Newsletter
ARBITRATION AND CONCILIATION ACT, 1996 DECEMBER, 2021
UPON FAILURE OF CONCILIATION UNDER THE MSME ACT, DISPUTE CAN BE RESOLVED BY ARBITRATION
Recently, the Hon’ble Supreme Court observed that under the Micro, Small and Medium Enterprises Development Act, if conciliation fails and stands terminated, dispute can be resolved between the parties by arbitration. The Hon’ble Bench also noted that Section 18(3) of the MSMED Act makes it clear that when the arbitration is initiated all the provisions of the Arbitration and Conciliation Act, 1996 will apply, as if arbitration was in pursuance of an arbitration agreement referred under sub-section (1) of Section 7 of the said Act. In the present case, one of the parties did not appear in proceedings for conciliation and on the first date of appearance the Facilitation Council passed an order directing that party to pay the due amount of the claim. However, the Facilitation Council failed to consider initiation of arbitration proceedings and thus did not record the same in the said order. When the matter was placed before this Hon’ble Bench, it was held that the said order passed by the Facilitation Council is a nullity as it runs contrary to the MSMED provisions as well as the provisions of Arbitration and Concilation Act, 1996. Read More...
INSOLVENCY AND BANKRUPTCY CODE, 2016
PRIMACY OF LIQUIDATION PROCEEDINGS UNDER IBC OVER ATTAHCMENT OF PROPERTY UNDER PMLA
Recently, the Hon’ble Delhi High Court in the case titled ‘Nitin Jian Liquidator PSL Ltd. v. Enforcement Directorate’ held that the power vested with Directorate of Enforcement to provisionally attach the properties of the Corporate Debtor ceases once the NCLT approves the mode of sale of Corporate Debtor as a going concern selected in the course of liquidation.

In the instant case, the Directorate of Enforcement summoned the liquidator to not dispose of the assets of the Corporate Debtor as a case was recorded under PMLA, 2002 against the said Company. The liquidator/petitioner challenged this direction before the Hon’ble High Court. The Hon’ble Court observed that the liquidator is entitled to proceed with liquidation process in accordance with the provisions of Insolvency and Bankruptcy Code. For That Section 32A of the Code provides assurance to the resolution applicant that it shall not be held liable for any offense committed by the Corporate Debtor prior to the initiation of the CIRP. The Hon’ble Court also noted that power to attach property under Section 5 of the PMLA would cease to be exercisable once any one of the measures specified in Regulation 32 of the Liquidation Regulations 2016 comes to be adopted and approved by the NCLT. Thus, Read More...
TREATMENT OF SHARE APPLICATION MONEY AS FINANCIAL DEBT UNDER SECTION 5(8) OF THE INSOLVENCY AND BANKRUPTCY CODE
The Division Bench of Hon’ble National Company Law Appellate Tribunal comprising of Justice Anant Bijay Singh and Justice Shreesha Merla held that Share Application Money in the event of non-allotment of shares constitutes interest under Section 42(6) of the Companies Act, 2013 and thus falls within the ambit of ‘Financial Debt’ as defined under Section 5(8) of the Insolvency and Bankruptcy Code, 2016. In the present case equity shares were allotted on preferential basis by Private Placement Offer and subsequently revoked. The Hon’ble Tribunal noted that Section 42 of the Companies Act, 2013 and the Deposit Rules provide that if the shares are not allotted within 60 days of receiving share application money, and if the refund does not take place within 15 days from expire of 60 days time limit, then this amount will be treated as a ‘Deposit’, advanced to the Company, which has to be returned by the Company at 12% rate of interest per annum from the expiry of 60th day. This, implies that the concerned person would get compensation for the time value of money given by him to the Company, thereby changing the nature and character of the money so given. Hence, under the law, the amount has been treated as loan and refund of share application money, in the event of non-allotment of shares constitutes financial debt. Read More...
WHETHER A PARTY CAN BE COMPELLED TO SETTLE A DISPUTE BY NCLT OR NCLAT?

Recently, the Hon’ble Bench of Supreme Court held that while the NCLAT and NCLT acknowledged that the consent terms of settlement were filed only by some of the stakeholders, and still erroneously proceeded to dismiss the appeal as not maintainable

In the instant case, the Financial Creditor preferred a Section 7 Application for initiating the Corporate Insolvency Resolution Process against the Corporate Debtor, which was dismissed on the ground that the corporate debtor has initiated the settlement process with the financial creditors. An appeal was preferred against the said order but the appeal was also dismissed on similar ground that the settlement process was set in motion at the pre-admission stage and the same was supported by the consent terms filed by some of the stakeholders.

The Hon’ble Bench further noted that the Adjudicating Authority and the Appellate Authority are creatures of the statute. Their jurisdiction is statutorily conferred. The statute which confers jurisdiction also structures, channelises and circumscribes the ambit of such jurisdiction. Thus, while the Adjudicating Authority and Appellate Authority can encourage settlements, they cannot direct them by acting as courts of equity. Read More...
The Code of Criminal Procedure, 1973
CONVICTION CANNOT BE SOLELY BASED ON ADMISSIONS MADE BY THE ACCUSED UNDER SECTION 313 OF CRPC
Recently, the Hon’ble High Court of Bombay observed that conviction cannot be solely made on the basis of the admissions made by the accused in the statement under Section 313 of the Criminal Procedure Code, 1973. The prosecution has to prove guilt of the accused beyond reasonable doubt. The Bench held that in the instant case, the discrepancy in the evidence of the prosecution witness casts a serious doubt on the prosecution case. The prosecution failed to establish guilt of the accused person beyond reasonable doubt, the conviction cannot be based solely on the explanation given by the other party on the basis of statement under section 313 of the CrPC Read More...
OTHER RELEVANT JUDGMENTS PASSED BY VARIOUS COURTS UNDER VARIOUS LAWS
JURISDICTION OF RERA AUTHORITY EXTENDS TO COMPLAINTS FILED AGAINST THE BANKS AS A SECURED CREDTIORS IF THE BANK TAKES RECOURSE IN ACCORDANCE WITH SECTION 13(4) OF THE SARFAESI ACT
Recently, the Hon’ble High Court of Rajasthan observed that the banks are the secured creditors of the promoters and if they wish to take coercive measures under the SARFAESI Act, 2002 to recover their unpaid dues, they will be amenable to jurisdiction of RERA. The Hon’ble Bench noted that RERA has the right to entertain a complaint by an aggrieved person against the bank as a secured creditor if the bank takes recourse to any of the provisions contained in Section 13(4) of the SARFAESI Act. Further, the definition of ‘promoter’ was construed widely by the bench to imply that the promoter is not only a person who constructs or causes the construction of independent building but also his assignees. Read More...
WHETHER AGREEMENTS RELATED TO IMMOVABLE PROPERTIES USED EXCLUSIVELY IN TRADE AND COMMERCE CONSTITUTE A COMMERCIAL DISPUTE?
Recently, a single judge bench comprising of Justice Amit Bansal held that all management and consultancy agreements would fall under the ambit of commercial disputes in accordance with Section 2(1)(c)(x) of the Commercial Courts Act, 2015. In the instant case, property in question was to be leased for commercial use and the agreement entered into between the parties was titled as ‘Confirmation of fee payable for consultancy/Brokerage Service’. The counsel for Defendant contended that the said agreement is regarding the broker’s fee and therefore would not fall under the ambit of a commercial dispute. The Hon’ble Bench, on the other hand, noted that all agreements relating to immovable properties, being used exclusively in trade and commerce are covered within the ambit of ‘Commercial Dispute’ in terms of Section 2(1)(c)(vii). Read More...
THE DOMINUS LITUS WHO MOVES THE FORUM HAS THE RIGHT TO DECIDE WHETHER OR NOT TO AMEND THE PLEADING OR TO PROCEED WITH THE CASE, AS IT STANDS
Recently, the Hon’ble Division Bench of Supreme Court comprising of Justice D.Y. Chandrachud, Justice Surya Kant and Justice Vikram Nath observed that it is for the Plaintiff or Complainant to determine whether a pleading, in a civil suit or a complaint before the consumer forum, should be amended. It was held that the plaintiff or complainant is the person who derives the benefits if the judgment is in his favour, or has to suffer the consequences of an adverse decision, hence he is entitled to decide whether or not to amend the pleading or to pursue the complaint as it stands or to withdraw the existing complaint so as to institute a fresh complaint/suit. Read More...
WHETHER MANDAMUS CAN BE ISSUED BY HIGH COURT DIRECTING THE FINANCIAL INSTITUTION TO GRANT THE BENEFIT OF OTS TO A BORROWER?
Recently, the Hon’ble Supreme Court held in a landmark ruling that the High Court does not have jurisdiction to issue mandamus under Article 226 of the Constitution of India to direct a bank to consider or grant the benefit of OTS to the borrower. The Hon’ble Bench further noted that the grant of OTS is subject to an eligibility criteria mentioned under the scheme itself and the guidelines governing such scheme are issued from time to time. The Hon’ble Bench also noted that such a decision should be left at the commercial wisdom of the bank who is directly affected by the loan and thus, it is always presumed that the bank shall take the right decision so as to grant the benefit of OTS scheme or not, having due regard to the public interest. Read More...
WRITTEN STATEMNET FLED BEYOND PRESCIBED PERIOD OF 45 DAYS CAN BE CONDEONED IN CONSUMER PROTECTION ACT, 1986
Recently, in a case titled ‘Diamond Exports & Anr. V. United India Insurance Co. Ltd. & Ors.’ A three-judge bench of Supreme Court comprising of Justice DY Chandrachud, Justice Surya Kant and Justice Vikram Nath affirmed the decision of NCDRC whereby the delay of 100 days in filing the written statement was condoned, subject to payment of cost of Rs. 50,000. It is clear that the prescribed limitation period under Section 13(2) of the Consumer Protection Act, 1986 is 45 days. The Hon’ble Bench discussed the judgment passed by the constitution bench titled ‘New India Assurance Co. Ltd. v. Hilli Multipurpose Cold Storage Pvt. Ltd.’ wherein it was held that delay beyond the period of 45 days in filing written statement cannot be condoned by NCDRC and noted that this judgment was given prospective effect. However, when the said decision was pending the reference to constitution bench, a two-judge bench of Supreme Court in the case titled ‘Reliance General Insurance Co. Ltd. v. Mampee Timbers and Hardwares Pvt. Ltd.’ held that in appropriate cases on suitable terms, the consumer for a may accept written statements beyond the period of 45 days. Further, the said judgment was affirmed in the case of Daddy’s Builders Pvt. Ltd. v. Manisha Bhargava. Additionally, the instant judgment also discussed the case titled ‘Bhasin Infotech and Infrastructure Pvt. Ltd. v. Neema Agarwal and Ors, wherein a two-judge bench considered an application for condonation of delay that was filed before 04.03.2020 (date of decision of constitution bench in New India Assurance case) but decided after the decision of constitution bench in New India Assurance case were considered but referred to larger bench for clarity. Hence, the matter was taken up by the three-judge bench and put to rest by condoning the delay of more than the prescribed time period. Read More...
 
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The contents of this newsletter are intended for information purposes only, and parts of this newsletter are based on news reports and have not been independently verified. The newsletter is not in the nature of a legal opinion or advice. They may not encompass all possible regulations and circumstances applicable to the subject matter and readers are encouraged to seek legal counsel prior to acting upon any of the information provided therein. Tandon & Co. neither assumes nor accepts any responsibility for any loss arising to any person acting or refraining from acting as a result of any material contained in this newsletter.  This newsletter is the exclusive copyright of Tandon & Co. and may not be circulated, reproduced or otherwise used by the intended recipient without the prior permission of its originator.