Legal Updates

Supreme Court reiterates that once NCLT is satisfied that default has occurred, there is hardly a discretion left with NCLT to refuse admission of the CIRP application u/s 7 IBC.

Supreme Court further clarified  that by the order in review that the decision in the case of Vidarbha Industries  was in the setting of facts of the case before this Court. 

Hence, the decision in the case of Vidarbha Industries  cannot be read and understood as taking a view which is contrary to the view taken in the cases of Innoventive Industries and E.S. Krishnamurthy . The view taken in the case of Innoventive Industries   still holds good. 

 

Creeping up an escalating liability to Chairpersons of large conglomerates/companies for cheques issued in day-to-day affairs of the business of a company would unfairly and unnecessarily expand the provisions of vicarious liability under the provisions of the Negotiable Instruments Act – Yashovardhan Birla Vs. Cecil Webber Engineering Ltd. & Ors

Honourable Supreme Court of India has held that an Exclusion Clause in a contract of insurance puts an onus as well as the burden lies with the insurer when reliance is made on such a clause. This is for the reason that insurance contracts are special contracts premised on the notion of good faith. It is not a leverage or a safeguard for the insurer, but is meant to be pressed into service on a contingency, being a contract of speculation. An insurance contract by its very nature mandates disclosure of all material facts by both parties. 14. An exclusion clause has to be understood on the touch-stone of the doctrine of reading down in the light of the underlining object and intendment of the contract. It can never be understood to mean to be in conflict with the main purpose for which the contract is entered. A party, who relies upon it, shall not be the one who committed an act of fraud, coercion or mis-representation, particularly when the contract along with the exclusion clause is introduced by it. Such a clause has to be understood on the prism of the main contract.

Section 36 of the A&C Act, an arbitral award is required to be enforced in accordance with the provisions of CPC, in the same manner as if it were a decree of the Court. In view of Section 13(1A) of the Commercial Courts Act, against a judgment or order of the Commercial Court or the Commercial Division of the High Court, an appeal would lie to the High Court’s Commercial Appellate Division. However, as per the proviso to Section 13(1A), an appeal shall lie only from such orders that are specifically enumerated under Order XLIII of the CPC, as amended by the Commercial Courts Act and Section 37 of the A&C Act. Further, Section 13(2) of the Commercial Courts Act expressly proscribes an appeal against any order or decree of a Commercial Division or Commercial Court, other than in accordance with the provisions of the Commercial Courts Act

The Single Bench of the Delhi High Court in the case of Anubhav Jain vs Satish Kumar Jain & Anr. consisting of Justice C. Hari Shankar held that the right conferred on the Defendant in an infringement suit, to move the Court for rectification of the register of marks is a right independent of other rights available under the Act for the same purpose. It has, therefore, to be treated as available in addition to the right available and conferred by Section 57 of the Trademarks Act, 1999 (hereinafter referred to as “the Act”). It could not be read as the only right available, in abrogation of Section 57 of the Act

COMPETITION ACT (AMENDMENT) 2023 KEY FEATURES. a) Mergers and acquisitions exceeding ₹2000 crores in value must be notified: If the value of any merger or acquisition exceeds Rs. 2,000 crores ($250 million), it would require CCI approval, provided that the party which is being acquired or amalgamated has “substantial business operations in India,” which will be defined by CCI. Earlier, combinations needed to be notified to the CCI only if the parties involved had assets or turnover exceeding a certain threshold; the value of the deal was not considered. b) Reduction in the time limit for assessment of combinations: The Bill reduces the overall time CCI has to approve merger and acquisition requests as well as the time companies have to respond to objections made by CCI. CCI needs to form its initial (prima facie) opinion in 30 days or else the combination is deemed to have been approved. The overall time limit for the assessment of combinations will be reduced to a period of 150 days from 210 days. c) Objections to combinations by CCI and proposal of modifications: If CCI thinks that a combination is likely to harm competition, it will state the objections to the parties identifying the appreciable adverse effect on competition, and then, direct the parties to explain why such a combination should be allowed to take effect. If the parties believe that the competition issues can be eliminated by suitable modifications, they may submit an offer of appropriate modifications. If the CCI finds the proposed modifications satisfactory, it may approve the combination. If not, the combination will not be allowed, or CCI can propose a scheme to be implemented by the parties to address the concerns. d) Covering hub-and-spoke cartels: Entities who are not engaged in identical or similar trade, shall also be presumed to be part of an anti-competitive agreement under Section 3(3) if they participate or intend to participate in the furtherance of such agreement. This covers parties who facilitate anti-competitive horizontal agreements, even if they are not part of the agreement. This is presumably to cover hub-and-spoke cartels—where individuals or organizations that don’t directly participate in the production or supply of goods or services, such as trade associations and consultants—facilitate collusion by acting as intermediaries. e) Covering sellers: The phrase “exclusive supply agreement” has been replaced with “exclusive dealing agreement” to cover the selling side, and not just purchasing side when looking at exclusive agreements. f) Covering sales of goods and services: Anticompetitive conduct like “tie-in arrangement,” “refusal to deal,” “resale price maintenance,” and “exclusive distribution agreement” have all been redefined to cover goods and services, and not just goods. g)Covering indirection restrictions: The “resale price maintenance” definition has been redefined to cover “any direct or indirect restriction”, not just an agreement. h) Modification to AAEC factors: Under the factors used by CCI to determine whether an agreement has an appreciable adverse effect on competition (AAEC), the Bill modifies two factors to widen the scope: o “foreclosure of competition by hindering entry into the market” to “foreclosure of competition” o “accrual of benefits” to “accrual of benefits or harm” Changes to penalties i) Penalty based on income or global turnover: The Bill empowers CCI to pass orders in relation to anti-competitive agreements and the abuse of dominant position, by imposing a penalty that can be up to 10% of the average income or turnover for the last three preceding financial years. Additionally, the turnover will be the global turnover and not just the turnover in India. j) Increase in penalty for combination misrepresentation: In case any party makes a false statement or omits material information when seeking approval for a combination, a penalty of up to ₹5 crores can be imposed by CCI, which is higher than the earlier upper limit of ₹1 crore. k) Liability of company and people in charge: There is a liability for both the company and the people in charge, unless the contravention was committed without the person’s knowledge or if the person had exercised all due diligence to prevent the commission of such contravention. l)Power to impose a lesser penalty: There are more criteria under which a lesser penalty may or may not be imposed by CCI. For example, there will be a lesser penalty for parties in an ongoing cartel investigation if they disclose information regarding other cartels. n) Recovery of legal cost: CCI can recover the legal costs or other losses in addition to penalties, which shall be credited to the Consolidated Fund of India. Introduction of a new settlements framework and changes to how appeals work o) Settlements and Commitments Framework: If entities are found to engage in anticompetitive agreements or abuse of dominance, they can propose a settlement for the alleged contraventions at any time after the Director General presents their report and before the CCI passes an antitrust order. Entities can also propose commitments in respect of the alleged contraventions at any time after a prima facie order is passed by the CCI and before the Director General presents their report. CCI can accept or reject the proposed settlement or commitments. This new framework is expected to provide an incentive for companies to settle with CCI rather than go to court. p) Deposit before filing an appeal: The appellate tribunal will not entertain an appeal from any company unless the company deposits 25 percent of the amount of penalty imposed by CCI. This additional requirement is expected to prompt companies to scrutinize their decision to appeal.

HIGH COURT OF DELHI in Teq Green Power XIII (P.) Ltd. v.REMC Ltd has held that when preference shares issued by the issuer are redeemable only on the option of the issuer and there is no tenure attached to the shares and further under Section 2(57) of the Companies Act the definition of net worth uses the expression paid-up share capital which is defined under Section 2(64) of the Companies Act to mean that the paid up share capital is the aggregate amount of money credited as paid up capital and is equivalent to the amount received as paid up capital in respect of shares issued including the amount credited as paid up capital in respect of shares of the company and further Section 43 of the Companies Act states that the share capital of a company limited by shares includes equity share capital and preference share capital which means that the expression includes both preference share capital as well as equity share capital of the company and hence the redeemable preference shares without fixed tenure are part of paid up capital and a component of networth.

Honorable Supreme Court in N. N. Global Mercantile (P.) Ltd. v .Indo Unique Flame Ltd has held that a) An Arbitration Agreement, within the meaning of Section 7 of the Act, which attracts stamp duty and which is not stamped or insufficiently stamped, cannot be acted upon, in view of Section 35 of the Stamp Act, unless following impounding and payment of the requisite duty, necessary certificate is provided under Section 42 of the Stamp Act. b) Further, the provisions of Sections 33 and the bar under Section 35 of the Stamp Act, applicable to instruments chargeable to stamp duty under Section 3 read with the Schedule to the Stamp Act, would render the Arbitration Agreement contained in such instrument as being non-existent in law unless the instrument is validated under the Stamp Act.

Honourable NCLAT IN AVJ Heights Apartment Owners Association v. India Infoline Finance Ltd has held that Loan sanctioned to a Suspended Director and backed by the Corporate Guarantee accompanied by board resolution guaranteeing/mortgaging of Corporate Debtor is a valid financial debt and hence admissible u/s 5(8) of IBC. Honourable NCLAT held that in the present instance, financial creditor had sanctioned loan facilities in favour of appellant-suspended director of corporate debtor and wherein corporate debtor had given a corporate guarantee and Thereafter, corporate debtor was admitted into CIRP and Resolution Professional(RP) was appointed and invited claims . Honble NCLAT and NCLT held that board resolution had been passed guaranteeing/mortgaging of property belonging to the Corporate Debtor by the Corporate Debtor himself and hence the loan provided to Suspended Director is admissible as a claim against the Corporate Debtor.

Honourable NCLAT in Ocean Deity Investment Holdings Ltd. v. Suraksha Asset Reconstruction Ltd has held that merely because there was a debt and default, it could not be construed that a section 7 application was required to be admitted; Honourable NCLAT has also held that the Adjudicating Authority ought to have examined nature of financial transactions before admitting section 7 application against corporate debtor.

The fundamental guidelines for making a statement under Section 313 of the Criminal Procedure Code are outlined by the Honourable Supreme Court in Premchand v. State of Maharashtra at Paragraph 15. “a. Section 313, Cr. P.C. [clause (b) of sub-section 1] is a valuable safeguard in the trial process for the accused to establish his innocence; b. Section 313, which is intended to ensure a direct dialogue between the court and the accused, casts a mandatory duty on the court to question the accused generally on the case for the purpose of enabling him to personally explain any circumstances appearing in the evidence against him; c. when questioned, the accused may not admit his involvement at all and choose to flatly deny or outrightly repudiate whatever is put to him by the court; d. the accused may even admit or own incriminating circumstances adduced against him to adopt legally recognized defenses; e. an accused can make a statement without fear of being cross-examined by the prosecution or the latter having any right to cross-examine him; f. the explanations that an accused may furnish cannot be considered in isolation but have to be considered in conjunction with the evidence adduced by the prosecution, and, therefore, no conviction can be premised solely on the basis of the section 313 statement(s); g. statements of the accused in course of examination under Section 313, since not on oath, do not constitute evidence under Section 3 of the Evidence Act, yet the answers given are relevant for finding the truth and examining the veracity of the prosecution case; h. the statement(s) of the accused cannot be dissected to rely on the inculpatory part and ignore the exculpatory part and has/have to be read in whole, inter alia, to test the authenticity of the exculpatory nature of admission; and i. If the accused takes a defense and proffers any alternate version of events or interpretation, the court has to carefully analyze and consider his statements; j. any failure to consider the accused’s explanation of incriminating circumstances in a given case may vitiate the trial and/or endanger the conviction.”

Honourable Supreme Court in State Bank of India vs Rajesh Agarwal and connected cases has held that a) At the outset, we clarify that principles of natural justice are not applicable at the stage of reporting a criminal offence, which is a consistent position of law adopted by this Court. b) In Union of India v. W N Chadha, a two-judge bench of this Court held that that providing an opportunity of hearing to the accused in every criminal case before taking any action against them would “frustrate the proceedings, obstruct the taking of prompt action as law demands, defeat the ends of justice and make the provisions of law relating to the investigation lifeless, absurd, and self-defeating.” c) Again, a two-judge bench of this Court in Anju Chaudhary v. State of UP has reiterated that the Code of Criminal Procedure, 1973 does not provide for right of hearing before the registration of an FIR"

Honourable Supreme Court in M/s. Asian Avenues Pvt. Ltd. Vs. Sri Syed Shoukat Hussain [Civil Appeal No. 2927 of 2023] has held that it is impossible to hold that an action instituted under Section 31 of Specific Relief for cancellation of an instrument is an action in rem and held that per decision of Honourable Supreme Court in Deccan Paper Mills Company Limited vs Regency Mahavir Properties and Others that an action instituted under Section 31 of Specific Relief Act for cancellation of an instrument is NOT an action in rem and hence the said dispute is Arbitrable by an Arbitrator/Arbitration Tribunal as the case may be.

Honourable Supreme Court in Shivashankara vs HP Vedavyasa Char held as follows:- a) Possessory Title - when the facts disclose no title in either party, at the relevant time, prior possession alone decides the right to possession of land in the assumed character of owner against all the world except against the rightful owner-‘Possessio contra omnes valet praeter eur cui ius sit possessionis’ (he that hath possession hath right against all but him that hath the very right)” b) Possessory Title- principle of “jus tertii”- ‘right of a third party-no defendant in an action of trespass can plead the ‘jus tertii’ that the right of possession outstanding in some third person.

Power u/s 319 CrPC is a discretionary and an extraordinary power. It is to be exercised sparingly and only in those cases where the circumstances of the case so warrant. It is not to be exercised because the magistrate or the sessions judge is of the opinion that some other person may also be guilty of committing that offence. Only where strong and cogent evidence occurs against a person from the evidence laid before the court that such power should be exercised and not in a casual and cavalier manner. 106 . Thus we hold that though only a prima facie case is to be established from the evidence laid before the court, not necessarily tested on the anvil of cross-examination, it requires much strong evidence that near probability of his complicity. The test that has to be applied is one which is more than prima facie case as exercised at the time of framing of charge, but short of satisfaction to an extent that the evidence, if goes unrebutted, would lead to conviction. In the absence of such satisfaction, the court should refrain from exercising power u/S 319 CrPC”.

The involvement of a person in any one or more of certain processes or activities connected with the proceeds of crime, namely, concealment, possession, acquisition, use, projecting as untainted property, or claiming as untainted property, constitutes the offence of money-laundering – All the places where any one or more of these processes or activities take place are the places where the offence of money-laundering has been committed – Triable by the special court(s) constituted for the area(s) in which the offence of money-laundering has been committed

Supreme Court in the matter of Bank of Baroda v. MBL Infrastructures Ltd. (supra), where Hon’ble Supreme Court, while reiterating its earlier pronouncements, held that the provisions of Section 29-A continue to permeate section 31(1)(f) which is applicable during the liquidation process and that section 29-A has been enacted to facilitate corporate governance and in larger public interest

On going though the documents which have been filed along with reply and writ petition, it is found that Committee has taken into consideration the evidence available on record for identification of petitioners as willful defaulter. Show cause notice was issued to petitioners on 04.07.2020. On going through the said notice, it is found that evidence, facts and other material which is available against petitioners have not been referred to in the notice and only reasons are given for identification of petitioners as willful defaulter. In show cause notice evidence and facts which were considered by Committee for identification was not supplied to petitioners. Since, material available with the Bank and facts relied upon by Bank for identification of petitioner as willful defaulter has not been supplied to petitioners, therefore, petitioners do not have adequate and proper opportunity of hearing. Mechanism provided by RBI in Master Circular dated 01.07.2015 in Clause-3(B) has not been followed.(p10) Bank considered representation of petitioners through its Advocate and same was communicated on 16.07.2022 to petitioners. Representation of petitioners was rejected on ground that powers for identification of a person or company as willful defaulter is administrative in nature. Lawyer has no right to appear before said Committee and reliance was placed on State Bank of India Vs. M/s. Jah Developers Pvt. Ltd. and Ors. (2019) ibclaw.in 136 SC and representation was rejected by Advocate of Bank. Representation of petitioners as per Clasue-3(B) is to be considered by Committee and not by an Advocate, Therefore, mechanism under Clause-3(B) was violated.(p11) On going through communication dated 08.10.2021, it is found that in paragraph-16 it is mentioned by respondents that there is no provision of review as envisaged by RBI, therefore, decision on representation is to be treated as a letter and not a decision in review. Further considering the minutes of meeting dated 09.03.2022, it is found that 14 accounts were submitted for review to Review Committee of willful defaulters which included the case of petitioners company i.e. M/s Sanwaria Consumer Limited but Review Committee has only considered the case of seven companies for review. Case of petitioners for review was not considered by Review Committee. In view of aforesaid facts and circumstances of the case, there is violation of RBI Master Circular dated 01.07.2015.(p12-13) Hon’ble Court concluded that orders dated 12.08.2021, 08.10.2021, 22.03.2022 and 04.08.2021, are quashed. Respondents-Bank is directed to issue show cause notice to petitioners along with material which was considered in minutes of meeting for identification of petitioners as willful defaulter. Thereafter, petitioners’ representation shall be considered by the Committee in accordance with Master Circular of RBI dated 01.07.2015 and also opportunity of personal hearing be provided to Director, Borrower or Promoter before Committee and further order passed by Committee shall be supplied to petitioner and representation, if any, be considered by Review Committee in accordance with Master Circular of RBI dated 01.07.2015 and procedure as envisaged in Jah Developers

Contra- Proferentem places the cost of losses on the party who was in the best position to avoid the harm. In essence, the doctrine of Contra-Proferentem puts an added responsibility on framer, checkers and approvers of tender documents and emphasizes additional efforts on their part to avoid ambiguities and to make contract documents clear, explicit and unambiguous in nature. Further, it requires tender documents to be complete ones so as to take care of not only foreseeable but unforeseen circumstances also.

Section 96 and 100 of the Code of Civil Procedure provide for preferring an appeal from any original decree or from decree in appeal respectively. The aforesaid provisions do not enumerate the categories of persons who can file an appeal. However, it is a settled legal proposition that a stranger cannot be permitted to file an appeal in any proceedings unless he satisfies the Court that he falls with the category of aggrieved persons. It is only where a judgment and decree prejudicially affects a person who is not party to the proceedings, he can prefer an appeal with the leave of the Appellate Court 1) Test for category of Aggrieved persons: a) A person aggrieved to file an appeal must be one whose right is affected by reason of the judgment and decree sought to be impugned. b) Ordinarily leave to appeal should be granted to persons who, though not parties to the proceedings, would be bound by the decree or judgment in that proceeding and who would be precluded from attacking its correctness in other proceedings. c)It has to be demonstrated that the decree affects the legal rights of the Appellants and would have adverse effect when carried out.

Prosecution under Section 70 of IBC can only be initiated by IBBI or Central Government or person Authorised by Central Government. In the event of non-cooperation and non-provision of Information and any other offence committed by Suspended Promoters, Officials of Corporate Debtor, neither the Adjudicating Authority nor the Resolution professional can initiate prosecution under section 70 of IBC.

TATA STEEL BSL LIMITED ..... Appellant versus VENUS RECRUITER PRIVATE LIMITED & ORS...... Respondents Delhi High Court. Key Take Aways:- 1) RP entitled to continue to prosecute suspended promoters of corporate Debtor under Section ,43-51 and 66 and 67 of IBC even after finalisation of Resolution plan of corporate Debtor and his fees will be decided by Adjudicating Authority. 2) Section 43-51, 66-67 of IB, largely endeavor to enhance the pool of assets of the corporate debtor available for either making it a lucrative prospect for a Resolution Applicant or in the event of liquidation, for distribution among creditors. The avoidance of these transactions essentially prevents unjust enrichment of one party at the expense of a Creditor. 3) Avoidance applications and CIRP are separate set of proceedings and adjudication of avoidance application is independent of resolution of Corporate Debtor and survives CIRP. 4) The Amount made available after transactions are avoided shall go solely to the Financial Creditors who have taken substantial haircuts and In accordance with Sections 44 to 51 of the IBC, 2016, the amount which is recovered can be distributed amongst the secure creditors in accordance with law as determined by the NCLT

The High Court in criminal revision against conviction is not supposed to exercise the jurisdiction alike to the appellate Court and the scope of interference in revision is extremely narrow. Section 397 CrPC vests jurisdiction for the purpose of satisfying itself or himself as to the correctness, legality or propriety of any finding, sentence or order, recorded or passed, and as to the regularity of any proceedings of such inferior court. The object of the provision is to set right a patent defect or an error of jurisdiction or law. There has to be well­ founded error which is to be determined on the merits of individual case. While considering the same, the revisional Court does not dwell at length upon the facts and evidence of the case to reverse those findings. Malkeet Singh Gill v. State of Chhattisgarh

Section 281 of the Income Tax Act does not create a charge, much less one preferential to the revenue, overriding or prevailing over Section 26 E of the SARFAESI Act and Section 31 B of the Recovery of Debts and Bankruptcy Act. The right to recover under the Income Tax Act, of 1961, must yield to the provisions under the SARFAESI Act and the Recovery of Debts and Bankruptcy Act, and thus, the exercise of attachment may not serve any useful purpose.

An order passed under section 26(1), directing investigation by Director General is an administrative order passed only to determine whether allegations made by informant under section 19(1), about possible violations of competition law are true. Once information is received under section 19(1) , CCI, based on material produced by informant has to form a prima facie opinion regarding possible competition law violations. • While forming a prima facie opinion, CCI has to only determine if allegations along with material produced are taken to be true, will that result in breach of competition law. CCI cannot determine legality or correctness of allegations by going into merits of case. It only has to see whether allegations, prima facie, constitute violation of competition law. • Scope of interference of High Courts under Article 226 of Constitution of India, in an order passed directing investigation under section 26(1) is extremely limited. CCI and authorities under Act, 2002 are well equipped to conduct investigation and possess expertise in said field. High Courts cannot interfere with such investigation unless there is an abuse of process and primafacie it appears that investigation was marred by mala fides.

Code of Criminal Procedure, 1973 ; Section 313 Sharad Birdhichand Sarda v. State of Maharashtra2 , it was held thus: “145. It is not necessary for us to multiply authorities on this point as this question now stands concluded by several decisions of this Court. It is mandatory that the circumstances which were not put to the appellant in his examination under Section 313 of the Criminal Procedure Code, 1973, shall have to be completely excluded from consideration.”

The Madras High Court has recently held that though the Maintenance and Welfare of Parents & Senior Citizens Act provides for declaring certain property transfers as void, a settlement of property cannot be cancelled unless it fulfills the conditions of the Act. Hence it is mandatory that the Conveyance Deed executed by Senior Citizens shall have mandatory clause wherein it is stipulated that the transferee shall provide the basic amenities and basic physical needs to the transferor and such transferee refuses or fails to provide such amenities and physical needs, the said transfer of property shall be deemed to have been made by fraud or coercion or under undue influence and shall at the option of the transferor be declared void by the Tribunal.

Delhi HC quashes proceedings since Pre-Notice Consultation was mandatory for Demands above Rs. 50 LakhsAMADEUS INDIA PVT. LTD. versus PRINCIPAL COMMISSIONER, CENTRAL EXCISE, SERVICE TAX AND CENTRAL TAX COMMISSIONERATE A two-judge bench of the Delhi High Court, while annulling the Service Tax proceedings, held that since the demand is above Rs. 50 lakhs, a pre-notice consultation was mandatory as per the Master Circular issued by the Central Board of Excise and Customs (CBEC). The Petitioner provides computer data processing software, which is used by travel agents and ticket booking entities in the Airline industry. In consequent to a search conducted by the Anti-evasion Unit of the Service Tax Commisionerate, the departmentsaid that the said services are subject to Service Tax. A show cause notice was issued by the department alleging that the tax was not paid on taxable services rendered by the Petitioner.The petitioner claimed that as per a Master Circular issued by the CBEC on 10th March, 2017, a pre-show cause notice consultation was mandatory in cases involving demand of duty above Rs. 50 Lakhs.A reminder was again sent by the Petitioner on 13th November, 2018. When no response was received, the petitioner approached the High Court for relief.The bench comprising of Justice S Muralidhar and Justice Prateek Jalan found that it was necessary in terms of para 5.0 of the Master Circular for the Respondent to have engaged with the Petitioner in a pre SCN consultation, particularly, since in the considered view of the Court neither of the exceptions specified in para 5.0 were attracted.

ARBITRATION AND CONCILIATION (AMENDMENT) ACT, 2021-IMPACT. Arbitration Act is a full-fledged, self-containedCode by itself. Arbitral Courts very rarely interfere in arbitral awards, unless and until the arbitral award on the face of it is perverse orprima faciehit by one of the grounds of challenge under Section 34(2) of the Arbitration Act. Arbitral Courts have exercised their discretion to allow an application granting stay of Arbitral Awards under Section 36(3)of the Act,by imposing conditions as the Arbitral Courts deems fit and appropriate.The Arbitration and Conciliation (Amendment) Act, 2021 has now added a proviso under section 36(3) wherein: If the arbitral courts areprima faciesatisfied by the case made out of either (i)The arbitration agreement or contract, which is the basis of the award.(or)(ii)The making of the awardwas induced or affected by fraud or corruption. The Arbitral Court shall stay the arbitral award unconditionally pending disposal of the challenge.New Proviso under Section 36(3) of the Act has a retrospective effect and deemed to be effective from October 23, 2015.Given the fact that Section36(3) of the Act has a retrospective effect, it is now open for parties, whose application under 36(2) of the Act are pending adjudication before a courtto make renewed applications based on the grounds listed inthe new The Arbitration and Conciliation (Amendment) Act, 2021.

Compromise or Compounding or Quashing or Acquittal of Accused in a predicate offence does not affect the investigations of Enforcement Directorate. Bombay High Court in Babulal Verma and Ors. Vs Enforcement Directorate and Ors.{MANU/MH/0835/2021} has held as follows:1)The language of Sections 3 and 4 of the Prevention of Money Laundering Act,2002 (“PMLA”)make it absolutely clear that, the investigation of an offence under Section 3, which is punishable under Section 4, is not dependent upon the ultimate result of the Predicate/Scheduled Offence. In other words, it is a totally independent investigation asdefined and contemplated under Section 2(na), of an offence committed under Section 3 of the said Act.2)PMLA is a special statute enacted with a specific object i.e.,to track and investigate cases of money-laundering. Therefore, after lodgementof Predicate/Scheduled Offence, its ultimate result will not have any bearing on the lodgement/investigation of a crime under the PMLA and the offence under the PMLA will survive and stand alone on its own. 3)Predicate/Scheduled Offence is necessary only for registration of crime/launching prosecution under PMLA and once a crime is registered under the PMLA, then the Enforcement Directoratehas to take it to its logical end, as contemplated under Section 44 of the Act.4)Section 44(b) only provides for filing of a complaint or submission of a closure report by the Investigating Agency under PMLA and none else.5)........It is clear that, even if the Investigating Agency investigating a Scheduled /Predicated Offence has filed closure report in it and the Court of competent jurisdiction has accepted it, it will not wipe out or cease to continue the investigation of Enforcement Directorate in the offence of money-laundering being investigated by it. The investigation of Enforcement Directorate will continue on its own till it reaches the stage as contemplated under Section 44 of the PMLA.

DO ALLEGATIONS OF FRAUD VITIATE THE ARBITRATION AGREEMENT?Hon’ble Supreme Court in the case of Avitel Post StudiozLtd. & Ors. Versus HSBC PI Holdings (Mauritius) Ltd(2020(4)ArbLR1(SC)) has held that cases involving serious and specific allegation of fraud, fabrication of documents, forgery, impersonation coercion etc and the cases involving prosecution for criminal offences shall fall outside the purview of Arbitrationif the specific, serious allegations of fraud fulfil either of the following tests: 1)Does the plea of fraud permeate the entire contract andas a result there of the entire contract/arbitration is void ipso facto?; or 2)Whether the allegations of fraud touch upon the internal affairs of the parties inter se having no implication in the public domain.The first testwill be satisfied only when the Agreement/Arbitration clause cannot be said to exist when the Court finds the agreement itself was void in the first instance (either by way of fraudulent inducement or misrepresentation as defined in Sections 17 and 18 ofthe Indian Contract Act, 1872)The second test can be said to have been met in caseswhere theallegations are made against the State or its instrumentalities are of arbitrary, fraudulent, or malafide conduct, thus necessitating the hearing of the case bya writ court in which questions are raised which are not predominantly questions arising from the contract itself or breach thereof, but questions arising in the public law domain.The aforesaid judgment in Avitel Post Studioz Ltd. & Ors. Versus HSBC PI Holdings (Mauritius) Ltd(2020(4)ArbLR1(SC))makes it clear that: a)if the contract is found to be void in the first instance, the arbitration clause would cease to exist; b)that parties cannot avoid arbitration merely be making allegations that are fraud simpliciter; and c)where there are serious allegations of fraud have a bearing on public law domain, arbitration clause would cease to exist.

STATEMENT OF LIABILITY IN BALANCE SHEET OF THE CORPORATE DEBTOR AMOUNTS TO ACKNOWLEDGMENT OF LIABILITY AND GIVES RISE TO FRESH PERIOD OF LIMITATION U/S 18 OF LIMITATION ACT.Hon’ble Supreme Court of India in the case of Asset Reconstruction Limitedv.Bishal Jaiswal & Anr has set aside the five-member Bench judgment of the National Company Law Appellate Tribunal (“NCLAT”) in V Padma Kumar v. Stressed Assets Stabilization Fund (the “Padma Kumar case”) and has held that an acknowledgement of liability in the balance sheet of the corporate debtor is an acknowledgment of debt.The Supreme Court also averted to the fact that “the filing of a balance sheet in accordance with the provisions of the Companies Act is mandatory, any transgression of the same being punishable by law”. However, what is of importance is that notes that are annexed to or forming part of such financial statements are expressly recognised by Section 134(7) of the Companies Act, 2013. Equally, the auditor’s report may also enter caveats with regard to acknowledgements made in the books of accounts including the balance sheet.It is now apparent that creditors who intend to initiate proceedings under Section 7 and/or 9 of Insolvency and Bankruptcy Code 2016, will need to ensure thata)Borrowers admit the liabilities owned by them to creditors in their balancesheets till the monies along with interest are repaid/settled; andb)There are no Observations/ Objections/Caveats made by the borrowerseither in the notes, auditors report etc with regard to acknowledgment made in the books of accounts including the balance sheet.