Leading Corporate and Commercial Law Cases in April 2023

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1. Ganesh Prasad v. Rajeshwar Prasad

Citation:  Ganesh Prasad v. Rajeshwar Prasad (14.03.2023 – SC): MANU/SC/0235/2023; Decided by the Hon’ble Justice Sudhanshu Dhulia and Hon’ble Justice J.B. Pardiwala

Ratio: Based on a series of cases, the Court reached the conclusion that amendments to the plaint, written statement, or the filing of an additional written statement are generally allowed, with an exception that any admission made in favor of the opposing party is incorrect. The Court emphasized that amendments to the pleadings should be permitted freely when necessary to resolve the actual disputes in the lawsuit, as long as the proposed amendment does not introduce a new cause of action in place of the original one. Additionally, the Court stated that amendments seeking to incorporate inconsistent and contradictory allegations that contradict the admitted factual position or contain mutually destructive allegations should not be permitted.

The Court also dismissed the defendant’s argument based on Order IX Rule 9 of the Civil Procedure Code (CPC) and noted that the present lawsuit does not arise from the same cause of action as the one previously brought before the Small Causes Court. The Court emphasized that the right to redeem is granted to the mortgagor by a specific law, and this right can only be deprived of in the manner prescribed by that law and strictly followed. Furthermore, the Court stated that if the right of redemption is not extinguished, provisions such as Order IX Rule 9 of the CPC will not prevent the mortgagor from filing a second lawsuit. It compared the cause of action in a redemption suit to that of a partition suit, explaining that in a redemption suit, the cause of action is recurring. Each successive action has a different cause of action until the right of redemption is extinguished or the time limit for filing a redemption suit has expired.

2. Gaurav Khullar vs Eleven V Industries and Ors.

Citation: Gaurav Khullar vs Eleven V Industries and Ors.: CRR – 1631 – 2016, Punjab and Haryana High Court, Decided by Hon’ble Justice Jasjit Singh Bedi

Ratio: The P&H high Court held that in all cases of conviction, unless there are exceptional circumstances, it was determined that a fine of up to twice the amount of the cheque should be imposed, and a portion of this fine should be awarded to the complainant as appropriate compensation. The Court also highlighted that the Supreme Court has ruled that the awarded compensation remains recoverable even if the convict has served the default sentence for non-payment of compensation. The Court emphasized that the direction to pay compensation as a form of restitution for the loss caused by the dishonor of the cheque should be practical and realistic. It further noted that compensation is awarded as reimbursement because typically, when proceedings are initiated under Section 138 of the Negotiable Instruments Act, no parallel civil suit for recovery is filed, as the complainant assumes that compensation will be received in the proceedings under Section 138. However, if the complainant is not awarded sufficient compensation at the conclusion of the proceedings, a civil suit for recovery, if filed, may be time-barred.

3. Shivshankara & Ors vs H.P Vedavyasa Char

Citation: Shivshankara & Ors vs H.P Vedavyasa Char, (29.03.2023 – SC): MANU/SC/0325/2023; Decided by Justice B.R. Gavai and Justice C.T. Ravikumar

Ratio: The appellant had requested not only for a decree of permanent injunction but also for a decree of mandatory injunction, compelling the respondents to surrender possession. The court was of opinion that such prayers fall outside the scope of Section 6 of the Specific Relief Act.

When an application for presenting additional evidence is granted, the appellate court has two available options. It can either personally record the evidence or instruct the trial court to do so.

4. The Chairman & Managing Director, City Union Bank Ltd. and Ors. Vs. R. Chandramohan

Citation: The Chairman and Managing Director, City Union Bank Ltd. and Ors. vs. R. Chandramohan (27.03.2023 – SC): MANU/SC/0310/2023; Decided by Hon’ble Justice Ajay Rastogi and Hon’ble Justice Bela M. Trivedi.

Ratio: The Supreme Court stated that if one of the Directors allegedly committed fraud or cheating, employees of bank could not be held liable if they had acted bona fide and followed the due procedure.

In the present case, the respondent-complainant has failed to provide sufficient evidence to prove that there was a deficiency in service on the part of the employees of the appellants-bank, as defined in Section 2(1)(g) of the Consumer Protection Act, 2019. Therefore, the complaint is dismissed. Consequently, the orders issued by the State Commission and the National Commission are overturned. The appeal is allowed accordingly.

5. Pani Logistics vs Vikas G Jain & Ors

Citation: Pani Logistics vs Vikas G Jain & Ors. (03.04.2023 – NCLT, New Delhi): MANU/NL/0313/2023; Decided by Justice Ashok Bhushan (Chairperson) and Barun Mitra, Member (Technical)

Ratio: The NCLT re-emphasized that as per settled law, the commercial wisdom of the Committee of Creditors in approving a resolution plan should be given due regard. The approval of a resolution plan can only be questioned on the limited ground that it violates any statutory provision, including Section 30 Sub-section (2) of the Insolvency and Bankruptcy Code, 2016. The allocation of funds to creditors in a resolution plan can be challenged if the amount earmarked for them is less than the liquidation value, but a mere allocation of a small amount does not suffice as a valid ground for challenge.

Allegations and pending cases against the Asset Reconstruction Company, such as an Income Tax raid, cannot form the basis for interfering with an approved resolution plan, as the law will take its own course.

6. Intec Capital Ltd vs SRD Management Company Pvt Ltd

Citation: Intec Capital Ltd vs SRD Management Company Pvt Ltd, CP (IB) No.1058/PB/2020, NCLT Court – V, New Delhi; Decided by Shri P.S.N. Prasad, Member (Judicial) Shri Rahul Bhatnagar, Member (Technical)

Ratio: In this case, Intec Capital, a non-banking financial company (NBFC), provided loans to SRD Management. Despite restructuring the debt, SRD Management defaulted on payments, acknowledging the debt on multiple occasions. The Corporate Debtor argued that the petition was time-barred, the matter was res judicata due to pending enforcement petitions, and the debt amount was not finalized.

The NCLT found that the petition was within the limitation period based on a valid acknowledgement of debt. They also held that a dispute over the debt amount does not reject an insolvency petition, as it is not the authority’s domain to determine the debt quantum. According to the NCLT, the pendency of enforcement proceedings does not reject the application if there is a debt and default,

7. Clicbrics Technologies Pvt Ltd vs Ansal Housing Ltd

Citation: Clicbrics Technologies Pvt Ltd vs Ansal Housing Ltd. (05.04.2023 – NCLAT, New Delhi): MANU/NL/0312/2023; Decided by Justice Ashok Bhushan, (Chairperson) and Barun Mitra, Member (Technical)

Ratio: After carefully considering the arguments presented by the counsel for both parties and reviewing the records, the NCLAT proceeds to examine whether the payment of brokerage commission triggered an operational debt in the present case and whether a default occurred in paying that debt. The Tribunal applies the test established in the case of Mobilox Innovations Private Limited vs. Kirusa Software Private Limited (2018) 1 SCC 353, which outlines the factors to consider when evaluating an application under Section 9 of the IBC, 2016. The Tribunal stated that the undisputed facts indicate that an MoU appointing the Operational Creditor as the exclusive real estate agent was entered into by the Corporate Debtor, who admitted to the services provided by the Operational Creditor and the amount due and payable. The Corporate Debtor also admitted to sending a cheque for the said amount. Furthermore, the Corporate Debtor admitted that the Operational Creditor became entitled to additional payment based on the sale proceeds received from the real estate allottees.

The Tribunal rejected the argument that the initiation of insolvency proceedings was premature and emphasizes that the Corporate Debtor’s admission of liability supports the validity of the operational debt claim. The Tribunal disagreed with the Adjudicating Authority’s conclusion that the Operational Creditor acted with malafide intention by refusing to accept the cheques, pointing out that no material was presented to dispute the operational debt prior to the demand notice. Finally, the Tribunal concludes that the Adjudicating Authority erred in dismissing the Section 9 petition and finds that the outstanding liability admitted by the Corporate Debtor and the default in payment justify initiating the Corporate Insolvency Resolution Process (CIRP).

8. Sanjay Kumar Agarwal vs Central Bureau of Investigation, Anti-Corruption Bureau, Dhanbad

Citation: Sanjay Kumar Agarwal vs Central Bureau of Investigation, Anti Corruption Bureau, Dhanbad (05.04.2023 – HC of Jharkhand at Ranchi): MANU/JH/0323/2023; Decided by Hon’ble Mr. Justice Gautam Kumar Choudhary

Ratio: Insolvency resolution professional (“IRP”) would be considered a “public servant” under Section 2(c) of the Prevention of Corruption Act, 1988. An IRP is appointed before the Company Law Tribunal and with the approval of the adjudicating authority, which alone would make him a public servant. Also, the nature of assignment and duty to be performed i.e., the to protect the assets of the corporate debtors would come within the meaning of public servant.

In the present case, IRP was caught accepting bribe for extending the Time period for corporate insolvency resolution and for favorable forensic audit report. The same was held to be a violation of Prevention of Corruption Act and quashing petition was dismissed.

9. Welspun Specialty Solutions Limited and Ors. vs Oil and Natural Gas Corporation Ltd.

Citation: Welspun Specialty Solutions Limited and Ors. vs Oil and Natural Gas Corporation Ltd. (13.11.2021 – SC of India): MANU/SC/1059/2021; Decided by Hon’ble Justice N.V. Ramana, C.J.I. and Hon’ble Justice Surya Kant.

Ratio: The Supreme Court expressed the view that the Arbitral Tribunal’s finding, which stated that damages would be awarded under Section 55 of Contract Act in conjunction with the principles outlined in Section 73 of the Contract Act instead of the pre-estimated sum specified in Section 74, is not entirely accurate. The Court believes that even if it is determined that time is not of the essence, the delay in completion would still trigger the provisions for liquidated damages. It is important to highlight that the Court endorsed these conclusions without conducting a thorough examination of how the various sections of the Contract Act interact and the underlying rationale behind liquidated damages as stated in Section 74.

10. Bhimashankar Sahakari Sakkare Karkhane Niyamita Vs. Walchandnagar Industries Ltd.

Citation: Bhimashankar Sahakari Sakkare Karkhane Niyamita vs. Walchandnagar Industries Ltd. (10.04.2023 – SC of India): MANU/SC/0343/2023; Decided by Justice M.R. Shah and Justice Krishna Murari

Ratio: Applying the legal principles established by this Court in the Assam Urban case, it cannot be concluded that the High Court and the learned III Additional District & Sessions Judge, Vijaypur, made any mistake in declining to condone the delay in filing an application under Section 34 of the Arbitration and Conciliation Act, 1996, which exceeded the prescribed time limit stated in Section 34(3) of the Act. Considering the situation, the present Appeal should be dismissed, and indeed, it is dismissed. Considering the facts and circumstances of the case, no costs are awarded.

11. Nawaz Iqbal Shaikh vs State of Maharashtra & Ors and Salman Khan vs State of Maharashtra & Ors

Citation: Mohd. Nawaz Iqbal Shaikh vs State of Maharashtra & Ors., (30.03.2023 – HC of Bomabay): MANU/MH/1451/2023; Decided by Justice Bharati H. Dangre

Ratio: Applying the principle established in the Fiona Shrikhande case (mentioned earlier) and considering the decision in the case of Manik Taneja Vs. State of Karnataka, it was determined that the essential elements of Sections 504 and 506 were not satisfied. Consequently, the complaint filed under Section 156(3) of the Criminal Procedure Code (Cr.P.C.), lacking the necessary ingredients of Sections 504 and 506, was deemed unjustified for further continuation. As a result, the appellant was granted discharge from the charges under Sections 504 and 506.

The Court also stated that necessary harassment, especially based on the accused person’s celebrity status. It is important to adhere to the procedures of the law, and the accused should not be subjected to unwarranted oppression by a complainant who initiated the legal proceedings out of personal vendetta, assuming that they were insulted by the celebrity.

In the exercise of its power under Section 482 of the Criminal Procedure Code (Cr.P.C.), the Court can prevent the misuse of the legal process and ensure justice is served, not only for the complainant but also for the accused individuals. To uphold substantial justice, it is appropriate to quash the challenged order by utilizing the wide powers vested in this Court under Section 482 of the Cr.P.C. Continuing any action against the applicants would result in grave injustice, and the circumstances described above necessitate the quashing of the order that authorized the issuance of process.

12. Paramjit Gandhi and Ors vs Ashwini Mehra

Citation: Paramjit Gandhi and Ors vs Ashwini Mehra, Company Appeal (AT) (Insolvency) No.06 of 2023, NCLAT, Principal Bench, New Delhi; Decided by Justice Ashok Bhushan (Chairperson) and Barun Mitra, Member (Technical)   

Ratio: Two appeals were filed challenging the same order, dated 11.11.2022, which partly allowed one application and dismissed another. Both applications were filed by the Successful Resolution Applicant, seeking directions regarding encroachment on the Corporate Debtor’s land and the implementation of the Resolution Plan.

The Adjudicating Authority granted an additional 90 days for both parties to implement the Resolution Plan, emphasizing the Insolvency and Bankruptcy Code, 2016’s objective of corporate revival. The Chairman of the Monitoring Committee was directed to take action against encroachment, with cooperation from the Revenue and Police Authorities. The appeals were disposed of since the plan had been implemented. The Successful Resolution Applicant may seek protection under Section 32A of the IBC if necessary. The direction in the impugned order may be extended for further plan implementation when required.

13. National Insurance Co Ltd vs Harsolia Motors & Ors

Citation: National Insurance Co Ltd vs Harsolia Motors & Ors. (13.04.2023 – SC of India): MANU/SC/0380/2023; Decided by Justice Ajay Rastogi and Justice C.T. Ravikumar

Ratio: To ascertain whether the insured can be categorized as a “consumer” or not, two key factors need to be considered: the close and direct connection between the insurance service and the profit-generating activity, and the dominant intention or purpose of the transaction in relation to which the claim has been raised, which should be aimed at facilitating profit generation for the insured.

As an example, provided by the Bench, if a company needs to purchase raw materials for the purpose of manufacturing a product, the acquisition of those materials would be considered for a “commercial purpose.” This implies that the purchase is directly linked to the company’s profit-generating activity.

14. MS South Indian Bank Ltd & Ors vs Naveen Mathew Philip & Anr.

Citation: MS South Indian Bank Ltd & Ors vs Naveen Mathew Philip & Anr., C.A. No.- 002861-002862 / 2023, SC of India; Decided by Hon’ble Mr. Justice Sanjiv Khanna and Hon’ble Mr. Justice M.M. Sundresh

Ratio: The Hon’ble Supreme Court was of the view that they strongly disapprove of the practice of the High Court entertaining writ applications under Article 226 of the Constitution without first exhausting the alternative statutory remedy provided by law. This approach seems to have been taken to bypass the requirement of pre deposit as stipulated in the second proviso to Section 18 of the SARFAESI Act.

The Supreme Court emphasized that although the powers granted under Article 226 of the Constitution of India are extensive, they should be exercised only in exceptional circumstances, particularly in cases concerning legal proceedings and the adjudicatory framework of a statute. This is especially relevant in commercial matters involving a lender and a borrower, especially when the legislature has established a specific mechanism for the proper resolution of such disputes.

15. Lyka Labs Limited & Anr. V/s. The State of Maharashtra & Anr

Citation: Lyka Labs Limited & Anr. V/s. The State of Maharashtra & Anr., Criminal Application No.886 OF 2022, HC of Bombay, Decided by Justice Amit Broker

Ratio: In an appeal lodged by individuals who are not the “drawer” against a conviction under Section 138 of the Negotiable Instruments Act, the Appellate Court possesses the authority to order the deposit of compensation when suspending the sentence under Section 389 of the Code of Criminal Procedure.

16. Manmohan Gupta Vs. MDS Digital Media Pvt. Ltd. & Anr

Citation: Manmohan Gupta Vs. MDS Digital Media Pvt. Ltd. & Anr., Company Appeal (AT) (Insolvency) No.202 of 2023, NCLAT Principal Bench, New Delhi; Decided by Justice Ashok Bhushan (Chairperson) and Barun Mitra, Member (Technical) 

Ratio: The above appeal challenges the order dated 16.12.2022, in which the Adjudicating Authority admitted an application under section 9 of the IBC, 2016, filed by the Operational Creditor. The appellant argues that there was no actual debt, as no debt was shown on the Operational Creditor’s balance sheet, and the claimed amount was incorrect.

However, the Adjudicating Authority admitted the application based on the Corporate Debtor’s admission of a specific amount. Since the admitted amount exceeded the threshold, the Authority made no error in admitting the Section 9 application. The determination of the correct debt amount would occur during the collation of claims by the Resolution Professional, and it was not necessary for the Adjudicating Authority to express an opinion at the admission stage.

17. M/s. Anirudh Agro Farms Pvt. Ltd. Vs. The State of Telangana

Citation: M/s. Anirudh Agro Farms Pvt. Ltd. Vs. The State of Telangana, (04.04.2023 – HC of Telangana): W.A No. 414 of 2023; Decided by Mr. Justice Ujjal Bhuyan (CJ) and Mr. Justice N. Tukaramji

Ratio: Section 89 of the Registration Act, 1908 states that copies of certain orders, certificates, and instruments should be sent to registering officers for filing. The above case the Hon’ble Madras High Court involved a sale certificate being sent to the Sub-Registrar’s office for filing in Book No.1. The Sub-Registrar demanded stamp duty, but the Court ruled that stamp duty is not required for filing, only for registration.

The Supreme Court had previously confirmed that a sale certificate does not require stamp duty and should be filed as per Section 89, in view of the same, the Court directed the Sub-Registrar to file the sale certificate in Book No.1 as an interim measure, pending the outcome of the writ petition.

18. Proud Securities and Credits (P) Ltd. v. Urrshila Kerkar

Citation: Proud Securities and Credits (P) Ltd. v. Urrshila Kerkar (17.04.2023 – HC of Delhi): MANU/DEOR/88228/2023; Decided by Hon’ble Mr. Justice Yashwant Varma

Ratio: The initiation of personal insolvency u/ Section 95 of the Insolvency and Bankruptcy Code, 2016 would amount to “settlement” u/ Section 16 of the Court Fees Act, 1870. This is de to the fact that a interim moratorium would come into play immediately upon institution of said proceedings with the sole remedy of the plaintiff being to participate in the collective statutory settlement process. Thus, in the event of such proceedings under IBC being initiated, the plaintiff is liable for refund of court fees paid.

19. Bhushan Shringarpure Vs. Mr. B.K. Mishra RP of Lakeland Chemicals (India) Ltd.

Citation: Bhushan Shringarpure vs. Mr. B.K. Mishra RP of Lakeland Chemicals (India) Ltd. (20.04.2023 – NCLAT, New Delhi): Company Appeal (AT) (Ins) No. 1504 of 2022 and I.A. No. 645 of 2023; Decided by Hon’ble Justice Rakesh Kumar Jain, Member (Judicial) and Dr. Alok Srivastava, Member (Technical)

Ratio: In the above case, the appellants are operational creditors with a cumulative admitted claim exceeding 10% of the corporate debtor’s admitted debt. The resolution professional (RP) failed to issue notice to the operational creditors as required by Section 24(3)(c) of the Insolvency and Bankruptcy Code, 2016. The NCLAT held that it is mandatory for the RP to serve notice to all operational creditors for each meeting of the Committee of Creditors (CoC). The absence of voting rights for operational creditors does not render the notice provision redundant. The RP’s failure to provide notice was deemed a dereliction of duty, and the RP was ordered to pay a cost of Rs. 1 lakh to the operational creditors.

However, despite the non-compliance, the resolution plan was not set aside since the operational creditors’ absence did not significantly impact the outcome, and the plan was approved by a substantial majority of the CoC. The appeal was disposed of accordingly.

20. Srei Equipment Finance Ltd. v. Sadhan Mandal

Citation: Srei Equipment Finance Ltd. v. Sadhan Mandal (11.04.2023 – HC of Calcutta): MANU/WB/0794/2023; Decided by Hon’ble Justice Shekhar B. Saraf.

Ratio: An arbitral award passed by unilaterally appointed arbitrator(s) do not carry the privilege of existence before the eyes of law and should be regarded as a nullity.

If an arbitrator is unilaterally appointed by one party without the mutual agreement of both parties, it results in a lack of inherent jurisdiction for the arbitrator to adjudicate disputes between the parties. As a consequence, both the arbitral proceedings and the award itself are deemed to be tainted or invalid.

21. NN Global Mercantile Pvt Ltd v. Indo Unique Flame Ltd & Ors

Citation: NN Global Mercantile Pvt Ltd v. Indo Unique Flame Ltd & Ors., (25.04.2023 – SC of India): MANU/SC/0445/2023; Decided by Hon’ble Justice K.M. Joseph, Justice Aniruddha Bose, Justice Ajay Rastogi, Justice Hrishikesh Roy and Justice C.T. Ravikumar.

Ratio: In the current case, it is acknowledged by both parties that there is an arbitration agreement between them, as stated in the High Court’s judgment and reiterated during oral submissions before this Court. Therefore, the parties have the option to mutually appoint a sole arbitrator. If they fail to reach an agreement, they can file an application under Section 11 of the Arbitration and Conciliation Act, to seek the appointment of an arbitrator before the High Court.

22. Gaddipati Divija & Anr v Pathuri Samrajyam & Ors.

Citation: Gaddipati Divija & Anr v Pathuri Samrajyam & Ors., Civil Appeal No. 4206-4207 OF 2011, SC of India, Decided by Justice Krishna Murari and Justice Sanjay Karol

Ratio: The Supreme Court made the following observations:

The relevant provision of law applicable in the present case is Section 16(c) of the Specific Relief Act, 1963, which pertains to personal bars to relief. The 2018 Amendment made certain changes to Section 16, including subsection (c) which is reproduced below.

Prior to the amendment, Section 16(c) stated that the plaintiff is entitled to specific performance of a contract if they can prove that they have performed or have always been ready and willing to perform their obligations under the contract. The amendment also clarified that in contracts involving the payment of money, the plaintiff does not need to physically deposit the money to the defendant but must aver that they have performed or are ready and willing to perform the contract according to its true construction.

These observations highlight the requirements and clarifications provided by Section 16(c) of the Specific Relief Act, 1963, both before and after the 2018 Amendment.

Disclaimer: This material and the information contained herein prepared by Anirudh Associates is intended to provide general information on a subject or subjects and is not an exhaustive treatment of such subject(s). Anirudh Associates is not, by means of this material, rendering professional advice or services. The information is not intended to be relied upon as the sole basis for any decision. Anirudh Associates shall not be responsible for any loss whatsoever sustained by any person who relies on this material.

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