to cheating. It was submitted that there was no dishonest intention from inception and that the criminal proceedings were an abuse of process, warranting quashing.

Per contra, the respondent argued that the appellant induced the complainant to part with money through false assurances and that dishonour of cheques indicated dishonest intention. It was contended that the repeated representations and failure to honour commitments established the offence of cheating.

Observations of the Court:

The Supreme Court reiterated the settled legal position that for an offence of cheating under Section 420 IPC, the existence of fraudulent or dishonest intention at the time of inducement is sine qua non. Mere breach of promise or failure to fulfil contractual obligations does not constitute cheating unless it is shown that the intention to deceive existed from the very inception.

Applying these principles, the Court noted that the transaction between the parties was one of investment in a movie project, which is inherently a high-risk commercial venture. The appellant had, in fact, completed and released the movie, thereby negating any allegation that the initial promise to produce the movie was false. The absence of any allegation that the movie generated profits further weakened the claim of deception.

The Court also clarified that dishonour of post-dated cheques, issued towards discharge of an existing liability, does not by itself establish dishonest intention at inception. Such cheques do not constitute inducement for delivery of property and may, at best, give rise to proceedings under Section 138 of the Negotiable Instruments Act, 1881.

The Court further observed that in cases involving commercial transactions with inherent risks, the High Court, in exercise of its inherent powers, is competent to assess whether the allegations disclose a criminal offence or merely a civil dispute. In the present case, the nature of the transaction and surrounding circumstances indicated absence of dishonest intention from the beginning.

Held:

The Court held that the allegations, even if taken prima facie, disclosed only a civil dispute arising out of a commercial transaction and did not satisfy the ingredients of the offence of cheating. The High Court erred in declining to quash the proceedings under Section 420 IPC.

Accordingly, the appeal was allowed, the impugned judgment of the Madras High Court was set aside to the extent it refused to quash the proceedings under Section 420 IPC, and the criminal proceedings against the appellant were quashed.

The judgment reaffirms the fundamental distinction between civil disputes and criminal offences, particularly in the context of commercial transactions, by emphasising that mere breach of contractual obligations or failure of a business venture, specially one involving inherent risk such as film production, cannot be elevated to the offence of cheating in the absence of dishonest intention at inception. The judgment further clarifies that dishonour of post-dated cheques, issued towards existing liabilities, does not by itself establish criminal culpability, thereby reinforcing judicial caution against misuse of criminal process for recovery of civil claims.

INSOLVENCY AND BANKRUPTCY LAW

Date: 20 March 2026

Case Name: Ujaas Energy Ltd. v. West Bengal Power Development Corporation Ltd., Civil Appeal of 2026 (arising out of SLP (Civil) No. 29651 of 2024)

Forum: Supreme Court

The present appeal arose from a challenge to the judgment dated 02 September 2024 passed by the Division Bench of the High Court at Calcutta in an appeal, whereby the judgment of the Ld. Single Judge dated 21 August 2024 was set aside. The appellant i.e., Ujaas Energy, a corporate debtor and MSME engaged in the business of solar power projects, had been awarded a contract by the respondent i.e., West Bengal Power Development Corporation Ltd., a public sector undertaking, pursuant to an e-tender floated on 15 February 2017. A Letter of Award was issued on 12 May 2017.

Subsequently, on 17 September 2020, the appellant was admitted into Corporate Insolvency Resolution Process ("CIRP") under the Insolvency and Bankruptcy Code, 2016 ("IBC"). Disputes having arisen between the parties, arbitration was invoked by the appellant through its Resolution Professional, leading to filing of claims and counterclaims before the Arbitral Tribunal. Notably, the respondent had not submitted its claim before the Resolution Professional during the CIRP, though it later raised a counterclaim before the Arbitral Tribunal.

The CIRP culminated in approval of a resolution plan by the National Company Law Tribunal ("NCLT") on 13 October 2023. Thereafter, the appellant sought dismissal of the respondent's counterclaim on the ground that such claims stood extinguished upon approval of the resolution plan. The Arbitral Tribunal accepted this contention and rejected the counterclaim by way of an interim award. While the Single Judge upheld this decision, the Division Bench set aside the same and permitted continuation of arbitral proceedings. Aggrieved thereby, the appellant approached the Supreme Court.

Issues:

1. Whether the respondent's counterclaim, not submitted before the Resolution Professional during CIRP, stands extinguished upon approval of the resolution plan?
2. Whether the 'clean slate' principle under the IBC should be applied strictly so as to bar all claims not forming part of the resolution plan?
3. Whether, despite extinguishment of the counterclaim, the respondent can raise a plea of set-off as a defence in arbitral proceedings?
4. Whether the terms of the resolution plan bar the plea of set-off in pending arbitral proceedings?

Submission by the Parties:

The appellant contended that the respondent's failure to submit its claim before the Resolution Professional within the CIRP period resulted in extinguishment of such claim upon approval of the resolution plan by NCLT. It was submitted that permitting the respondent to pursue a counterclaim thereafter would defeat the fundamental objective of the IBC, namely, the 'clean slate' principle. The appellant argued that the resolution plan, once approved, binds all stakeholders and extinguishes all claims not forming part thereof.

Per contra, the respondent supported the reasoning of the Division Bench and argued that the 'clean slate' principle ought not to be applied so rigidly as to defeat legitimate claims. While conceding that the counterclaim may not survive independently, the respondent urged that it should at least be permitted to raise a plea of set-off as a defence, so as to avoid unjust enrichment of the appellant. It was contended that denial of such a defence would result in serious prejudice, particularly where the respondent would be compelled to pay without accounting for reciprocal dues.

Observations of the Court:

The Court examined the statutory framework under the IBC, particularly Section 31(1), and reiterated that approval of a resolution plan renders it binding on all stakeholders and results in extinguishment of all claims not forming part thereof. Relying upon settled precedent, the Court affirmed that the 'clean slate' principle ensures finality and certainty in resolution proceedings.

Applying this principle, the Court held that the respondent's counterclaim, not having been submitted during CIRP, stood extinguished and could not be pursued as an independent claim before the Arbitral Tribunal.

However, the Court proceeded to examine whether a limited indulgence could be granted by permitting the plea of set-off as a defence. In this regard, the Court took note of specific factual aspects, including that the counterclaim had been raised prior to approval of the resolution plan, that the Resolution Professional was aware of such claim, and that the resolution plan did not expressly bar a defensive plea of set-off.

Upon interpreting Paragraph 12.4.1 of the resolution plan, the Court observed that while the clause clearly barred claims for payment or settlement not forming part of the plan, it did not expressly or impliedly exclude the plea of set-off as a defence. The Court invoked principles of statutory interpretation to conclude that such exclusion cannot be inferred in the absence of explicit language.

Accordingly, the Court drew a distinction between a claim seeking affirmative relief and a defensive plea of set-off, holding that the latter could be permitted in limited circumstances without undermining the IBC framework.

Held:

The Court held that although the respondent's counterclaim stood extinguished upon approval of the resolution plan and could not be pursued independently, the respondent ought to be permitted to raise the plea of set-off by way of defence in the arbitral proceedings.

It was clarified that such a plea would be limited strictly to a defensive purpose and would not entitle the respondent to any affirmative or monetary relief. In the event the respondent's claim exceeded the appellant's claim, the surplus would not be recoverable. Conversely, any amount remaining payable to the appellant after adjustment would be recoverable by the appellant. It was further clarified that if the arbitral proceedings initiated by the appellant were withdrawn, the respondent's counterclaim would also fail.

In view of the above, the impugned judgment of the Division Bench was modified, and the appeal was partly allowed. The parties were directed to bear their own costs.

The Supreme Court, while reaffirming the strict application of the 'clean slate' principle under the Insolvency and Bankruptcy Code, 2016 and the binding effect of an approved resolution plan under Section 31(1), held that all claims not forming part of the resolution plan stand extinguished and cannot be pursued as independent causes of action. However, the Supreme Court carved out a limited exception by permitting the plea of set-off as a defence, thereby ensuring that the respondent is not left without recourse in respect of mutual dealings, without allowing any affirmative or monetary relief, thus striking a nuanced balance between finality of insolvency proceedings and equitable considerations, and clarifying that such indulgence is confined to the specific facts and terms of the resolution plan in the present case.

WHITE COLLAR CRIME

Date: 16 March 2026

Case Name: Ratnawali Vanshwati v. State of Madhya Pradesh & Ors., Writ Petition No. 20253 of 2022

Forum: Madhya Pradesh High Court

The petitioner filed the present writ petition under Article 226 of the Constitution challenging the order dated 21 June 2021 passed by the Commissioner, Institutional Finance, whereby she was dismissed from service. The petitioner had been trapped by the Lokayukta in a bribery case and was subsequently convicted by the Special Court under the Prevention of Corruption Act, 1988. She was sentenced to imprisonment and fine under Sections 7 and 13 of the said Act.

Following her conviction, action was taken under Rule 10(ix) of the Madhya Pradesh Civil Services (Classification, Control and Appeal) Rules, 1966, resulting in her dismissal from service. The petitioner contended that her criminal appeal against conviction was pending and, therefore, the proceedings had not attained finality. She also challenged the dismissal on the grounds of violation of natural justice and absence of departmental enquiry.

Issues

1. Whether an opportunity of hearing is required before passing a dismissal order after conviction in a criminal case?
2. Whether non-conduct of a departmental enquiry vitiates dismissal based on conviction?
3. Whether pendency of appeal against conviction affects the validity of dismissal?
4. Whether the disciplinary authority applied its mind and imposed a proportionate penalty?
5. Whether the dismissal order violated principles of natural justice?

Submission of the Parties:

The petitioner contended that the impugned order was passed without affording her an opportunity of hearing and without conducting a departmental enquiry. It was further argued that since her criminal appeal was pending, the dismissal was premature and violative of natural justice.

Per contra, the State submitted that the petitioner had been duly convicted by a competent court and that action was taken strictly in accordance with Rule 19 of the Rules of 1966. It was contended that no further enquiry or hearing was required once conviction was recorded, and that the dismissal was lawful and justified.

Observations of the Court:

The Court examined the scheme of the Rules of 1966 and held that Rule 19 provides a special procedure enabling dismissal of a government servant upon conviction in a criminal case, without the necessity of a departmental enquiry. Relying upon the judgment of the Supreme Court in Union of India v. Tulsiram Patel, the Court reiterated that once a conviction is recorded, the disciplinary authority can impose penalty based on the conduct leading to such conviction without conducting a fresh enquiry.

The Court further observed that while principles of natural justice are fundamental, they cannot be stretched to require a second opportunity of hearing on the same facts which have already been adjudicated in a criminal trial. The criminal proceedings themselves provide adequate opportunity of defence.

The Court also noted that the disciplinary authority had duly applied its mind, considered the nature of the offence involving moral turpitude under the Prevention of Corruption Act, and acted in accordance with the applicable government circular mandating dismissal in such cases. The order was found to be a reasoned and speaking order.

Held:

The Court held that no illegality or procedural irregularity was committed in passing the dismissal order. It upheld that dismissal based on conviction without departmental enquiry is permissible under Rule 19 of the Rules of 1966, and that no separate opportunity of hearing is required post-conviction.

The judgment reaffirms the settled legal position that conviction of a government servant in a criminal case—particularly for offences involving moral turpitude—constitutes sufficient basis for dismissal without a separate departmental enquiry, provided the disciplinary authority applies its mind and passes a reasoned order; it further clarifies that principles of natural justice do not mandate a second hearing once due opportunity has already been afforded in criminal proceedings, thereby balancing individual rights with the larger public interest of maintaining integrity and efficiency in public service.

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