Newsletter For December 2025

ARBITRATION

Date: 09 December, 2025

Case Name: Hindustan Petroleum Corporation Ltd. v. BCL Secure Premises Pvt. Ltd. Civil Appeal No. 14647 of 2025

Forum: Supreme Court

The present appeal arises from the judgment and order dated 07 April 2025 passed by the Bombay High Court allowing a petition under Section 11(4) of the Arbitration and Conciliation Act, 1996 (“the Act”) filed by the respondent i.e., BCL Secure Premises Pvt. Ltd., and appointing a sole arbitrator to adjudicate disputes between BCL and the appellant, Hindustan Petroleum Corporation Ltd. The appellant is a public sector enterprise, and the respondent is a sub-vendor engaged by M/s. AGC Networks Ltd. (presently Black Box Ltd.), which was the original contractor under a purchase order issued by the appellant.

Pursuant to a tender floated by appellant for design, supply, installation, and commissioning of a Tank Truck Locking System (“TTLS”), the appellant awarded the contract to AGC Networks Ltd. vide purchase order dated 20 August 2013. Clause 3.17 of the tender conditions expressly prohibited sub-letting, subcontracting, or assignment of work without appellant's prior written consent. On 15 January 2014, AGC entered into a back-to-back agreement with the respondent, whereby the respondent undertook to perform the entire TTLS work. The appellant was not a party to this agreement.

Subsequently, disputes arose between the appellant and AGC regarding the performance of the contract, and several proceedings ensued between the respondent and AGC, including civil suits and claims before the MSME Facilitation Council. Ultimately, AGC and respondent entered into a Settlement-cum-Assignment Agreement dated 31 October 2023, whereby AGC assigned its receivables from the appellant to the respondent. Relying on this assignment, respondent issued a notice dated 28 August 2024 to the appellant invoking arbitration under the arbitration clause contained in appellant's tender documents.

The appellant replied denying the existence of any arbitration agreement with the respondent, contending that there was no privity of contract and that the purported assignment was invalid for want of prior written consent. The respondent thereafter filed a petition under Section 11(4) of the Act before the Bombay High Court, which allowed the petition and appointed an arbitrator, observing that the question of whether respondent was bound by the arbitration agreement could be decided by the arbitral tribunal as a preliminary issue under Section 16 of the Act.

Issues:

The Court, while adjudicating upon the appeal, framed the following issues for consideration:

1. Whether a non-signatory to an arbitration agreement can invoke arbitration under the “Group of Companies” doctrine or through assignment of receivables?
2. Whether the High Court, while exercising jurisdiction under Section 11(6) of the Act, must be prima facie satisfied that the non-signatory is a “veritable party” to the arbitration agreement?
3. Whether the assignment of receivables, without more, transfers the right to invoke the arbitration agreement?

Submission of the Parties:

The appellant contended that there was no privity of contract between the appellant and respondent, and that the arbitration clause could not be invoked by a stranger. It was submitted that Clause 3.17 of the tender conditions expressly prohibited assignment without prior written consent, which was never obtained. The appellant relied on the principle that arbitration is consensual and that a non-signatory cannot compel arbitration unless it is demonstrated that such party was intended to be bound by the arbitration agreement. The appellant further argued that respondent's role was limited to that of a sub-vendor under a separate contract with AGC, and that the respondent had no direct contractual relationship with the appellant.

The respondent contended that it was a “veritable party” to the contract between the appellant and AGC, as it had performed the entire contract on a back-to-back basis. It was argued that the assignment of receivables under the Settlement-cum-Assignment Agreement entitled the respondent to step into the shoes of AGC and invoke the arbitration clause. The respondent relied on the “Group of Companies” doctrine and the principle of “composite transaction” to contend that it was, in effect, a party to the arbitration agreement. It was further submitted that the question of whether respondent was bound by the arbitration agreement should be left for the arbitral tribunal to decide under Section 16 of the Act.

Observations of the Court:

The Court observed at the outset that arbitration is a creature of consent, and a non-signatory can be bound by an arbitration agreement only if it is evident from the conduct, correspondence, or surrounding circumstances that such party intended to be bound. The Court referred to its earlier decision in Cox and Kings Ltd. v. SAP India Pvt. Ltd., which held that the referral court must be prima facie satisfied that the non-signatory is a “veritable party” to the arbitration agreement.

The Court noted that the respondent was not involved in the negotiation, performance, or termination of the contract between the appellant and AGC. In fact, Clause 4 of the back-to-back agreement between AGC and BCL expressly prohibited BCL from communicating with HPCL without AGC's prior approval. The Court also noted that the Settlement-cum-Assignment Agreement only assigned receivables and did not purport to assign the arbitration agreement. The Court emphasised that assignment of a contractual right does not, by itself, transfer the arbitration agreement unless there is clear evidence of such intention.

The Court further observed that the prohibition against assignment in Clause 3.17 of the tender conditions was clear and unambiguous, and appellant's prior written consent had not been obtained. The Court held that in such circumstances, it could not be said that appellant had consented to arbitration with the respondent.

Held:

The Supreme Court allowed the appeal and set aside the judgment and order of the Bombay High Court. The Court held that the respondent, being a non-signatory to the arbitration agreement, could not invoke arbitration merely on the basis of assignment of receivables or its role as a sub-contractor. The Court reiterated that the referral court must be prima facie satisfied that the non-signatory is a “veritable party” to the arbitration agreement, which was not established in this case. The Court emphasised that the “Group of Companies” doctrine requires clear evidence of mutual intent to bind the non-signatory, which was conspicuously absent in the present case.

The Court further held that the question of arbitrability cannot be left to the arbitral tribunal under Section 16 when the very existence of the arbitration agreement is in doubt. The Court concluded that permitting arbitration in such circumstances would undermine the consensual nature of arbitration and defeat the legitimate expectations of the signatory party.

This judgment reaffirms the fundamental principle that arbitration is consensual and that a non-signatory cannot compel arbitration without clear evidence of mutual intent. It clarifies the limits of the “Group of Companies” doctrine and reinforces the importance of contractual privity in arbitration agreements. The judgment also underscores the role of the referral court in ensuring that arbitration is not invoked by strangers to the arbitration agreement.

CIVIL LAW

Date: 11 December 2o25

Case Name: Life Insurance Corporation of India & Anr. v. Vita  Civil Appeal No. 2638 of 2023

Forum:  Supreme Court

The present appeal, along with a batch of connected matters, was referred to a three-Judge Bench of the Supreme Court to resolve a conflict between the Constitution Bench decision in Ashoka Marketing Ltd. v. Punjab National Bank and the subsequent two-Judge Bench decision in Suhas H. Pophale v. Oriental Insurance Co. Ltd. regarding the overriding effect of the Public Premises (Eviction of Unauthorised Occupants) Act, 1971 (“the PP Act”) over State Rent Control Acts.

The lead matter involved premises owned by the Life Insurance Corporation of India (“LIC”), a statutory corporation wholly owned by the Central Government. The tenancy in respect of Flat No. G-B, Jeevan Jyot Building, Mumbai, was created in favour of the Respondent, Vita Private Limited, in April 1957. The PP Act came into force on 23 August 1971 but was deemed effective retrospectively from 16 September 1958. After the tenancy was terminated, LIC initiated eviction proceedings under the PP Act before the Estate Officer, who passed an eviction order. The City Civil Court dismissed the appeal filed by the tenant, but the Bombay High Court set aside the eviction order, relying on Suhas H. Pophale, which held that the PP Act does not apply to tenancies created before the premises became “public premises”.

Issue:

1. Whether the PP Act, 1971 prevails over State Rent Control Acts in respect of tenancies created before the premises became “public premises”?
2. Whether a distinction can be made between tenants who were in occupation prior to the enforcement of the PP Act and those who entered into occupation thereafter?

Submission of Parties:

The appellants i.e., LIC and other public sector entities, contended that the PP Act is a special statute enacted to provide a speedy mechanism for eviction of unauthorised occupants from public premises, and it overrides all State Rent Control Acts irrespective of when the tenancy was created. It was argued that the two-Judge Bench in Suhas H. Pophale erroneously created an artificial distinction based on the date of tenancy, which was contrary to the Constitution Bench ruling in Ashoka Marketing. The appellants emphasised that the PP Act is a complete code in itself and must be given full effect to achieve its objective.

The respondents i.e., tenants, argued that the PP Act cannot be applied retrospectively to tenancies created before the premises became public premises, as it would take away vested rights protected under State Rent Acts. It was submitted that tenants who were inducted prior to the acquisition of the premises by a government entity cannot be treated as “unauthorised occupants” under the PP Act. The respondents relied on Suhas H. Pophale to contend that such tenants continue to be governed by the State Rent Control Acts.

Observations of the Court:

The Court observed at the outset that the Constitution Bench in Ashoka Marketing had unequivocally held that the PP Act is a special statute that overrides State Rent Control Acts. The Court noted that the two-Judge Bench in Suhas H. Pophale had disregarded this binding precedent and created a distinction that was not warranted by the statute. The Court emphasised that the doctrine of stare decisis requires that a Bench of lesser strength must follow the law laid down by a larger Bench.

The Court examined the definition of “unauthorised occupation” under Section 2(g) of the PP Act, which includes continuance in occupation after the authority under which the person was allowed to occupy has expired. The Court held that this definition is broad enough to cover all persons whose tenancy has been terminated, regardless of when the tenancy was created. The Court further observed that the PP Act is intended to provide a speedy and summary remedy for eviction from public premises, and its object would be defeated if it were not given overriding effect.

The Court also noted that the PP Act and State Rent Control Acts are both special statutes, but in the event of a conflict, the later enactment i.e., the PP Act must prevail. The Court rejected the argument that the PP Act cannot be applied retrospectively, holding that the Act is procedural in nature and does not affect substantive rights.

Held:

The Supreme Court allowed the appeals and overruled Suhas H. Pophale. The Court held that the PP Act, 1971 prevails over State Rent Control Acts, and it applies to all tenancies, whether created before or after the premises became public premises. The Court reiterated that the PP Act is a special statute aimed at speedy eviction of unauthorised occupants from public premises, and it must be given full effect to achieve its objective.

The Court emphasised that the definition of “unauthorised occupation” under Section 2(g) of the PP Act is comprehensive and includes all persons whose authority to occupy has expired. The Court held that tenants of public premises cannot invoke the protection of State Rent Control Acts once their tenancy has been terminated. The Court also directed that all pending eviction proceedings under the PP Act be expedited.

This judgement settles a long-standing conflict and reinforces the supremacy of the PP Act in eviction matters involving public premises. It ensures that government and public sector entities can recover premises efficiently without being hindered by rent control legislation. The judgment also underscores the importance of judicial discipline and the binding nature of precedents set by larger Benches.

Date:  19 December 2025

Case Name: Dr. Amit Arya v. Kamlesh Kumari Civil Appeal of 2025 (arising out of SLP(C) No. 20091 of 2022)

Forum:  Supreme Court

The dispute arose out of an agreement to sell dated 11 December 2004 executed between the parties in respect of a plot of land admeasuring 2 biswas 10 biswasi situated at Kalka, District Panchkula, for a total sale consideration of ₹9,05,000, out of which ₹1,00,000 was paid as earnest money.

The appellant instituted a civil suit for specific performance and permanent injunction in the year 2006, seeking execution of the sale deed and delivery of possession, or alternatively, recovery of money with interest. The Trial Court decreed the suit on 14 May 2011, directing the respondent to execute the sale deed upon receipt of the balance consideration of ₹8,05,000 within two months, failing which execution could be carried out through court.

The First Appellate Court by judgment dated 22 April 2013 reversed the decree for specific performance and granted only the alternative relief of refund of double the earnest money. The High Court, in second appeal, set aside the First Appellate Court's judgment on 08 February 2016 and restored the decree of the Trial Court, holding that the appellant was ready and willing to perform his part of the contract.

Subsequently, the appellant filed an execution petition on 04 July 2016, i.e., after expiry of the two-month period mentioned in the decree. The balance sale consideration was deposited in parts on 26 August 2016 and 13 December 2016. Objections were filed by the respondent contending that the execution was time-barred, that the appellant lacked readiness and willingness, and that the decree had become inexecutable.

The Executing Court dismissed the objections on 20 January 2018. However, the High Court, by judgment dated 08 August 2022, allowed the respondent's revision petition and dismissed the execution proceedings, holding that the delay in filing execution and deposit of consideration rendered the decree inexecutable. Aggrieved thereby, the appellant approached the Supreme Court.

Issue:

1. Whether the execution of a decree for specific performance becomes inexecutable merely because the execution petition was filed beyond the time period stipulated in the decree?
2. Whether non-deposit of the entire balance sale consideration within the period fixed by the decree amounts to abandonment or rescission of the contract?
3. Whether the decree of the Trial Court merged with the judgment of the High Court in second appeal, thereby affecting the interpretation of the time stipulation?
4. Whether the High Court was justified in adopting a strict and technical interpretation of the time clause while dismissing the execution proceedings?

Submission of Parties:

On behalf of the appellant, it was contended that the High Court erred in holding the decree to be inexecutable on account of delay. It was submitted that the appellant had been consistently found ready and willing to perform his obligations, that the delay in filing execution and depositing consideration was neither deliberate nor indicative of abandonment, and that the doctrine of merger applied once the High Court restored the decree of specific performance in second appeal. It was further argued that execution proceedings are a continuation of the original suit and ought not to be defeated by a hyper-technical approach.

On behalf of the respondent, it was argued that the execution petition was filed 87 days beyond the period fixed in the decree and that the balance consideration was deposited much later, demonstrating lack of readiness and willingness. It was submitted that no application for extension of time was filed, that the Executing Court lacked jurisdiction to extend time, and that the decree therefore ceased to be enforceable in law.

Observations of the Court:

The Supreme Court examined the scope and effect of Section 28 of the Specific Relief Act, 1963, and reiterated that the power to extend time for compliance with a decree for specific performance inheres in the court and is intended to advance justice rather than defeat substantive rights. The Court observed that non-grant of extension of time cannot ipso facto terminate the transaction or render the decree inexecutable.

Relying on settled precedent, the Court held that mere non-payment of the balance consideration within the time stipulated in the decree does not amount to abandonment or rescission of the contract unless the conduct of the decree-holder indicates a positive refusal to perform. The Court emphasised that readiness and willingness must be assessed from the overall conduct of the parties and not through a rigid application of timelines.

On the doctrine of merger, the Court held that once the High Court decided the second appeal on merits and restored the Trial Court decree, the decree merged with the appellate judgment, and only one operative decree subsisted. Consequently, the High Court erred in treating the original time stipulation in isolation while adjudicating the execution proceedings.

The Court deprecated the hyper-technical approach adopted by the High Court and held that execution proceedings should not be frustrated on technicalities when the decree-holder has demonstrated bona fide intent to comply with the decree.

Held:

The appeal was allowed. The judgment of the High Court dated 08 August 2022 dismissing the execution proceedings was set aside. The order of the Executing Court dated 20 January 2018 rejecting the respondent's objections was restored. The Executing Court was directed to proceed with the execution of the decree for specific performance in accordance with law.

The judgment reaffirms that decrees for specific performance are to be enforced in a manner that advances substantive justice rather than defeated by rigid procedural formalism. It clarifies that delay in filing execution proceedings or in depositing consideration, by itself, does not render a decree inexecutable when readiness and willingness are otherwise established. The decision strengthens the application of the doctrine of merger in execution matters and underscores that courts must eschew hyper-technical interpretations which undermine the efficacy of decrees for specific performance.

CRIMINAL LAW

Date:  10 December 2025

Case Name: State of West Bengal v. Anil Kumar Dey Criminal Appeal No. 5373 of 2025

Forum:  Supreme Court

The present appeal arose from a judgment and order dated 04.10.2024 passed by the Calcutta High Court, setting aside the freezing of the respondent's bank accounts by the investigating authorities under Section 102 of the Code of Criminal Procedure, 1973 (“CrPC”) in a case registered under the Prevention of Corruption Act, 1988 (“PC Act”). The High Court held that the attachment/freezing of properties in PC Act cases must be done only under Section 18A of the PC Act, which applies the Criminal Law Amendment Ordinance, 1944, and not under Section 102 CrPC.

The case originated from FIR No. 09/2019 registered against Prabir Kumar Dey Sarkar (son of the respondent) under Section 13(2) read with Section 13(1)(b) of the PC Act for allegedly possessing assets disproportionate to his known sources of income. During investigation, certain fixed deposits held by the respondent, who is the father of the main accused, were frozen. The respondent filed an application for defreezing the accounts before the City Sessions Court, Calcutta, which was rejected. The High Court, however, allowed the respondent's revision petition, relying on Ratan Babulal Lath v. State of Karnataka, which observed that the PC Act is a “Code in itself”.

Issue:

1. Whether the powers under Section 102 CrPC and Section 18A of the PC Act are co-existent or mutually exclusive?
2. Whether the police can freeze bank accounts under Section 102 CrPC in a case investigated under the PC Act?

Submission of the Parties:

The appellant-State contended that Section 102 CrPC and Section 18A of the PC Act operate in distinct and complementary spheres. It was argued that Section 102 CrPC is an investigative power available to the police to seize property suspected to be stolen or involved in the commission of an offence, while Section 18A provides a judicial process for attachment, which requires an application before the Special Judge. The appellant submitted that the two provisions are not inconsistent and can be applied simultaneously. It was further argued that Ratan Babulal Lath did not lay down a binding precedent as it lacked detailed reasoning and was per incuriam.

The respondent argued that the PC Act is a self-contained Code, and therefore, the power under Section 102 CrPC cannot be invoked for properties involved in PC Act offences. It was contended that the exclusive procedure for attachment is provided under Section 18A of the PC Act, which incorporates the Criminal Law Amendment Ordinance, 1944. The respondent relied on Ratan Babulal Lath and Opto Circuit India Ltd. v. Axis Bank to submit that the police cannot bypass the statutory scheme of the PC Act.

Observations of the Court:

The Court observed at the outset that Section 102 CrPC empowers a police officer to seize any property which may be alleged or suspected to have been stolen or which may be found under circumstances creating suspicion of the commission of any offence. The provision is intended to secure evidence during investigation. In contrast, Section 18A of the PC Act provides for a judicial process of attachment, which requires an application to the Special Judge supported by affidavits and offers an opportunity of hearing to the affected person.

The Court noted that the two provisions serve different purposes: one is investigative and immediate, the other is adjudicatory and deliberate. The Court held that there is no inconsistency between the two, and they can coexist. The Court emphasised that the power under Section 102 CrPC is available to investigating agencies even in PC Act cases to secure property during investigation.

The Court also examined the decision in Ratan Babulal Lath and observed that it did not lay down a binding precedent under Article 141, as it lacked detailed reasoning and did not consider the scheme of the PC Act and CrPC. The Court held that Ratan Babulal Lath cannot be relied upon to exclude the application of Section 102 CrPC in PC Act cases.

Held:

The Supreme Court allowed the appeal and set aside the judgment and order of the Calcutta High Court. The Court held that the power under Section 102 CrPC is available to investigating agencies in PC Act cases to seize property during investigation. However, since the investigation was complete and a chargesheet had been filed, the Court directed the respondent to either re-deposit the amount in the frozen accounts or furnish a bank guarantee of equivalent value within three weeks.

The Court clarified that the power under Section 102 CrPC is not an alternative to the attachment procedure under Section 18A of the PC Act but is a complementary investigative tool. The Court also reiterated that the right to property is not absolute and is subject to reasonable restrictions in the interest of investigation.

This judgment clarifies the co-existence of investigative powers under CrPC and the special attachment procedure under the PC Act. It reinforces the ability of investigating agencies to secure property during investigation, while ensuring that final attachment follows the due process under Section 18A. The judgment also underscores the importance of precedential discipline and the need for reasoned decisions to have binding force under Article 141.

Date:  19 December 2025

Case Name: M/s. Sri Om Sales v. Abhay Patel & Anr. Criminal Appeal No. 5588 of 2025 (arising out of SLP(Crl.) No. 8703 of 2019)

Forum:  Supreme Court

The appellant i.e., M/s Sri Om Sales, instituted a complaint under Section 138 of the Negotiable Instruments Act, 1881 against the first respondent alleging that goods were supplied to him and, in discharge of the corresponding liability, the first respondent issued a cheque dated 04 March 2013 for an amount of ₹20,00,000. The cheque was presented on the same day but was returned unpaid on 11 March 2013 due to insufficiency of funds in the drawer's account.

Upon assurance given by the first respondent that the cheque would be honoured if re-presented, the appellant again presented the cheque on 17 March 2013, whereupon it was dishonoured on 18 March 2013 for the same reason. A statutory notice of demand dated 02 April 2013 was thereafter issued. In reply dated 8 April 2013, the first respondent denied issuance of the cheque and refused to make payment.

Consequently, a criminal complaint was filed, and the learned Magistrate took cognizance and summoned the first respondent by order dated 27 September 2013. The first respondent challenged the summoning order and the entire proceedings by filing a petition under Section 482 of the Code of Criminal Procedure, 1973 before the High Court of Judicature at Patna. By order dated 20 June 2019, the High Court quashed the criminal proceedings, holding that the cheque was not issued for discharge of any debt or liability. Aggrieved thereby, the complainant approached the Supreme Court.

Issue:

1. Whether the High Court was justified in exercising jurisdiction under Section 482 of the Code of Criminal Procedure to quash a complaint under Section 138 of the Negotiable Instruments Act by conducting a pre-trial enquiry into whether the cheque was issued for discharge, in whole or in part, of any debt or other liability?
2. Whether, in the presence of a statutory presumption under Section 139 of the Negotiable Instruments Act and prima facie disclosure of the ingredients of Section 138, the criminal proceedings could be quashed at the threshold?

Submission of the Parties:

On behalf of the appellant, it was submitted that the High Court exceeded its jurisdiction by embarking upon an enquiry into the existence of debt or liability at the pre-trial stage. It was argued that Section 139 of the Negotiable Instruments Act raises a statutory presumption in favour of the holder of the cheque and that such presumption is rebuttable only during trial. Since the complaint disclosed all the essential ingredients of an offence under Section 138, quashing of the proceedings at the threshold was impermissible.

On behalf of the first respondent, it was contended that the complaint was mala fide and that the High Court was competent to examine whether the cheque was issued for discharge of any legally enforceable debt or liability. It was submitted that once the High Court recorded a finding that no such liability existed, interference by the Supreme Court was unwarranted.

Observations of the Court:

The Supreme Court reiterated that while considering a petition for quashing at the threshold, the Court is required to examine only whether the allegations in the complaint, taken at face value along with supporting material, disclose a prima facie case. If such a case is made out, appreciation of evidence or adjudication on disputed questions of fact is impermissible at the pre-trial stage.

The Court noted that the complaint clearly alleged issuance of the cheque in discharge of liability arising from supply of goods, its dishonour for insufficiency of funds, issuance of statutory notice within the prescribed period, and failure of the drawer to make payment. These averments, supported by the cheque and bank return memo, prima facie satisfied all the ingredients of Section 138 of the Negotiable Instruments Act.

The Court held that under Section 139 of the Negaotiable Instruments Act, a statutory presumption operates in favour of the holder of the cheque regarding existence of debt or liability. Though rebuttable, such presumption can only be displaced by evidence adduced at trial. The High Court, by testing the truthfulness of the complainant's case and examining whether the cheque was issued towards a debt, undertook a roving enquiry which was wholly unwarranted in proceedings under Section 482 of the Code.

The Supreme Court further observed that disputed factual defences raised by the accused, unless of an unimpeachable character, cannot form the basis for quashing criminal proceedings at a nascent stage particularly when a statutory presumption operates in favour of the complainant.

Held:

The appeal was allowed. The order dated 20 June 2019 passed by the High Court of Judicature at Patna quashing the criminal proceedings was set aside. The criminal complaint was restored to the file of the concerned Magistrate and directed to be proceeded with in accordance with law.

The Supreme Court clarified that no opinion had been expressed on the merits of the defence and that all issues, including whether the cheque was issued for discharge of liability, shall be decided independently by the Trial Court.

This judgment reinforces the limited scope of interference under Section 482 of the Code of Criminal Procedure in prosecutions under Section 138 of the Negotiable Instruments Act. It underscores that the statutory presumption under Section 139 cannot be nullified by a pre-trial enquiry into disputed facts and that the defence of absence of liability must ordinarily be tested at trial. The decision serves as a caution against premature quashing of cheque dishonour proceedings and affirms the primacy of trial as the proper forum for rebuttal of statutory presumptions, thereby strengthening the efficacy and object of the Negotiable Instruments Act.

INSOLVENCY AND BANKRUPTCY LAW

Date:  10 December 2025

Case Name: M/s. Saraswati Wire and Cable Industries v. Mohammad Moinuddin Khan & Ors. Civil Appeal No. 12261 of 2024

Forum:  Supreme Court

The present appeal arose from a judgment dated 13 March 2024 passed by the National Company Law Appellate Tribunal (“NCLAT”), which set aside the order dated 06 December 2023 passed by the National Company Law Tribunal, Mumbai Bench-IV (“NCLT”), admitting an application filed under Section 9 of the Insolvency and Bankruptcy Code, 2016 (“the Code”) by the Operational Creditor, M/s. Saraswati Wire and Cable Industries (“the Firm”), against Dhanlaxmi Electricals Private Limited (“the Corporate Debtor”). The NCLAT held that a pre-existing dispute existed between the parties, which barred the initiation of the Corporate Insolvency Resolution Process (“CIRP”).

The Corporate Debtor, a licensed engineering company, placed purchase orders on the Firm for supply of pipes and cables. The parties maintained a running account, and payments were made periodically. On 25 August 2021, the Firm issued a demand notice under Section 8 of the Code claiming ₹1,79,93,691/- along with interest. In response, the Technical Director of the Corporate Debtor raised disputes regarding two invoices (Invoice Nos. 203 and 205), alleging non-supply, sub-standard quality, and short supply. The Firm subsequently filed an application under Section 9 of the Code before the NCLT, which admitted the application and initiated CIRP. The NCLAT, however, reversed this decision, holding that the disputes raised were genuine and pre-existing.

Issue:

1. Whether the defense of a “pre-existing dispute” under Section 8(2)(a) of the Code can be based on unsubstantiated or spurious claims?
2. Whether the subsequent conduct of the Corporate Debtor, including making payments after the demand notice, negates the existence of a dispute?

Submission of Parties:

The Firm contended that the defense raised by the Corporate Debtor was merely “moonshine” and lacked any credible foundation. It was submitted that the Corporate Debtor's own ledger account, communicated via email dated 04 August 2021, certified a closing debit balance of ₹1,79,93,690.80 due to the Firm. The appellant emphasised that the Corporate Debtor continued to make payments totaling ₹61 lakh after the issuance of the demand notice, which unequivocally acknowledged the debt and negated any bona fide dispute. The appellant relied on Mobilox Innovations Private Limited v. Kirusa Software Private Limited to argue that the adjudicating authority must separate genuine disputes from spurious ones.

The respondents contended that the disputes pertaining to non-supply, short supply, and supply of sub-standard material had been raised much prior to the issuance of the demand notice and, therefore, constituted pre-existing disputes within the meaning of the Code. It was submitted that the Firm had failed to demonstrate that any debt was due and payable, inasmuch as there existed a bona fide and substantive dispute concerning both the quality and quantity of the supplies. In support of this contention, reliance was placed on the reply dated 20 November 2021 issued by the Technical Director, wherein specific objections and counter-claims were expressly raised, thereby rendering the application filed under Section 9 of the Code untenable and not maintainable in law.

Observations of the Court:

The Court observed at the outset that the existence of a “pre-existing dispute” must be determined on the basis of material placed on record and not on bald assertions. The Court referred to Mobilox Innovations, which held that the defence must fulfil the criteria of “not spurious, hypothetical, or illusory.” The Court noted that the Corporate Debtor's own ledger account, signed and communicated to the Firm, unequivocally acknowledged the debt. The Court also noted that the Corporate Debtor made substantial payments after the demand notice, which clearly indicated acknowledgment of liability.

The Court examined the alleged disputes regarding Invoice Nos. 203 and 205 and found that the Firm had produced delivery challans, e-way bills, and transport bills to prove supply. The Court held that the Corporate Debtor's allegations were unsubstantiated and appeared to be an afterthought. The Court further observed that the Corporate Debtor had failed to file a reply before the NCLT, and its right to do so was forfeited, which spoke volumes about the bona fides of its defence.

The Court also noted that the NCLAT had erroneously attributed delay to the Firm in filing the Section 9 application, without considering that a separate CIRP was already pending against the Corporate Debtor, and the Firm had lodged its claim with the Interim Resolution Professional. The Court held that the NCLAT failed to appreciate the material on record and erroneously reversed the NCLT's well-reasoned order.

Held:

The Supreme Court allowed the appeal and set aside the judgment dated 13 March 2025 passed by NCLAT, thereby restoring the NCLT's order admitting the Section 9 application. The Court held that the defence of a pre-existing dispute raised by the Corporate Debtor was not bona fide and was merely bluster. The Court reiterated that for a dispute to be considered “pre-existing,” it must be real and substantial, and not hypothetical or illusory.

The Court emphasised that the Code is not intended to be used as a tool for resolving frivolous or illusory disputes, and the adjudicating authority must separate the grain from the chaff. The Court also directed that further proceedings in the matter be conducted expeditiously in accordance with law.

This judgment reinforces the principle that the Code is a mechanism for resolution of genuine insolvency and cannot be thwarted by unsubstantiated claims of pre-existing disputes. It underscores the importance of documentary evidence, such as the corporate debtor's own accounts, in determining the existence of debt and dispute. The judgment also highlights the need for adjudicating authorities to apply a pragmatic approach while examining defenses raised under Section 8(2)(a) of the Code

WHITE COLLAR CRIMES

Date:  11 December 2025

Case Name: Kapil Wadhawan & Anr. v. Central Bureau of Investigation  Criminal Appeal No. of 2025 (Arising out of SLP (Crl) No. 16953 of 2025)

Forum:  Supreme Court

The present appeals were filed assailing the orders dated 04.08.2025 and 16.09.2025 of the Delhi High Court rejecting the regular bail applications of the appellants i.e., Kapil Wadhawan and Dheeraj Wadhawan, in a high-value bank fraud case involving an alleged siphoning of ₹57,242 crores from a consortium of 17 banks by Dewan Housing Finance Corporation Limited (“DHFL”). The appellants were arrayed as accused Nos. 1 and 2 in FIR/RC No. 2242022A0001 registered under Section 120-B read with Sections 409, 420, and 477-A of the Indian Penal Code, 1860 (“IPC”) and Section 13(2) read with Section 13(1)(d) of the Prevention of Corruption Act, 1988 (“PC Act”).

The appellants were granted default bail on 03.12.2022, but the Supreme Court set aside the default bail order on 24.01.2024. The chargesheet filed by the Central Bureau of Investigation (“CBI”) spans over four lakh pages, proposes examination of 736 witnesses, and implicates a total of 110 accused persons (including 40 individuals and 70 companies). The appellants have been in custody since April 2020. It was submitted that the appellants have been granted bail in all other 10 connected cases arising from the same transaction, and that given the voluminous evidence and the large number of witnesses, the trial is unlikely to conclude in the near future.

Issue:

1. Whether prolonged incarceration without trial, especially in cases involving voluminous evidence and multiple accused, violates the right to speedy trial under Article 21 of the Constitution?
2. Whether the seriousness of economic offences and the magnitude of the fraud alone are sufficient grounds to deny bail when the trial is likely to be protracted?
3. Whether the principles laid down under Section 479 of the Bharatiya Nagarik Suraksha Sanhita, 2023 (“BNSS”), formerly Section 436-A of the CrPC, apply to offences punishable with life imprisonment?

Submission of the Parties:

The appellants contended that they had been in custody for over five and a half years, charges were yet to be framed, and the trial was not likely to conclude in the foreseeable future. It was argued that their continued incarceration without trial violated their fundamental right to speedy trial under Article 21 of the Constitution. The appellants placed reliance on Javed Gulam Nabi Shaikh v. State of Maharashtra and Manish Sisodia v. Directorate of Enforcement to submit that bail cannot be withheld as punishment, and that the gravity of the offence alone cannot justify indefinite pre-trial detention.

The respondent-CBI opposed the bail, contending that the appellants were involved in a massive economic fraud that had a severe impact on the banking sector and public interest. It was argued that economic offences constitute a distinct class of offences, and the courts must adopt a strict approach while considering bail in such cases. The respondent relied on State of Bihar v. Amit Kumar to submit that delay in trial is not a sufficient ground for grant of bail in serious economic offences. It was further argued that the appellants, being influential individuals, may tamper with evidence or influence witnesses if released.

Observations of the Court:

The Court observed at the outset that “bail is the rule and jail is the exception” and that the right to speedy trial is an integral part of Article 21 of the Constitution. The Court referred to Union of India v. K.A. Najeeb, which held that prolonged incarceration pending trial strikes at the heart of constitutional liberty. The Court noted that the appellants had been in custody for a substantial period, the chargesheet runs into lakhs of pages, and the trial involves examination of 736 witnesses. The Court held that in such circumstances, it would be impossible to conclude the trial within a reasonable time.

The Court also examined the argument that economic offences require a stricter approach and observed that while economic offences are serious, they do not form a separate class that justifies indefinite pre-trial detention. The Court referred to Satender Kumar Antil v. CBI, which held that economic offences cannot be treated as a monolithic category for denial of bail. The Court emphasised that the gravity of the offence is one of the factors to be considered, but it cannot override the constitutional right to liberty.

The Court further considered the provision of Section 479 of the BNSS (erstwhile Section 436-A CrPC) and held that while the appellants may not be entitled to bail under this provision (since the offence is punishable with life imprisonment), the provision cannot be interpreted as a mandate to keep undertrial prisoners incarcerated indefinitely. The Court held that the constitutional right to speedy trial must prevail over statutory restrictions.

Held:

The Supreme Court allowed the appeals and granted bail to the appellants subject to stringent conditions, including execution of personal bonds of ₹10,00,000/- each with two sureties of the like amount, surrender of passports, reporting to the local police station once a month, and not leaving the country without permission. The Court held that while the allegations are serious, the appellants' prolonged incarceration without trial violates their right to speedy trial. The Court also noted that the investigation is complete, the chargesheet has been filed, and there is no allegation that the appellants would tamper with evidence or influence witnesses.

The Court clarified that the observations made in this order are limited to the bail application and shall not affect the merits of the trial. The Court also directed the trial court to expedite the proceedings and make all efforts to conclude the trial within a reasonable time.

The judgment reinforces the constitutional right to speedy trial and limits the use of prolonged pre-trial detention as punitive. It balances the seriousness of economic offences with the fundamental rights of the accused, emphasising that bail cannot be withheld as punishment. The judgment also underscores the need for expeditious trial in cases involving voluminous evidence and multiple accused.

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