319 Cr.P.C - Power to proceed against other persons appearing to be guilty of offence.

Date Of Article : 03/07/2023

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”.


Date Of Article : 03/06/2023

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

Section 29-A continue to permeate section 31(1)(f) which is applicable during the liquidation process

Date Of Article : 02/03/2023

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

Banks Order classifying as Wilful Defaulter quashed for non compliance with Clause 3B of RBI Circular.

Date Of Article : 02/07/2023

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

Doctrine of Contra- Proferentem

Date Of Article : 02/03/2023

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.

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.

Date Of Article : 02/11/2023

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.

Date Of Article : 02/11/2023

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.

Resolution Professional entitled to continue prosecution of Suspended Directors of Corporate Debtor for Avoidance Transactions even after conclusion of CIRP.

Date Of Article : 02/12/2023

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

Code of Criminal Procedure, 1973; Section 397

Date Of Article : 12/05/2022

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

Attachment By Tax Department subsequent to a Mortgage Favouring Secured Creditors does create any vested right

Date Of Article : 12/14/2022

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.

HCs can’t interfere with CCI’s probe unless there is an abuse of process and it appears a mala fide investigation

Date Of Article : 12/14/2022

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

Date Of Article : 12/14/2022

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.”

Senior Citizens Act: The clause to maintain settlee or transferree in the Gift Deed is Mandatory to cancel the Gift Deed

Date Of Article : 12/15/2022

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 Demandsabove Rs. 50 Lakhs

Date Of Article : 10/05/2019

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.


Date Of Article : 11/05/2021

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.


Date Of Article : 01/04/2021

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.


Date Of Article : 01/09/2020

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.


Date Of Article : 22-04-2021

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 & Anrhasset 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.