Newsletter For April 2026

ARBITRATION

Case Name: Rajiv Gaddh v. Subodh Parkash Civil Appeal No. of 2026 (@ SLP (C) No. 4430 of 2025)

Forum: Supreme Court

The present appeal arose from an order dated 08.11.2024 passed by the Punjab and Haryana High Court, whereby an application filed by the respondent under Section 11 of the Arbitration and Conciliation Act, 1996 (“the Act”) was allowed and a sole arbitrator was appointed. The parties had jointly participated in an auction conducted by Jammu & Kashmir Bank for the purchase of 550 marlas of land situated in Hoshiarpur, Punjab (“the Hoshiarpur Land”). Three inter-related agreements were executed between the parties on 02.04.2013 to resolve disputes arising out of their joint venture and the Hoshiarpur Land, each containing an arbitration clause.

The respondent invoked the arbitration clause by a notice dated 06.05.2015 and filed an application under Section 11(6) of the Act, resulting in the appointment of successive arbitrators. However, by a communication dated 29.08.2019, the respondent unilaterally declared that he would no longer participate in the arbitral proceedings, and the sole Arbitrator proceeded to pass an award on 30.06.2020 against the respondent, decreeing the claim of the appellant and dismissing the claim of the respondent. The respondent thereafter issued a fresh notice invoking arbitration on 01.09.2021, purportedly on the basis of a judgment of this Court dated 09.07.2021 in Civil Appeal No. 1599 of 2011, and filed a second application under Section 11(6) of the Act. The High Court allowed this fresh application, holding that the issue of res judicata did not fall for determination at the Section 11 stage, and left the question to be decided by the newly constituted arbitral tribunal. The present appeal was preferred against the said order.

Issues:

1. Whether the respondent's unilateral withdrawal from and refusal to participate in the earlier arbitral proceedings amounted to abandonment, thereby barring the fresh application under Section 11(6) of the Act?
2. Whether the principles of Order 23 Rule 1 of the Code of Civil Procedure, 1908, barring institution of fresh proceedings on the same cause of action without leave, apply to proceedings under Section 11(6) of the Act?
3. Whether the judgment of this Court dated 09.07.2021 in Civil Appeal No. 1599 of 2011 gave rise to a fresh cause of action in favour of the respondent?
4. Whether the issue of res judicata falls for consideration at the stage of proceedings under Section 11 of the Act

Submission of the Parties:

The appellant contended that the respondent had clearly abandoned the earlier arbitration proceedings and was, therefore, barred from seeking a fresh appointment of an arbitrator. It was submitted that Order 23 Rule 1(3) of the Code of Civil Procedure, 1908 imposed a bar on the institution of subsequent proceedings on the same cause of action, and that such principles applied with equal force to proceedings under Section 11(6) of the Act.

Per contra, the respondent submitted that the issue of res judicata does not arise in a proceeding under Section 11 of the Act, and that a fresh cause of action had accrued to the respondent upon the pronouncement of the Supreme Court's judgment dated 09.07.2021 in Civil Appeal No. 1599 of 2011.

Observations of the Court:

The Supreme Court affirmed the well-settled position that the jurisdiction under Section 11 of the Act is primarily confined to determining the existence of an arbitration agreement, and that the issue of res judicata does not arise for determination at this stage. However, the Court observed that the principles of Order 23 Rule 1 of the Code, which prohibit the institution of a fresh proceeding on the same cause of action absent leave of the Court, stand on a different footing. Relying upon HPCL Bio-Fuels Ltd. v. Shahaji Bhanudas Bhad, 2024 SCC OnLine SC 3190, the Court held that such principles apply to proceedings under Section 11(6) of the Act.

The Court further held that abandonment of proceedings cannot be readily inferred, and must be established from conduct that leads to only one conclusion, namely, that the party has given up the claim. On the facts, the Court found that the respondent's communication dated 29.08.2019 refusing to accept the arbitrator's authority and declaring non-participation left no room for doubt that the proceedings had been abandoned.

On the question of a fresh cause of action, the Court held that the subject matter of Civil Appeal No. 1599 of 2011 was the validity of the auction of the Hoshiarpur Land, and the inter-party dispute was not the subject matter of that appeal at all. Accordingly, the dismissal of that appeal by this Court on 09.07.2021 did not give rise to any fresh cause of action in favour of the respondent. The subsequent application under Section 11(6) was therefore based on the same cause of action as the earlier application, and was squarely barred by the principles contained in Order 23 Rule 1 of the Code.

Held:

The Supreme Court held that the subsequent application filed by the respondent under Section 11(6) of the Act was not maintainable, as it was based on the same cause of action as the abandoned earlier proceedings, and no liberty to file a fresh application had been reserved. The impugned order dated 08.11.2024 passed by the Punjab and Haryana High Court was accordingly quashed and set aside. The appeal was allowed with no order as to costs. Accordingly, the Supreme Court allowed the appeals, set aside the judgment of the High Court, and restored the arbitral award dated 08 May 2017.

The judgment affirms the settled principle that the bar under Order 23 Rule 1 of the Code of Civil Procedure, which prohibits fresh proceedings on the same cause of action without leave, is founded on public policy and applies with equal vigour to applications for appointment of an arbitrator under Section 11(6) of the Act; a party cannot be permitted to abandon arbitral proceedings and thereafter seek a fresh appointment on the same cause of action, as such conduct amounts to an abuse of process. The Court further clarifies that a judgment of the Supreme Court in collateral proceedings, which does not adjudicate the dispute between the parties, cannot generate a fresh cause of action so as to circumvent the bar under Order 23 Rule 1.

Date: 21 April 2026

Case Name: M/s. MCM Worldwide Private Limited v. M/s. Construction Industry Development Council, Civil Appeal No. of 2026 (@ SLP (C) No. 33075 of 2025)

Forum: Supreme Court

The present appeal arose from a judgment dated 08.05.2025 passed by a Division Bench of the Delhi High Court in FAO (Comm.) No. 83 of 2024, whereby an appeal under Section 37 of the Arbitration and Conciliation Act, 1996 was allowed on merits, without examining the threshold question of whether such an appeal was maintainable against an order passed by an arbitrator rejecting a plea of lack of jurisdiction under Section 16 of the Arbitration Act.

Arbitration had commenced between the parties upon appointment of a sole Arbitrator by the Delhi High Court in the context of disputes arising under two Memoranda of Understanding dated 02.03.2006 and 05.05.2008. During the course of the arbitral proceedings, at the stage of framing of issues, the respondent filed an application under Order VII, Rule 11 of the Code of Civil Procedure, 1908, seeking rejection of the appellant's claim petition on the ground of limitation that the claims were time-barred. The Arbitrator dismissed this application on 16.04.2022. Following an unsuccessful challenge to this order in the District Court and High Court, where liberty was granted to file an application under Section 16. The respondent thereafter filed a fresh application before the Arbitrator, this time specifically under Section 16 of the Arbitration Act, asserting that the Arbitrator lacked jurisdiction on account of the claims being barred by limitation. This application too was dismissed by the Arbitrator on 19.05.2023. Aggrieved, the respondent filed an application under Section 34 of the Arbitration Act, which was dismissed, and a further appeal under Section 37. Although the appellant initially raised a maintainability objection, they erroneously conceded the point after the respondent cited Supreme Court precedent. The District Judge subsequently dismissed the Section 34 application on merits on 26.03.2024, leading to the further Section 37 appeal. The Division Bench of the High Court allowed the appeal on merits without addressing the fundamental question of whether an order under Section 16(2) rejecting the plea of want of jurisdiction was amenable to challenge under Section 34 and Section 37.

Issues:

1. Whether an order passed by an arbitrator under Section 16(2) of the Arbitration Act, rejecting a plea of lack of jurisdiction, is amenable to challenge under Section 34 of the Arbitration Act?
2. Whether, in consequence, an appeal under Section 37 of the Arbitration Act is maintainable against a decision passed on such a challenge?
3. Whether the decision in Indian Farmers Fertilizer Cooperative Limited v. Bhadra Products, (2018) 2 SCC 534, had been misunderstood so as to render such a challenge maintainable?

Observations of the Court:

The Supreme Court undertook a detailed analysis of the scheme of Section 16 of the Arbitration Act. Section 16(5) categorically mandates that where the arbitral tribunal rejects a plea under Section 16(2) or (3), it shall continue with the arbitral proceedings and make an arbitral award. Section 16(6) provides that the party aggrieved by such an award may then make an application under Section 34 against the final award. Section 37 of the Act, which governs appealable orders, provides for an appeal only in the event an arbitrator upholds the plea of lack of jurisdiction under Section 16(2) or (3), i.e., where the arbitrator terminates the proceedings by accepting the plea of no jurisdiction.

The Court noted that the decision in Indian Farmers Fertilizer Cooperative Limited v. Bhadra Products had been misunderstood. That decision related to a situation where the arbitrator had decided the issue of limitation as a preliminary issue, independently of Section 16, and that decision had been held to constitute an interim award amenable to challenge under Section 34. That Court had, however, specifically observed that such a drill would not apply to decisions under Sections 16(5) and 16(6) of the Arbitration Act. The concession by the appellant before the District Judge that the application under Section 34 was maintainable was therefore erroneous and unsustainable, and was plainly a misreading of the earlier judgment.

The Court emphasised that accepting the interpretation adopted by the learned District Judge and the Division Bench would do violence to the scheme of the Arbitration Act and render Section 37(2) superfluous, since it is only an order accepting the plea of lack of jurisdiction that is directly appealable without recourse to Section 34.

Held:

The Supreme Court held that the respondent was not entitled to file an application under Section 34 of the Arbitration Act against the order dated 19.05.2023 rejecting its plea of lack of jurisdiction under Section 16(2). As the said application under Section 34 was not even maintainable, the question of an appeal under Section 37 being entertained did not arise. The Division Bench of the Delhi High Court had erred in overlooking this crucial aspect of the matter. The judgment of the Division Bench dated 08.05.2025 was accordingly set aside. It was clarified that the respondent would remain at liberty to test the validity of the order dated 19.05.2023 only after the passing of the final award and, if the situation so warranted, by way of an application under Section 34 against the final award.

The judgment provides an important reaffirmation of the legislative scheme under Section 16 of the Arbitration and Conciliation Act, 1996, clarifying that where an arbitral tribunal rejects a jurisdictional challenge under Section 16(2), the aggrieved party has no immediate recourse to Section 34 and must await the final award before raising such a challenge; the Court further corrects a widespread misreading of Indian Farmers Fertilizer Cooperative Limited v. Bhadra Products, making it explicit that the holding in that case pertained only to a preliminary award on limitation made outside the framework of Section 16, and that the exclusion of an order under Section 16(2) from the ambit of Section 34 is manifest from the scheme of the Act, thereby discouraging piecemeal challenges to arbitral proceedings.

CIVIL LAW

Date: 07 April 2026

Case Name: State Bank of India v. Amit Iron Private Limited and Others, Civil Appeal Nos. 4243-4244 of 2026 (@ Special Leave Petition (C) Nos. 20618-20619 of 2025

Forum: Supreme Court

The present batch of appeals concerned the rights of borrowers whose loan accounts had been classified as “fraud” by the appellant-banks in exercise of their powers under the Reserve Bank of India (Frauds Classification and Reporting by Commercial Banks and Select FIs) Directions, 2016 (“Master Directions-2016”) and the Reserve Bank of India (Fraud Risk Management in Commercial Banks (including Regional Rural Banks) and All India Financial Institutions) Directions, 2024 ("Master Directions-2024"). The central questions were whether the borrowers were entitled to a personal/oral hearing before classification of their accounts as fraud, and whether the entire Forensic Audit Report was required to be furnished to the borrowers prior to such classification.

In one set of appeals, the appellant State Bank of India had classified the account of respondent No. 1 as fraud, having issued a show cause notice, elicited a reply, and passed a reasoned speaking order. The Calcutta High Court, followed by the Division Bench, held that a personal hearing was mandatory and that the entire Forensic Audit Report must be supplied to the borrower, drawing this conclusion from this Court's earlier judgment in State Bank of India v. Rajesh Agarwal, (2023) 6 SCC 1. In the other appeal, the Delhi High Court followed the same interpretation on analogous facts. Both matters were heard together by the Supreme Court, with the RBI duly impleaded as a party.

Issues

1. Whether the decision in Rajesh Agarwal (supra) recognised a right in the account holder or borrower to a personal/oral hearing before the account is classified as fraud under the Master Directions of the RBI?
2. Whether issuance of a detailed show cause notice, consideration of the reply filed by the borrower, and the obligation to pass a reasoned order would satisfy the principles of natural justice?
3. Whether there is an obligation on the banks to furnish the entire Forensic Audit Report to the borrowers before declaration of the account as fraud?

Submission of the Parties:

The RBI, appearing through learned senior counsel, submitted that the Master Directions-2024 correctly embodied the scope of Rajesh Agarwal (supra) by incorporating a procedure of detailed show cause notice, a minimum 21-day period for reply, examination of responses, and the mandatory making of a reasoned order. The RBI contended that Rajesh Agarwal (supra) did not, by any measure, mandate a personal/oral hearing, and that the principle of audi alteram partem is sufficiently met if the written/documentary response of the borrower is duly considered.

The appellant-banks, appearing through the learned Solicitor General of India, further elaborated that classification of a fraud account is an internal administrative decision of the bank, premised on objective documentary evidence, and that insisting on personal hearings would undermine the entire regulatory framework by converting a swift administrative process into a protracted one, causing significant delay and providing opportunities to recalcitrant borrowers to dissipate assets or abscond.

The respondent-borrowers, appearing through learned senior counsel, contended that Rajesh Agarwal (supra) had mandated a personal hearing, that classification as fraud amounted to “civil death” entailing debarment from institutional finance, ineligibility under Section 29A of the IBC, and exposure to criminal proceedings, and that the forensic audit report was a central investigative document which had to be disclosed in its entirety to enable the borrower to represent its case effectively

Observations of the Court:

The Supreme Court undertook a detailed examination of the judgment in Rajesh Agarwal (supra) and the clarification order passed in M.A. No. 810 of 2023. The Court concluded that Rajesh Agarwal (supra) did not recognise any right in the borrower to a personal/oral hearing before the account is classified as fraud. What was contemplated in paragraphs 75 and 81 of that judgment was a show cause notice, a written representation in the form of a reply, and a reasoned order. The use of the phrases “reply and representation” in the judgment was not to be construed as mandating a personal hearing in addition to written submissions.

The Court held that the RBI, in its Master Directions of 15.07.2024, had correctly understood the scope of Rajesh Agarwal (supra) and had incorporated the appropriate procedure in Clause 2.1.1.1 to 2.1.1.4. The Court observed that granting a right of personal hearing to each and every borrower would be practically inexpedient given the large volume of cases; would convert an administrative process intended to be swift into a protracted one; would provide opportunity for recalcitrant borrowers to dissipate assets or abscond; and would impose significant logistical and infrastructural burdens on the banks, particularly as frauds are detected through a structured multi-tiered process of Early Warning Signals, Red Flagging, and Forensic Audit over a 180-day window.

On the question of Forensic Audit Reports, the Court held that disclosure of such reports to the borrower is mandatory where the bank intends to rely upon such reports in classifying the account as fraud. This position, the Court found, was consonant with paragraph 95 of Rajesh Agarwal (supra). The right to disclosure is, however, not absolute, and where any portion of the report affects third-party rights, the bank may withhold those portions after communicating the reasons therefor, subject to the borrower having an opportunity to demonstrate that the information is necessary for effective representation.

Held:

The Supreme Court held: (a) that Rajesh Agarwal (supra) did not recognise any right in the borrower to a personal/oral hearing before classification of the account as fraud; (b) that the procedure prescribed in the Master Directions-2024 comprising a detailed show cause notice, not less than 21 days for reply, examination of responses, and a reasoned order strikes a fair balance between promptitude and fairness and duly comports with the principles of natural justice; (c) that disclosure of the Forensic Audit Report to the borrower is mandatory as the rule, subject only to limited and exceptional circumstances where third-party rights are genuinely affected; and (d) that the supply of findings and conclusions alone is not sufficient compliance with natural justice, as reasons for the findings are in the body of the report; (e) that the directions of the High Courts mandating personal hearings were accordingly set aside, while the directions to supply forensic audit reports were upheld.

The judgment settles a long-standing controversy arising from divergent High Court interpretations of Rajesh Agarwal (supra), holding definitively that the requirements of natural justice in the context of fraud classification under the RBI Master Directions are satisfied by the procedure of show cause notice, written representation, and reasoned order, and do not extend to a personal/oral hearing; at the same time, the Court emphatically mandates disclosure of forensic audit reports as a rule, recognising that the right of the borrower to explain material relied upon against it is a core component of the principle of audi alteram partem and cannot be watered down by withholding the very documents which form the basis of the adverse determination, thereby reinforcing both the efficiency of the regulatory framework and the fundamental fairness owed to affected parties.

Date: 29 April 2026

Case Name: Reliance Eminent Trading and Commercial Private Limited v. Delhi Development Authority, Civil Appeal No. of 2026 (Arising Out of S.L.P. (Civil) No. 22100 of 2025)

Forum: Supreme Court

The present appeal arose from an order of the High Court of Delhi dismissing an application for summary judgment filed by the appellant under Rule 4 of Order XIII-A of the Code of Civil Procedure, 1908 ("CPC"), in a suit for recovery of the sale consideration paid to the Delhi Development Authority ("DDA") in respect of a commercial plot, the underlying acquisition of which had been judicially declared to have lapsed under Section 24(2) of the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013 ("Fair Compensation Act").

The appellant had purchased Plot No. 13 at the Non-hierarchical Commercial Complex, Jasola, New Delhi ("Subject Plot") through a public auction in 2007, paying a total consideration of Rs. 164,91,00,000/-, pursuant to which the DDA executed a freehold Conveyance Deed dated 06.02.2008 in its favour. In 2015, the original owner of the underlying land filed a writ petition before the Delhi High Court seeking a declaration of lapse of the acquisition, which was allowed on 15.11.2016. The DDA's appeal was dismissed by this Court on 04.05.2017, the DDA being granted six months to initiate fresh acquisition proceedings, a period that expired on 04.11.2017 without any action. A subsequent Review Petition was dismissed on 17.10.2019, and a Curative Petition was dismissed on 19.05.2022. The appellant, having learnt of these proceedings only in December 2017, thereafter filed a civil suit - CS (Comm.) No. 582 of 2021 seeking recovery of Rs. 459,73,61,098/- inclusive of principal, stamp duty, property tax, and interest. Within the suit, the appellant preferred an application for summary judgment, which was dismissed by the Single Judge of the High Court on 09.06.2025, on the ground that the question of possession of the Subject Plot was contentious and triable, and that refund could not be granted without the appellant first offering to return possession to the DDA or establishing that the rightful owner was already in possession.

Issues:

1. Whether the appellant was entitled to a summary judgment under Order XIII-A of the CPC, in a suit for refund of consideration paid for a plot whose underlying acquisition had been declared to have lapsed?
2. Whether the DDA's defence founded upon the appellant's failure to return physical possession of the Subject Plot as a precondition to claiming refund constituted a real and triable issue or was fanciful and illusory?
3. Whether the plea of counter-restitution impossibility raised by the DDA was a valid defence to the appellant's claim for refund?
4. Whether the suit was barred by limitation?
5. What are the applicable guidelines governing the exercise of power under Order XIII-A of the CPC?

Submission of the Parties:

The appellant submitted that the facts were entirely undisputed. It had paid full consideration through a public auction; the underlying acquisition had lapsed under Section 24(2) of the Fair Compensation Act, as affirmed by this Court, with review and curative proceedings also having been dismissed, and the DDA had failed to initiate fresh acquisition within the period allowed. The Conveyance Deed, being dependent on the validity of the underlying acquisition, was rendered void, and the DDA was obliged to refund the consideration. The defence premised on possession was illusory, since no right or title subsisted with the appellant following the lapse of acquisition, making counter-restitution conceptually impossible.

Per contra, the DDA submitted that the question of possession was a genuine triable issue requiring oral evidence, that refund could not be claimed without first returning possession, that the suit was time-barred, and that the original owner had not been impleaded as a party.

Observations of the Court:

The Supreme Court laid down non-exhaustive guidelines for courts exercising jurisdiction under Order XIII-A, drawing upon the analogous standard under Rule 24.2 of the Civil Procedure Rules, 1998 of the United Kingdom. It held that the expression “real prospect” postulates a likelihood that is real and substantial as distinct from fanciful or speculative and that a court adjudicating such an application must consider not only the evidence presently on record but also such evidence as could reasonably be expected at trial; that it ought not to conduct a mini-trial, but must nonetheless distinguish a defence that is genuinely real from one that is merely colourable; and that where a matter raises a neat point of law or construction upon undisputed facts, the court must “grasp the nettle” and decide it summarily.

Applying these principles, the Court held that the High Court had fundamentally misdirected itself. Since the acquisition had lapsed and been declared void, no subsisting right, title, or benefit in respect of the Subject Land remained with the appellant; consequently, there was nothing capable of being the subject matter of counter-restitution. The DDA's defence based on possession was therefore fanciful. The order in Civil Appeal No. 6345 of 2017 was an in rem adjudication and operated as res judicata, precluding the DDA from re-agitating the question of the acquisition's validity in the present proceedings. On limitation, the right to seek refund accrued on 04.11.2017, being the date of expiry of the six-month period allowed for fresh acquisition, and the suit filed on 02.11.2020 was accordingly within time. The DDA's defence of non-joinder of the original owner was equally rejected as inapposite given that the issue of possession was wholly irrelevant to the claim.

Exercising power under Article 142 of the Constitution of India to do complete justice, the Court set aside the registered Conveyance Deed dated 06.02.2008 and decreed the suit for refund of the principal consideration of Rs. 164,91,00,000/- with interest at 7.5% per annum from 12.07.2007, being the date of complete payment by the appellant, till actual payment. The amount already deposited by the DDA before the High Court was directed to be released forthwith, and the balance to be paid within eight weeks, failing which interest at the prevailing prime lending rate of the Reserve Bank of India would apply.

Held:

The Supreme Court allowed the appeal and decreed the suit by way of summary judgment under Order XIII-A of the CPC, setting aside the impugned order of the Delhi High Court. The Conveyance Deed was set aside under Article 142 of the Constitution, and the DDA was directed to refund the sale consideration of Rs. 164,91,00,000/- with interest at 7.5% per annum.

The judgment is a significant pronouncement on the scope and application of Order XIII-A of the CPC, holding that a court exercising summary jurisdiction must “grasp the nettle” when confronted with a neat point of law upon undisputed facts, and that a defence premised on possession which is legally untethered from any subsisting right following a declared lapse of acquisition constitutes a fanciful and illusory plea that cannot resist a summary judgment. The Court further holds that the right to claim refund of consideration paid for a plot, whose underlying acquisition has been judicially declared void, accrues upon the expiry of the period allowed for fresh acquisition; and that an in rem adjudication on the status of an acquisition, once final, forecloses any indirect attempt by the acquiring authority to re-agitate that question by way of a possession-based defence in related proceedings.

CRIMINAL LAW

Date: 15 April 2026

Case Name: The State of Kerala v. K.A. Abdul Rasheed, Criminal Appeal No. of 2026 (@ Special Leave Petition (Crl.) No. 1808 of 2026)

Forum: Supreme Court

The present appeal arose from an order of acquittal passed by the High Court of Kerala setting aside the conviction of the respondent-accused under Sections 7 and 13(1)(d) read with Section 13(2) of the Prevention of Corruption Act, 1988. The trial court had convicted the accused and sentenced him to undergo rigorous imprisonment of two years under each of the two provisions, to be suffered concurrently, along with a fine.

The respondent, who was the Taluk Supply Officer (“TSO”), was the supervising authority over the complainant, an Authorised Ration Dealer (“ARD”), whose activities were subject to the control and supervision of the Civil Supply Department through the Taluk Supply Office. The ARD was required to produce weekly accounts before the Revenue Inspector and to get verified the “Abstract” of changes in ration cards every three months, which abstract required the counter-signature of the TSO. The prosecution alleged that the accused had consistently refused to countersign the Abstract and had demanded a bribe of Rs. 500/- for doing so. The complainant, unwilling to pay the bribe, approached the Vigilance Department, where a complaint was recorded, and a trap was laid in which the marked note was recovered from the shirt pocket of the accused after the trap proceedings.

The High Court acquitted the accused on the ground that the complainant (PW1) had prevaricated in his deposition, the demand was not established, and that the independent witness who had accompanied the complainant into the cabin of the accused at the time of handing over the bribe had not been examined, thereby creating a lacuna in direct evidence of the demand and the offer. Placing reliance upon the Constitution Bench judgment in Neeraj Dutta v. State (NCT of Delhi), (2023) 4 SCC 731, the High Court ordered acquittal.

Issues:

1. Whether the demand for illegal gratification was established beyond reasonable doubt notwithstanding the prevaricating deposition of the complainant (PW1)?
2. Whether the creditworthy portions of the deposition of a hostile witness can be acted upon to establish the demand?
3. Whether non-examination of the independent witness who accompanied the complainant into the accused's cabin was fatal to the prosecution's case on the issue of demand?
4. Whether the acceptance of the bribe having been proved and admitted, the false explanation offered by the accused constituted an additional circumstance pointing to guilt?

Submission of the Parties:

The State of Kerala, appearing through learned senior counsel, contended that though PW1 had made inconsistent statements in cross-examination, there was sufficient oral evidence regarding the demand, and that the acceptance stood proved by the evidence of PW1 corroborated by PW2 (an independent witness) and PW17 (the officer who led the trap). It was submitted that PW1's First Information Statement (Ext. P1) constituted the oral complaint taken down by PW17 in the presence of the independent witnesses, and the complainant had confirmed the statements therein as correct, which confirmation was corroborated by PW2 and PW17. The false explanation offered by the accused for accepting the amount was highlighted as a further circumstance of guilt.

Per contra, the respondent-accused submitted that the presumption of innocence stood fortified by the order of acquittal, that the complainant had denied the demand in his cross-examination, and that in the absence of direct evidence of the demand at the time of handing over, the ingredients of the offences under Sections 7 and 13(1)(d) of the Act were not made out. Reliance was placed upon Jayaraj B. v. State of Andhra Pradesh, 2014 KHC 4199.

Observations of the Court:

The Supreme Court applied the principles laid down by the Constitution Bench in Neeraj Dutta v. State (NCT of Delhi), (2023) 4 SCC 731, which held that proof of demand and acceptance of illegal gratification by a public servant as a fact in issue is a sine qua non in order to establish the guilt of the public servant under Sections 7 and 13(1)(d) of the Act. The Court also referred to Sat Paul v. Delhi Administration, (1976) 1 SCC 727, for the principle that where a witness is cross-examined and contradicted with leave of Court, his evidence cannot as a matter of law be treated as washed off the record altogether; it is for the Judge of fact to consider whether, in the result, the witness stands thoroughly discredited or can still be believed in regard to a part of his testimony.

The Court, having gone through the deposition of PW1 with care, found that though PW1 had prevaricated and accepted every suggestion made by the defence in cross-examination, the prosecution had specifically confronted PW1 with his statement before the Vigilance Department regarding the demand of Rs. 500/-, and PW1 had affirmed the statement that the accused had made the demand on two occasions. PW1 had further confirmed that the statements recorded in Ext. P1 were affirmed by him as correct before the independent witnesses. These portions of the deposition were creditworthy and could not be eschewed. The Court further noted that the non-examination of the Special Tahsildar who had accompanied PW1 into the accused's cabin could have produced evidence of what transpired at the time of handing over, but the demand could still be inferred from the entirety of PW1's evidence.

The Court also emphasised that the acceptance of the Rs. 500/- note was not only established but was also admitted by the accused, and the false and contradictory explanation offered under Section 313 of the Code of Criminal Procedure constituted a further compelling circumstance pointing to guilt.

Held:

The Supreme Court allowed the appeal, set aside the order of acquittal of the High Court, and restored the order of conviction passed by the trial court. Finding that the sentence awarded was the statutory minimum, it declined to interfere with the quantum of sentence.

The judgment reinforces the principle that the deposition of a hostile witness is not automatically effaced from the record and that the court of fact is duty-bound to examine the evidence holistically to identify and act upon those portions which are creditworthy; it further affirms that the demand for a bribe may be inferred from circumstantial evidence and from the complainant's pre-trap complaint, affirmed in the presence of independent witnesses, even where the complainant prevaricates at trial, provided such portions of the evidence are corroborated by other witnesses; the false explanation offered by an accused for admitted acceptance of a bribe constitutes an additional circumstance of guilt that cannot be lightly disregarded by an appellate court in an order of acquittal.

INSOLVENCY AND BANKRUPTCY LAW

Date: 23 April 2026

Case Name: Anjani Technoplast Ltd. v. Shubh Gautam, Civil Appeal No. 8247 of 2022

Forum: Supreme Court

The present appeal was preferred under Section 62 of the Insolvency and Bankruptcy Code, 2016 ("the IBC") by the corporate debtor against an order of the National Company Law Appellate Tribunal ("NCLAT") directing admission of an application filed by the respondent under Section 7 of the IBC. The respondent was a money lender who had advanced two loans to the appellant aggregating Rs. 4.50 crores in 2010. The cheques furnished as security were dishonoured and, during the pendency of proceedings under Section 138 of the Negotiable Instruments Act, 1881, the parties entered into a compromise on 31.08.2013. By 31.07.2014, the appellant had made aggregate payments of Rs. 3,53,51,520/- to the respondent.

A summary suit was thereafter filed by the respondent before the Delhi High Court, which was decreed on 11.01.2018 for Rs. 4,38,00,617/- with interest at 24% per annum. The decree was affirmed in appeal and the appellant's Special Leave Petition was dismissed by this Court on 22.10.2021, rendering the decree final. Instead of proceeding with execution of the decree, the respondent filed a petition under Section 7 of the IBC before the NCLT on 13.12.2021, barely two months after the dismissal of the SLP. The NCLT dismissed the petition, inter alia, on the ground that the IBC is not a recovery mechanism and that its invocation against a solvent company constituted an abuse of process. The NCLAT reversed this finding and directed admission. The present appeal was preferred against the order of the NCLAT.

Separately, the quantum of the decretal amount was seriously disputed, with the respondent's computation charts before different fora showing amounts ranging from Rs. 96,48,480/- (as on 31.03.2012, before the Income Tax Appellate Tribunal) to over Rs. 12,51,18,074/- (before this Court as on 28.02.2026).

Issues:

1. Whether the initiation of the Corporate Insolvency Resolution Process ("CIRP") by the respondent against a solvent company, in preference to execution of a final decree, amounts to misuse of the IBC as a recovery mechanism?
2. Whether the IBC can be used as a substitute for execution proceedings under the Civil Procedure Code, 1908?
3. Whether the existence of serious, unresolved disputes as to the quantum of the decretal amount is a relevant consideration in determining whether CIRP proceedings ought to be maintained?

Submission by the Parties:

The appellant-corporate debtor contended that it was a solvent, functioning enterprise with revenue of approximately Rs. 35 crores, profits of Rs. 8 crores, and 95 full-time employees, and that the respondent had bypassed execution proceedings to use the insolvency process as a coercive tool for debt recovery. It was further submitted that the quantum of the debt was seriously disputed and that the proceedings before the Delhi High Court in I.A. No. 17634 of 2022 under Section 151 of the Code of Civil Procedure were pending for redetermination of the decretal amount.

Per contra, the respondent contended that since the decree constituted a financial debt and the appellant was in default thereof, the invocation of Section 7 of the IBC was legally maintainable, relying upon the decisions in Dena Bank (Now Bank of Baroda) v. C. Shivakumar Reddy, (2021) 10 SCC 330, and Kotak Mahindra Bank Ltd. v. A. Balakrishnan, (2022) 9 SCC 186.

Observations of the Court:

The Supreme Court reiterated the legislative character and purpose of the IBC. The Code was enacted to provide for the reorganisation and insolvency resolution of corporate persons in a time-bound manner for the maximisation of the value of assets, and is not a debt recovery legislation. Relying upon Swiss Ribbons (P) Ltd. v. Union of India, (2019) 4 SCC 17, the Court emphasised that the primary focus of the IBC is to ensure the revival and continuation of the corporate debtor and not to benefit individual creditors. The Court also applied the principles in GLAS Trust Co. LLC v. BYJU Raveendran, (2025) 3 SCC 625, wherein a three-Judge Bench had held that improper use of the IBC mechanism includes using insolvency as a substitute for debt enforcement or attempting to obtain preferential payments by coercing the debtor.

The Court found that the respondent held a final decree, had recourse to the well-established machinery of civil execution, and had chosen instead to invoke the insolvency jurisdiction against a solvent company. The appellant had deposited Rs. 3,60,98,847/- with the Registrar General of the Delhi High Court and had consistently maintained its willingness to pay whatever was lawfully due, while disputing the quantum. Such conduct was not that of an insolvent entity. The question of the amount due under the decree, the respondent having taken contradictory positions before different fora, was a matter properly before the Delhi High Court in the pending proceedings under Section 151 of the Code of Civil Procedure, and not a matter for the NCLT or NCLAT to resolve.

Held:

The Supreme Court held that the initiation and maintenance of CIRP proceedings against the appellant was nothing more than the use of the IBC as a recovery mechanism and constituted an abuse of process. The NCLAT had erred in setting aside the NCLT's order. The appeal was allowed and the order of the NCLT dated 20.06.2022 dismissing the Section 7 petition was restored. The respondent was left at liberty to pursue execution of the decree dated 11.01.2018 in accordance with law. Costs of Rs. 5,00,000/- were awarded in favour of the appellant.

The judgment constitutes a significant reaffirmation of the principle that the Insolvency and Bankruptcy Code, 2016 is a rescue and revival statute and not a debt recovery mechanism for individual creditors; while recognising that a decree for money may, as a general proposition, constitute a financial debt capable of founding a Section 7 petition, the Court holds that the question of whether the invocation of the IBC amounts to misuse must be examined on the facts of each case, and that a creditor who bypasses execution proceedings in favour of insolvency against a solvent and willing debtor, particularly where the quantum of the debt is seriously disputed and the debtor has demonstrated genuine willingness to pay, acts contrary to the purpose and spirit of the Code and may be restrained from doing so as an abuse of process.

WHITE COLLAR CRIME

Date: 08 April 2026

Case Name: Sunita Mehta, Subash Mehta and Sanjay Mehta v. Special Director, Enforcement Directorate, Misc. Appeal (FEMA) Nos. 2, 3 and 4 of 2025

Forum: High Court of Delhi

The present appeals were filed by the appellants under Section 35 of the Foreign Exchange Management Act, 1999 (“FEMA”) challenging the common order dated 31.05.2012 passed by the Appellate Tribunal for Foreign Exchange, which had dismissed their appeals and upheld the common Adjudication Order No. ADJ/25-28/B/SDE/RAJ/2010/FEMA dated 17.08.2010 passed by the Adjudicating Authority imposing penalties upon the appellants and ordering confiscation of the amounts lying to the credit of their Non-Resident (Non-Repatriable) Rupee Accounts (“NRNR Accounts”).

The appellants, Indian nationals resident in Canada, had opened NRNR Accounts in India in accordance with Regulation 5(1)(iv) of the Foreign Exchange Management (Deposit) Regulations, 2000 ("the Regulations") read with Schedule 4 thereof. In the year 2001, upon discovering that the cooperative banks where they held these accounts were in financial difficulty, the appellants came to India attempted to withdraw their deposits. The banks, however, declined to effect withdrawal and instead advised the appellants to avail of loans against the security of the existing NRNR Accounts, which the appellants accordingly did. The loan proceeds being funds raised within India and not remitted from abroad were then utilised to open fresh NRNR Accounts with other banks.

Show cause notices were thereafter issued to the appellants under Section 3(b) read with Section 6(3)(f) of FEMA and Regulation 5(1)(iv) read with Schedule 4 of the Regulations, alleging that the opening of the subsequent NRNR Accounts from loan proceeds raised within India, as opposed to funds remitted from outside India, constituted a contravention of the Regulations. The Adjudicating Authority, by its order dated 17.08.2010, imposed penalties under Section 13(1) of FEMA and ordered confiscation of the amounts in the appellants' NRNR Accounts under Section 13(2) of FEMA, without assigning specific reasons for the confiscation. The Appellate Tribunal dismissed the appellants' challenge thereto by its impugned order of 31.05.2012.

Issues:

1. Whether the liability for contravention of Regulation 5(1)(iv) read with Schedule 4 of the Regulations was restricted exclusively to the Authorised Dealer, to the exclusion of the account holder?
2. Whether the omission of Regulation 5(1)(iv) of the Regulations by the Amendment Notification dated 01.03.2002 extinguished the liability of the appellants for antecedent violations committed while the Regulation was in force, so as to render the subsequently issued show cause notices non-maintainable?
3. Whether the RBI Circular dated 04.03.2002, which provided for the maturity proceeds of NRNR Accounts to be credited to the account holder's NRE Account, precluded the imposition of penalty upon the appellants even for an assumed technical violation?
4. Whether confiscation of amounts under Section 13(2) of FEMA is an automatic consequence of the levy of penalty under Section 13(1), or whether the Adjudicating Authority, as a quasi-judicial body, is obliged to assign reasons for the exercise of such discretion?

Submission by the Parties:

On behalf of the appellants, it was contended that Regulation 5(1)(iv) casts an obligation exclusively upon the “Authorised Dealer” to accept deposits under the NRNR Account Scheme, and accordingly, any contravention thereof could only give rise to penalty proceedings against the Authorised Dealer and not against the appellants as account holders. It was further submitted that Regulation 5(1)(iv) stood omitted by a Notification dated 01.03.2002, prior to the issuance of the show cause notices, and that following the ruling of the Supreme Court in Rayala Corporation (P) Ltd. v. Director of Enforcement, (1969) 2 SCC 412, proceedings initiated after the omission of the relevant provision were not maintainable. It was additionally argued that even if a technical violation were assumed, the RBI Circular dated 04.03.2002 permitting crediting of NRNR maturity proceeds to NRE Accounts, which are freely convertible, foreclosed any penalty. Finally, it was urged that the order of confiscation, passed without any reasons, was non-speaking and liable to be set aside on that ground alone, inasmuch as confiscation under FEMA is not automatic but a discretionary exercise of quasi-judicial power requiring reasoned justification.

Per contra, the respondent-Enforcement Directorate submitted that Schedule 4 of the Regulations, read with Clause 8 thereof, mandatorily requires that NRNR Accounts be funded exclusively through remittances from outside India, and that loans raised against existing NRNR Accounts can be utilised only for personal or business purposes and not for re-lending or re-investment in fresh NRNR Accounts. The obligation under Regulation 5(1)(iv), on a proper reading, is cast upon the account holder as well as the Authorised Dealer. On the omission of the Regulation, reliance was placed on Fibre Boards Private Limited v. Commissioner of Income Tax, (2015) 10 SCC 333 and Shree Bhagwati Steel Rolling Mills v. Commissioner of Central Excise, (2016) 3 SCC 643, which have clarified, in the light of Sections 6 and 6A of the General Clauses Act, 1897, that an omission is equivalent to a repeal and accordingly does not extinguish liability for antecedent violations. It was also submitted that no separate reasons are required to be assigned for confiscation as it lies at the discretion of the Adjudicating Authority.

Observations of the Court:

On the exclusivity of liability to the Authorised Dealer. The Court held that while Regulation 5(1)(iv) is framed as a permission to the Authorised Dealer, the corresponding obligation under Schedule 4, that NRNR Accounts be opened only through funds remitted from outside India, is cast equally on the account holder. Section 13(1) of FEMA penalises “any person” who contravenes any provision of the Act or any regulation thereunder, and accordingly, liability for contravention falls upon both the Authorised Dealer and the account holder.

On the effect of omission of Regulation 5(1)(iv), the Court held that Rayala Corporation was inapplicable on two grounds: first, the later decisions in Fibre Boards and Shree Bhagwati Steel Rolling Mills had explained and confined that judgment to its peculiar facts; and second, the omission of Rule 132-A of the Defence of India Rules at issue in Rayala Corporation contained its own express saving clause, thereby excluding the application of Section 6 of the General Clauses Act, which applies only where “a different intention” does not appear. The omission of Regulation 5(1)(iv) in the present case contained no such limiting saving clause its only operative effect was that from the date of omission, Authorised Dealers could no longer accept fresh NRNR deposits. Antecedent violations by the appellants were entirely unaffected.

On confiscation under Section 13(2) of FEMA. The Court held that confiscation under Section 13(2) is not automatic. The Adjudicating Authority, exercising a quasi-judicial function, is bound to assign reasons as to why, on the facts, the imposition of penalty alone does not suffice and why confiscation is additionally warranted. In the present case, neither the Adjudicating Authority nor the Appellate Tribunal had assigned any reasons for the confiscation order, and the Adjudicating Authority's own order noted that the loan transactions had stood settled through the maturity proceeds of the appellants' NRNR Accounts, resulting in no loss of foreign exchange a factor left entirely unconsidered. The confiscation orders were accordingly non-speaking and unsustainable. Given the efflux of time since 2008 and the absence of any loss of foreign exchange, the Court declined to remand the matter and directly set aside the confiscation.

Held:

The Delhi High Court partially allowed all three appeals. The orders imposing penalty upon the appellants under Section 13(1) of FEMA were upheld; the orders directing confiscation of the amounts lying to the credit of the appellants in their NRNR Accounts, as passed by the Adjudicating Authority and affirmed by the Appellate Tribunal, were set aside.

The judgment authoritatively settles two important propositions under FEMA. First, that the obligation under Regulation 5(1)(iv) read with Schedule 4 of the Foreign Exchange Management (Deposit) Regulations, 2000 is cast upon the account holder equally as upon the Authorised Dealer, making the account holder susceptible to penalty under Section 13(1) of FEMA. Second, that confiscation under Section 13(2) of FEMA is not a mechanical or automatic appendage to the imposition of penalty under Section 13(1), being a discretionary exercise of quasi-judicial power, it demands reasoned justification addressing why penalty simpliciter is inadequate and why confiscation of the property in question is additionally warranted. The judgment further clarifies, following Fibre Boards and Shree Bhagwati Steel Rolling Mills, that the omission of a subordinate regulatory provision does not extinguish accrued liability for antecedent violations, and that Rayala Corporation has no application where the omitting notification contains no limiting saving clause of its own.

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