Arbitration, Civil Law, Criminal Law, And Insolvency & Bankruptcy Law- Newsletter

ARBITRATION

Date: 02 September 2025

Case Name: ONGC vs. G & T Beckfield Drilling Services Pvt. Ltd. Civil Appeal No. 113245 of 2025 (arising out of SLP(C) 18331 of 2019)

Forum: Supreme Court

The appellant i.e., Oil and Natural Gas Corporation Ltd. ("ONGC"), was subjected to an arbitral award dated 21 November 2004 passed by a three-member arbitral tribunal. By this award, ONGC was directed to pay a sum of USD 656,272.34 to the respondent i.e., G & T Beckfield Drilling Services Pvt. Ltd., together with interest at the rate of 12% per annum from 12 December 1998 (being the date on which the statement of claim was affirmed) until recovery, along with litigation costs of INR 5 lakhs

ONGC challenged this award by filing an application under Section 34 of the Arbitration and Conciliation Act, 1996 (the "1996 Act"). It contended, inter alia, that Clause 18.1 of the governing contract did not permit payment of interest on the claim. The District Judge, Sivasagar, by order dated 15 November 2007, allowed the application and set aside the award on two primary grounds: first, that the award was unreasoned and thereby contravened Section 31(3) of the 1996 Act, and second, that an objection under Section 16(2) had neither been dealt with before proceeding further nor considered in the final award.

The respondent preferred an appeal before the Gauhati High Court under Section 37(1)(c) of the 1996 Act, which was allowed. The High Court restored the arbitral award in its entirety. The appellant then approached the Supreme Court through a Special Leave Petition, which was admitted but confined only to the question of whether interest could be awarded on the total amount from 12 December 1998 at the rate of 12% per annum. The appellant agreed before the Court that it would pay the principal amount within four weeks.

Issue:

The central issue before the Supreme Court was:

Whether Clause 18.1 of the contract barred the arbitral tribunal from granting pendente lite interest on the awarded sum?

Clause 18.1 of the agreement between the parties stipulated that the appellant would remit payments under the contract within thirty days from the date of receipt of invoice, subject to verification. It further permitted the appellant to withhold disputed amounts until resolution, provided that undisputed amounts were paid within the stipulated period. Crucially, the clause concluded with the statement: "No interest shall be payable by ONGC on any delayed payment/disputed claim."

Submissions of the Parties:

The appellant submitted that Section 31(7)(a) of the 1996 Act makes the arbitral tribunal's power to award interest between the cause of action and the date of the award subject to the terms of the contract. It contended that Clause 18.1 clearly prohibited the payment of interest on delayed or disputed claims and therefore the arbitral tribunal had exceeded its jurisdiction by granting pendente lite interest.

The respondent, on the other hand, argued that Clause 18.1, when read in its entirety, only restricted payment of interest on delayed payments or disputed claims during the subsistence of the contract. It did not extend to arbitral proceedings. The respondent pointed out that the tribunal had already refrained from awarding pre-reference interest and had limited interest only from the date on which the claim was affirmed before it. Consequently, once it was determined that the balance amount under the invoices was wrongfully withheld, the award of pendente lite interest was lawful.

Observations of the Court:

The Supreme Court examined Section 31(7) of the 1996 Act and clarified that it contains two parts. Clause (a) relates to prereference and pendente lite interest, which is subject to party autonomy under the contract. Clause (b), dealing with postaward interest, is statutory and not subject to contractual exclusion.

The Court emphasised that an arbitral tribunal has the power to award interest for three distinct periods: the pre-reference period, the pendente lite period, and the post-award period. While the first two are governed by the agreement between the parties, the third is governed by statutory mandate. Importantly, the Court held that the tribunal can be deprived of the power to award pendente lite interest only if the agreement contains an express prohibition or a prohibition that can be inferred by necessary implication.

The Court further observed that a clause merely stating that "no interest shall be payable on delayed payments or disputed claims" cannot automatically be extended to cover arbitral proceedings. Such a clause is distinguishable from contractual provisions that broadly and unambiguously exclude interest "in any respect whatsoever" which have been upheld in earlier precedents

Held:

Upon analysing Clause 18.1, the Supreme Court concluded that it does not expressly or by necessary implication prohibit the award of pendente lite interest. The clause was directed only at delayed or disputed payments during the life of the contract and did not curtail the arbitral tribunal's discretion to grant interest once the matter reached arbitration. The tribunal, therefore, had acted within its jurisdiction in granting pendente lite interest.

The Court further upheld the award of post-award interest, holding it to be consistent with Section 31(7)(b) of the Act. Accordingly, the appeal was dismissed, and the award, including the interest component, was affirmed.

The judgment establishes that contractual clauses restricting payment of interest on delayed or disputed claims cannot, unless couched in explicit or necessarily implied terms, be read as prohibiting the arbitral tribunal from granting pendente lite interest. The decision underscores the principle that party autonomy under arbitration agreements must be respected, but such autonomy must be expressed in clear terms to override the tribunal's statutory discretion.

CIVIL LAW

Date: 11 September 2025

Case Name: Jyoti Sharma v. Vishnu Goyal Civil Appeal Nos. 10047 of 2025 (Arising out of SLP (C) No. 29500 of 2024)

Forum: Supreme Court

The disputed premises was a shop originally let out in 1953 by Ramji Das, the father-in-law of the plaintiff, to Kishan Lal, the father of the defendants. Kishan Lal ran a grocery business from the premises, and upon his death, his sons being the defendants, continued the business. The plaintiff's husband runs a sweets and savouries shop in an adjoining portion of the same building, while their family resides on the first floor

Ramji Das died on 07 August 1999, having previously executed a Will dated 12 May 1999 bequeathing the disputed shop to his daughter-in-law, the plaintiff. On this basis, the plaintiff filed a suit seeking recovery of rent arrears from January 2000 onwards and eviction of the defendants, citing both default in payment and bona fide need to expand her husband's business.

Procedural History:

The trial court dismissed the suit. On first appeal, the matter was remanded for fresh consideration, but in second appeal before the High Court, the remand order was set aside on consent for a full rehearing. Upon rehearing, the first appellate court dismissed the appeal, and the High Court affirmed this dismissal in second appeal. The matter ultimately came before the Supreme Court, where leave was granted.

Issues

1. Whether the plaintiff had valid title over the disputed property to claim eviction as landlord?
2. Whether there was attornment of tenancy in favour of the plaintiff after the death of Ramji Das?
3. Whether the plaintiff had established a bona fide need for the premises?

Submissions of the Parties:

The plaintiff asserted ownership based on the Will of Ramji Das and argued that her husband had collected rent on her behalf after his father's death. She also produced a registered notice informing the defendants of the bequest and relied on a probate order dated 09 February 2018 in Probate Case No. 8 of 2013 to establish the Will's validity. The plaintiff further argued that she required the shop to expand the sweets and savouries business run by her husband and sons.

The defendants, in response, challenged Ramji Das's ownership, claiming the property belonged to his paternal uncle, Sua Lal, who died in 1984. They alleged that the Will was fraudulent, although they admitted that the rent deed was executed by Ramji Das and that he collected rent through his son, the plaintiff's husband. They contended that they accepted only the plaintiff's husband as landlord after Ramji Das's death and denied any attornment of tenancy to the plaintiff.

Observations of the Court:

On Title: The Court held that the probate order in favour of the plaintiff validated the Will and could not be ignored. It emphasised that in eviction suits, proof of ownership need not be as stringent as in declaratory suits. The suspicion cast on the Will by the trial court was rejected. Further, a relinquishment deed by Sua Lal in 1953, established Ramji Das's ownership. The Court reiterated the principle that tenants who came into possession under a landlord cannot later dispute that landlord's title. Since the defendants had consistently paid rent to Ramji Das since 1953, they could not challenge his ownership.

On Attornment:

The Court noted that the plaintiff's husband had collected rent on her behalf after Ramji Das's death and that the defendants admitted non-payment of rent since January 2000. The registered notice, with supporting receipts, established that the defendants were duly informed of the bequest. The Court applied the presumption that a registered notice sent to a tenant's address is deemed served, thereby establishing attornment

On Bona Fide Need:

The Court observed that the plaintiff's family was already engaged in the sweets and savouries business in the adjacent shop and that the plaintiff's sons had joined in the enterprise. The intention to expand the business into the disputed premises was found to be genuine. Thus, the Court held that the ground of bona fide need had been successfully established.

Held:

The Supreme Court found that all three courts below had failed to consider material evidence and had reached conclusions based on conjecture. Accordingly, the judgments of the trial court, first appellate court, and High Court were set aside.

The Court decreed the suit in favour of the plaintiff, directing recovery of arrears of rent from January 2000 until delivery of possession and granting eviction on grounds of both default and bona fide need. However, in view of the long tenancy, the defendants were allowed to remain in possession for six months on strict conditions: they were required to file an undertaking before the trial court within two weeks of the judgment, pay arrears within one month, and hand over vacant possession within six months. Failure to comply would entitle the plaintiff to seek summary eviction

The Supreme Court reaffirmed that a tenant cannot challenge the landlord's title when inducted under a valid rent deed, and that probate of a Will conclusively validates succession in such disputes. The Court also emphasised that bona fide need must be viewed practically, specially where the landlord seeks to expand an established family business. By decreeing eviction and recovery of arrears, while also granting reasonable time to vacate, the Court balanced the rights of the landlord with fairness to long-standing tenants.

CRIMINAL LAW

Date: 10 September 2025

Case Name: Shree Nagani Silk Mills Pvt. Ltd. vs. L.D. Industries Ltd. & Ors., Criminal Appeal Nos. 3821 of 2025 (Arising out of SLP (Crl.) No.1550/2024)

Forum: Supreme Court

The appellant i.e., Shree Nagani Silk Mills Pvt. Ltd., as original complainant, filed multiple complaints under Sections 138 and 141 of the Negotiable Instruments Act, 1881 ("NI Act") against the respondents i.e., L.D. Textile Industries Ltd. and its directors for dishonour of cheques issued in 2001 towards part payment for supplies. The cheques, when deposited, were returned unpaid for "insufficient funds".

Despite service of statutory notices, no payment was made, compelling the complainant to initiate criminal proceedings against the company and those in charge of its day-to-day affairs. Based on the complaint and supporting affidavits, the Magistrate issued process and summoned the accused.

The accused applied for recall of process, contending that the company had already been declared "sick" under the provisions of the Sick Industrial Companies (Special Provisions) Act, 1985 ("SICA") by the Board for Industrial and Financial Reconstruction ("BIFR") and was under restraint from disposing of assets without BIFR's approval. The Magistrate rejected the plea, but in revision the Sessions Court allowed the application and discharged the accused. Criminal writ petitions filed by the complainant before the Bombay High Court were dismissed by order dated 05 October 2023. Aggrieved, the complainant approached the Supreme Court.

Issue:

1. Whether proceedings under Section 138 of the NI Act are barred against a "sick" company due to a restraint order issued by BIFR under Section 22A of SICA?
2. Whether recall of process issued by the Magistrate is permissible in law?

Submission of the Parties

The complainant-appellant argued that recall of process is impermissible in view of the law laid down in Adalat Prasad v. Rooplal Jindal and reiterated by the Constitution Bench in In Re: Expeditious Trial of Cases under Section 138 of NI Act, 1881.

It was further contended that the High Court had misapplied Kusum Ingots & Alloys Ltd. v. Pennar Peterson Securities Ltd., which did not bar complaints under Section 138 merely because a company was declared sick.

The appellant stressed that the BIFR restraint order of 21 August 2000 permitted the use of current assets for day-to-day operations and thus did not impose an absolute embargo. Since the cheques were issued in 2001, a statutory presumption under Section 118(b) of the NI Act applied that they were issued on the date they bore. The question of whether proceedings were barred was, therefore, a mixed issue of law and fact requiring trial and evidence, not one that could be decided at the threshold.

The accused-respondents supported the High Court's decision, submitting that since the company was declared sick under SICA and a restraint order was operative, the proceedings under Section 138 could not continue. They argued that the cheques in question were post-dated and issued in circumstances where prosecution would be legally impermissible.

Observations of the Court:

The Court observed that the BIFR's restraint order dated 21 August 2000 did not bar utilisation of current assets for day-today business operations. The cheques, according to the complaint, were issued against supplies made, and under Section 118(b) of the NI Act, the presumption was that they were drawn on the dates they bore.

The Supreme Court clarified that the decision in Kusum Ingots does not create a blanket prohibition on proceedings under Section 138 against sick companies. Section 22 of SICA does not bar such proceedings per se. The effect of a restraint order under Section 22A of SICA must be determined based on its language and the facts of the case, and such issues are to be examined during trial, not at the preliminary stage.

On the question of recall of process, the Court reiterated the principle laid down in Adalat Prasad that once process has been issued, the Magistrate has no power to recall it. This view, subsequently affirmed by a Constitution Bench, squarely applied to the present case.

Held:

The Supreme Court allowed the appeals, setting aside the judgments of both the High Court and the Sessions Court. It restored the complaints under Sections 138 and 141 of the NI Act to the file of the Magistrate, directing that the proceedings be carried to their logical conclusion in accordance with law

The Court held that the revisional court erred in recalling the process and discharging the accused at the threshold, and the High Court erred in affirming that course by misapplying the precedent in Kusum Ingots.

The judgment underscores that proceedings under Section 138 of the NI Act are not automatically barred against a sick company merely because of a restraint order under SICA. Such issues must be adjudicated after evidence, not at the stage of summoning. The decision also reaffirms that once a Magistrate issues process, he has no authority to recall it. By restoring the complaints, the Supreme Court has clarified the interplay between the NI Act and SICA and protected the legislative objective of maintaining the sanctity of negotiable instruments.

Date: 10 September 2025

Case Name: Jupally Lakshmikantha Reddy vs. State of Andhra Pradesh & Anr., (Arising out of SLP (Crl.) No.9744 of 2024)

Forum: Supreme Court

The appellant's society, JVRR Education Society, had been running a college since 2016 in a non-multi-storied building consisting of a ground floor and three upper floors, with a height of 14.20 meters.

On 13 July 2018, the District Fire Officer of Kurnool lodged a complaint alleging that the college had secured recognition from the School Education Department by submitting a forged fire no-objection certificate ("NOC") purportedly issued by the Assistant District Fire Officer. On the basis of this complaint, an FIR was registered on 15 July 2018 at Nandyal III Town Police Station as Crime No. 99/2018 under Sections 420, 465, 468, and 471 of the Indian Penal Code, 1860 ("IPC"). Following investigation, a chargesheet was filed under Section 420 IPC alleging that the appellant had created and used a forged NOC to defraud the authorities

However, under the National Building Code of India, 2016, a fire NOC was not required for educational buildings below 15 meters in height. Since the appellant's building was only 14.20 meters high, a writ petition bearing W.P. No. 14542 of 2018 was filed by the appellant and other institutions before the High Court.

On 25 April 2018, the High Court directed the Education Department to renew affiliation without insisting on a fire NOC. Later, when this order was not complied with, contempt notices were issued to both the Education and Fire Departments. The appellant claimed that the criminal case was a retaliatory measure to harass him and therefore sought quashing of the proceedings before the High Court, which was rejected.

Issues:

Whether the criminal proceedings against the appellant under Section 420 IPC should be quashed, considering that no fire NOC was legally required for educational institutions housed in buildings below 15 meters in height?

Submissions of the Parties:

On behalf of the appellant, it was argued that since the National Building Code did not require a fire NOC for the appellant's building, and the High Court itself had directed renewal without such a certificate, the ingredients of cheating under Section 420 IPC were not met. The alleged forged NOC could not have induced the authorities to act differently since affiliation was not contingent upon such a certificate.

The respondents, however, argued that the appellant had used a fake fire NOC to obtain recognition or renewal of affiliation, thereby making a false representation. Even if the charge was filed only under Section 420 IPC, the facts indicated that the appellant had knowingly used a fabricated document, thereby attracting the contours of forgery.

Observations of the Court:

The Court clarified that for the offence of cheating under Section 420 IPC, two elements are essential: (i) deception by making a false representation, and (ii) dishonest or fraudulent inducement of the victim to deliver property or act in a manner causing wrongful loss or gain. Citing Hridaya Ranjan Prasad Verma v. State of Bihar and Dr. Sharma's Nursing Home v. Delhi Administration, the Court emphasised that intention to cheat is the crux of the offence.

Held:

The Supreme Court held that the High Court erred in refusing to quash the proceedings. The allegations, when read with the High Court's order in the writ petition, did not disclose the essential ingredients of cheating or forgery. The appeal was therefore allowed, the impugned order of the High Court was set aside, and proceedings in C.C. No. 303 of 2020 under Section 420 IPC were quashed.

This decision reinforces that criminal proceedings under Section 420 IPC cannot be sustained when the alleged misrepresentation is immaterial and incapable of inducing the authorities to act differently. It also underscores that forgery provisions cannot be invoked in the absence of evidence showing creation or conscious use of a fabricated document with dishonest intent. By quashing the proceedings, the Supreme Court safeguarded against misuse of criminal law for harassment where no offence was made out in law.

INSOLVENCY AND BANKRUPTCY LAW

Date: 09 September 2025

Case Name: Amit Nehra v. Pawan Kumar Garg Civil Appeal No. 4296 of 2025.

Forum: Supreme Court

M/s Puma Realtors Private Limited, an IREO Group company, undertook development of integrated residential townships in Punjab, including the IREO Rise (Gardenia) project in Mohali. The appellants, residents of Bengaluru, booked an apartment in the project in 2010 and executed an Apartment Buyer's Agreement on 27 May 2011 for Apartment No. GBD00-001 in Block D. Out of the total sale consideration of INR 60,06,368, the appellants paid INR 57,56,684, with the balance to be adjusted against delay in possession.

Under the agreement, possession was due by 27 November 2013, but the corporate debtor failed to deliver. Consequently, the appellants filed Consumer Complaint No. 279 of 2018 before the State Consumer Disputes Redressal Commission, Chandigarh, seeking refund with interest and compensation. Meanwhile, on 17 October 2018, the NCLT admitted an application under Section 7 of the Insolvency and Bankruptcy Code, 2016 ("IBC"), commencing CIRP against the corporate debtor. On 13 December 2018, the Consumer Commission disposed of the complaint, allowing the appellants to pursue their claim in the CIRP.

The Interim Resolution Professional made a public announcement on 22 October 2018 inviting claims. The appellants asserted that they submitted their claim on 11 January 2019 at the Mohali project office and resubmitted it on 07 February 2020 following an invitation to resubmit due to incomplete records. Their claim was duly verified and included in the list of financial creditors published on 30 April 2020 at Serial No. 636. Despite this, possession of the apartment was not delivered. Applications filed before the NCLT and NCLAT were dismissed, leading to the present appeal.

Issues:

1. Whether the appellants should be treated as belated claimants entitled only to a 50% refund of their principal deposit under Clause 18.4(xi) of the Resolution Plan; or
2. Verified claimants entitled to possession of their apartment under Clause 18.4(vi)(a) of the Resolution Plan.

Submissions of the Parties:

The appellants argued that the NCLT and NCLAT erred in law and fact by treating them as belated claimants. They had paid almost the entire sale consideration and acquired vested rights in their allotted unit. Their claim was duly verified, admitted, and published in the list of creditors, which excluded them from the residuary Clause 18.4(xi). Instead, they fell squarely within Clause 18.4(ii) read with Clause 18.4(vi)(a), entitling them to possession. They also stressed that the Resolution Professional had himself invited resubmission of claims due to incomplete records. Relying on Puneet Kaur v. K.V. Developers Pvt. Ltd., they contended that non-consideration of their admitted claim was inequitable

The respondents maintained that the appellants failed to submit their claim within the statutory timeline following the public announcement of 22 October 2018. They denied receipt of the January 2019 filing, emphasising that the Form-CA submitted by the appellants bore interest calculations up to February 2020, proving it was prepared then. Since the CoC had approved the Resolution Plan on 23 August 2019, any claim filed in February 2020 was belated. They contended that Clause 18.4(xi) and 18.4(xix) applied, limiting the appellants to a 50% refund of their deposit.

Observations of the Court:

The Supreme Court recognised the appellants as bona fide homebuyers who had paid almost the entire consideration years in advance. The Court noted that while there was a factual dispute on the January 2019 filing, this was not determinative. What was undisputed was that the appellants' claim was resubmitted, verified, and included in the list of creditors on 30 April 2020.

The Court held that the list of creditors published by the Resolution Professional pursuant to statutory duty could not be treated as a meaningless formality. Having been verified and published, the appellants' claim could not be relegated to Clause 18.4(xi), which was a residuary provision for those who failed to file or pursue their claims. Instead, their case fell within Clause 18.4(ii) and Clause 18.4(vi)(a), entitling them to possession of the unit.

The Court rejected the respondents' interpretation of Clause 18.4(xi), emphasising that the legislative intent under the IBC is to protect genuine homebuyers and not to reduce them to unsecured refund claimants after having invested substantial sums. The Court also highlighted the broader equity concerns regarding individual homebuyers who put in life savings in anticipation of housing.

Held:

The Supreme Court allowed the appeal, setting aside the orders of the NCLT dated 26 July 2023 and the NCLAT dated 10 January 2025. The respondents were directed to execute the Conveyance Deed and hand over possession of the apartment (No. GBD-00-001, Block D, IREO Rise (Gardenia), Mohali) to the appellants within two months. The Court further rejected an interlocutory application linked to an earlier decided case namely, Paramjeet Kaur v. Puma Realtors Pvt. Ltd. The appeal was thus allowed with the relief of possession granted.

The Supreme Court confirmed the principle that once a homebuyer's claim is verified and admitted in CIRP proceedings, they cannot be treated as belated claimants under residuary clauses of a resolution plan. Verified claims must be honoured in accordance with the plan, and bona fide allottees are entitled to possession rather than mere refunds. The decision strongly safeguards the rights of homebuyers against arbitrary dilution of their entitlements in insolvency resolutions.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.