“It always seems impossible unless it is DONE!

Amendments
Introduced in August
2023

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 “It always seems impossible unless it is DONE!”

CORPORATE LAWS
(INCLUDING COMPANIES ACT,
2013)

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A. Durga Builders Pvt Ltd vs. Registrar of Companies & Anr [NCLAT]

Facts :
A. The Company Durga Builders (“Appellant”) was in litigation and therefore, could not filed
financial statements as required under the Companies Act, 2013.
B. Without giving him an opportunity of being heard, RoC (“Respondent”) struck off the name
of the Appellant Company’s from the Register maintained by him.
C. The Appellant filed a petition for restoration of the name of the company with the NCLT
which rejected the same. Aggrieved, the Appellant filed the instant appeal.

Decision –
The Court decided in favour of the Appellant (Durga).

Legal Principles held / Observations made –

1. That the Bank Statements of the Appellant Company from 2015 -2018 showed that the
Appellant Company was having substantial movable as well as immovable assets.
2. That it cannot be said that the Appellant Company was not carrying on any business or
operations.

Conclusion –
The Court orders the RoC to restore the name of the company and also directed that after
restoration of the Company’s name in the Register maintained by the RoC, the Company would
file all their Annual Returns and Balance Sheets.

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B. IFB Agro Industries Ltd vs. Sicgil India Ltd [SC]

Facts :
A. There were questions of law in this matter related to the following –
a. What is the scope and ambit of Section 59 of the Companies Act, 2013 to rectify the
register of members?
b. Which is the appropriate forum for adjudication and determination of violations and
consequent actions under the SEBI (SAST) Regulations 1997 and the SEBI (PIT)
Regulations 1992?

Decision –
The Court laid down the following principles.

Legal Principles held / Observations made –

1. That the rectificatory powers of NCLT under Section 59 of the 2013 Act demonstrate that it
is a summary power to carry out corrections or rectifications in the register of members. The
rectification must relate to and be confined to the facts that are evident and need no serious
enquiry.
2. That if a petition seeks an adjudication under the garb of rectification, then the NCLT would
not have jurisdiction, and it would be duty-bound to re-direct the parties to approach the
relevant forum.
3. That if any seriously disputed questions arise, the Company Court should relegate parties to a
forum which is more appropriate for investigation and adjudication of such disputed questions.
4. That the important role of SEBI in cases covers under SAST Regulations and PIT Regulations
cannot be circumvented by simply asking for rectification under Section 59 of the 2013 Act.
5. That the scrutiny and examination of a transaction allegedly in violation of the SEBI (PIT)
Regulations will have to be processed through the regulations and remedies provided therein.

Conclusion –
The Court passed the above orders.

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C. Garish Oberoi & Ors vs. Hotel and Restaurant Association of Western India & Anr
[NCLAT]

Facts :
A. The Executive Committee proposed to amend clauses of the AoA of FHRAI was under challenge
related to the process of election of President of FHRAI for the year 2018-19, which was
opposed by the Eastern Region members against the proposal of the members of Northern and
Western Regions.
B. The Eastern Region Executive Committee members decided to put forward the name of Mr.
Sudesh Kumar Poddar, a fully qualified contestant, as the sole candidate for the post of
President of FHRAI and the members of Executive Committee from Northern and Western
Regions were insistent on accepting any member as President except Mr. Sudesh Kumar Poddar,
without any rationale.

Decision –
The Court decided in favour of the Respondent (Hotel).

Legal Principles held / Observations made –

1. That, in the interest of corporate democracy and to ensure proper functioning of FHRAI in
accordance with the AoA and to examine the alleged acts of oppression and mismanagement,
it was a case where exceptional circumstances demanded grant of waiver under section 244 of
the Companies Act.
2. That the procedure being adopted in the election of the President of FHRAI for the year 2018-
19 as interpreted by the siting President Mr. Garish Oberoi was clearly an act of oppression
and mismanagement, which if not checked at nascent stage, could result in further oppression
of FHRAI’s members and mismanagement of the affairs of the company to the detriment of
the functioning of the company FHRAI.
3. That by not completing the process of election of President for the year 2018-19, and presiding
over the Executive Committee as sitting President and also electing the office bearers including
the .Vice Presidents and others, Mr. Garish Oberoi not only exhibited a blatant and high-handed
oppressive behaviour nefariously assisted by some other members who were acting like a ‘clique’,
he also disregarded provisions of the AoA and acted in an oppressive manner.

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Conclusion –
The Court passed an order holding the acts of Mr. Girish to constitute acts leading to
mismanagement of the affairs of the company covered under sections 241-242.

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D. Mukesh Kumar Gupta vs. Registrar of Companie [NCLAT]

Facts :
A. The name of the company was struck off by the ROC on the grounds that the company did
not have any operations for the said years.
B. The Appellant filed a petition for restoration of the name of the company with the NCLT
which rejected the same. Aggrieved, the Appellant filed the instant appeal.

Decision –
The Court decided in favour of the Appellant (Mukesh).

Legal Principles held / Observations made –

1. That the Audited Financial Statements for the Financial Years from 2014-15 to 2015-16 showed
that the Appellant Company was having substantial movable as well as immovable assets and
the Company was/is in operation when the name was struck off.

Conclusion –
The Court passed an order directing restoration of the name of the company.

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E. Thyagaraja vs. The Church of South India Trust& Ors [NCLAT]

Facts :
A. The Appellant herein was only a Member of the Church and he had not filed any documentary
evidence to substantiate that any of the requirements under Section 2(55) of the Companies
Act, 2013.
B. There was a four layered Election Process to become a Member of the Company which were
not completed by the Appellant in the instant case.
C. However, the Appellant filed a petition for oppression and mismanagement against the Church
seeking exemptions under Section 244.
D. NCLT dismissed the petition. Aggrieved, the Appellant filed the instant appeal.

Decision –
The Court decided in favour of the Respondent (Church).

Legal Principles held / Observations made –

1. That merely because a person is a Member of Church, he does not have the locus standi to
file a Petition under Sections 241 & 242 of the Companies Act, 2013, against a Section 8
Company of which, he is admittedly, not a ‘Member’.

Conclusion –
The Court passed an order rejecting the appeal.

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F. Union Of India vs. Deloitte Haskins And Sells LLP [SC]

Facts :
A. Proceedings were initiated against the Auditors of IL&FS under Section 140 of the Act.
Subsequently the Auditors resiegned from the post and filed a petition seeking quashing of the
proceedings initiated against them on account of their resignation.
B. High Court permitted such quashing of the procedings. Aggrieved, the instant appeal was filed.

Decision –
The Court decided in favour of the Appellants (Union).

Legal Principles held / Observations made –

1. That subsequent resignation of an auditor after the application is filed under section 140(5)
by itself shall not terminate the proceedings under section 140(5). Resignation and/or removal
of an auditor cannot be said to be an end of the proceedings under section 140(5).
2. That the enquiry/proceedings initiated under the first part of section 140(5) has to go to its
logical end and subsequent resignation and/or discontinuance of an auditor shall not terminate
the enquiry/proceedings under section 140(5).
3. That the object and purpose of second proviso to section 140(5), as observed hereinabove, is
to make the provision more stringent and to provide for consequences for an auditor when such
an auditor is found to have been perpetrating a fraud and is removed by the NCLT for such
fraud.
4. That section 140(5) is neither discriminatory, arbitrary and/or violative of Articles 14, 19(1)(g)
of the Constitution of India.

Conclusion –
The Court passed an order upholding the views of NCLT and rejecting the view of the High
Court.

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G. Official Liquidator, Calcutta vs. Ujjain Nagar Palika Nigam & Ors [SC]

Facts :
A. The dispute between OL and Nigam was with regard to the rates and taxes for the period
between 10.07.1997 (being the date on which the company was ordered to be wound up) and
04.07.2003 (being the date on which the sale in favour of the purchaser was confirmed).
B. Part rejection of the claim of 1 Nigam by the OL, in relation to the period aforesaid between
10.07.1997 to 04.07.2003 was not approved by the Company Court while observing that post-
liquidation liabilities were to be treated as part of the costs of winding up of the company in
liquidation and such liability would get priority over all other liabilities of the company.
C. The Company Court observed and reiterated that the principle of priority of certain creditors
would be applicable to the liability of the company at the time of passing of the order of
winding up but, costs and expenses incurred on behalf of the company in winding up were to
be paid in full; and the liability of the company to pay rates and taxes would not automatically
come to an end with the order of winding up.
D. The Division Bench summarised its conclusion that the claim in question was that of a post-
liquidation liability which the OL was obliged to discharge in absence of a clear provision in
the sale notice obliging the intended purchaser to satisfy himself as regards the assets of the
company in liquidation in all respects, including encumbrances.
E. The question in this case was as to whether the claims so made by the Nigam towards property
tax and water tax pertaining to the post- liquidation period, from the date of order of winding
up and until the date of confirmation of sale of assets to the auction purchaser, were admissible
against the OL.

Decision –
The Court decided in favour of the Respondent (Nigam).

Legal Principles held / Observations made –

1. That the question of payment of preferential payments would arise after payment of costs and
expenses of winding up that are properly incurred by the OL. The taxes payable to the 1 Nigam
during the period in question would directly amount to the costs and expenses of liquidation.

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2. That the liability on account of the property tax and water tax claimed by the respondent to
the extent rejected by the OL has been a post liquidation liability, which the OL was obliged
to discharge.

Conclusion –
The Court held that the liquidator will have to make payments of the taxes incurred even after
the order of winding up was passed.

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 “It always seems impossible unless it is DONE!”

FEMA and Other Economic

Laws

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A. Union of India through Deputy Legal Adviser, Directorate of Enforcement vs. Kamal Chand

Facts :
A. The Adjudicating Authority imposed a penalty of INR 16 crore on Shri Kamal Chand Proprietor
of M/s. Anjaneya Enterprises for contravention of provisions of FEMA 1999 and Regulation
thereunder involving amount of Rs. 15,21,95,977/- (Rupees Fifteen Crore Twenty One Lakh
Ninety FiveThousand Nine Hundred and Seventy Seven only).
B. Penalty of Rs. 16,00,00,000/- comprised of Rs. 8,00,00,000 for the contravention of the
provisions of Section 10(6) of FEMA, 1999 r/w Regulation 6(1) of Foreign Exchange Management
(Realisation, Repatriation and Surrender of Foreign Exchange) Regulations, 2000 and Rs.
8,00,00,000 (Rupees Eight Crore only) for the contravention of the provisions of Section 3(b)
of FEMA, 1999.
C. The Appellant filed the instant appeal stating that the quantum of penalty imposed was highly
unreasonable and ridiculously low despite the charges against the respondent having been
upheld on merit by the Adjudicating Authority.

Decision –
The Court decided in favour of the Respondent (Kamal).

Legal Principles held / Observations made –

1. That in the present case the statute (FEMA) itself provided for a penalty up to thrice the
sum involved in such contravention and thereby gave explicit scope to the Adjudicating Authority
to exercise his discretion, albeit judiciously, for imposition of penalty.
2. That the appeal failed to bring out the reasons that why the penalty imposed is low and as
to how the Adjudicating Authority did not exercise his discretion judiciously

Conclusion –
The Court held that the penalty imposed could not be increased.

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INSOLVENCY LAWS

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A. Andhra Pradesh State Financial Corporation vs. Kalptaru Steel Rolling Mills Ltd & Ors
[NCLAT]

Facts :
A. The corporate debtor had mortgaged the property and handed over the title deeds to the
appellant.
B. NCLT, while approving the Resolution Plan, also passed an order allowing the application filed
by the Resolution Professionals seeking direction to the Appellant for releasing original title
deeds of the property mortgaged with the Appellant by the Corporate Debtor.
C. Aggrieved, the appellant filed the instant appeal.

Decision –
The Court decided in favour of the respondents (Kalptaru)

Legal Principles held / Observations made –

3. That there has been equitable treatment between both the similarly situated secured creditors,
and the CoC had approved the Resolution Plan by the requisite majority.
4. That there were no grounds to interfere with the order approving the Resolution Plan. The order
passed by the Adjudicating Authority allowing I.A. No.2123 (PB)/2019 was a consequential
order to the approval of the plan dated 14.02.2020 and needed no interference.

Conclusion –
The Court dismissed the appeals.

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B. Shahi Md Karim vs. Kabamy India LLP & Anr

[NCLAT]

Facts :
A. The NCLT admitted an application under section 9 of IBC initiating CIRP against the corporate
debtor.
B. Aggrieved, the corporate debtor filed an appeal on the following grounds-
a. That the order was passed without the corporate debtor being given an opportunity of being
heard.
b. That there existed an arbitration clause between the two parties.

Decision –
The Court decided in favour of the Respondent (kabamy).

Legal Principles held / Observations made –

1. That the Corporate Debtor had appeared on both the dates and a copy of the Petition and the
supporting documents were also served on them. When the matter came up for hearing the
Corporate Debtor could have been present and submitted his arguments.
2. That there is no embargo on the Operational Creditor, to file a Section 9 Petition, under I &
B Code, 2016, even if there is an arbitration clause, in the Agreement. The scope and objective
of the Code is ‘Resolution’, and not a ‘Recovery Mode / Forum’.

Conclusion –
The Court held that CIRP was rightly initiated.

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C. Supriyo Kumar Chaudhuri & Anr vs. Jhunjhunwala Oil Mills Ltd & Anr
[NCLAT]

Facts:
A. Two IAs were filed by Jhunjhunwala Oil Mills Limited (in short ‘JOML’) praying for direction
to the Resolution Professional (in short ‘RP’) of the corporate debtor JVL Agro Industries Pvt.
Ltd. (in short ‘JVL Agro’ ) to pay the rent along with interest of the premises owned by
JOML which was used by JVL Agro and also to vacate the premises of JOML.
B. The Appellant/JOML was aggrieved by the part of the order whereby vacant possession of the
said premises has not been directed to be handed over to JOML and further the rent directed
to be paid is as per the assessment done by the District Magistrate and not the amount of
Rs. six lakhs plus GST per month, which was agreed to between the two parties.

Decision –
The Court decided in favour of the Appellant (Supriyo).

Legal Principles held / Observations made –

1. That the ‘said premises’ were definitely in possession of JVL Agro from 14.2.2018, if not earlier,
and was definitely in the possession of the corporate debtor on 25.7.2018 when the CIRP of
the corporate debtor was initiated.
2. That , the recovery of any property by the owner has been expressly prohibited under section
14(1)(d) of the IBC during the period when moratorium is in force.
3. That the ‘said premises’, therefore, should have lawfully been with the RP/ corporate debtor
and continue in its lawful possession during the continuation of the CIRP of the corporate
debtor.
4. That the no objection certificate given by JOML regarding the use of this premises to the
corporate debtor did not mention payment of any monthly rent to the owner of the premises.
5. That no rent was agreed upon to be paid for use of ‘said premises’ when the ‘said premises’
were offered to be used as registered office of the corporate debtor nor any rent was paid prior
to the initiation of the CIRP of the corporate debtor.

Conclusion –

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The Court set aside the order passed by the NCLT.

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D. Moser Baer Karamchari Union vs. Union of India & Ors

[SC]

Facts:
A. By way of this writ petition under Article 32 of the Constitution of India, the petitioner sought
for an appropriate writ, direction or order striking down Section 327(7) of the Companies Act,
2013 as arbitrary and violative of Article 21 of the Constitution of India.
B. The petitioner also sought for an appropriate direction so as to leave the statutory claims of
the “workmen’s dues” out of the purview of waterfall mechanism under Section 53 of the
Insolvency and Bankruptcy Code, 2016. A

Decision –
The Court decided in favour of the Appellant (Supriyo).

Legal Principles held / Observations made –

1. That Section 53 of the Code which begins with a non-obstante clause and states that
notwithstanding anything to the contrary contained in any law enacted by the Parliament or
any State Legislature for the time being in force, the proceeds from the sale of liquidation
assets shall be distributed in the order of priority, which is stipulated, and within such period
and such manner as may be specified.
2. That Section 53 of the Code overrides the rights of parties, including the secured creditor,
when the said provision applies. Section 53 of the Code is the complete and comprehensive
code which ensures collection of assets and then provides the manner in which the creditors
are to be paid. Even the rights of the secured creditor falling under Section 53 of the Code to
enforce, realise, settle, compromise or deal with the secured assets as applicable to the security
interest are diluted and compromised.
3. That the waterfall mechanism is based on a structured mathematical formula, and the hierarchy
is created in terms of payment of debts in order of priority with several qualifications, striking
down any one of the provisions or rearranging the hierarchy in the waterfall mechanism may
lead to several trips and disrupt the working of the equilibrium as a whole and stasis, resulting
in instability.

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4. That Sections 326 and 327 of the Act, 2013 shall not be applicable in the event of liquidation
under the IBC, which has been necessitated in view of the enactment of IBC and it applies
with respect to the liquidation of a company under the IBC, Section 327(7) of the Act, 2013
cannot be said to be arbitrary and/or violative of Article 21 of the Constitution of India. In
case of the liquidation of a company under the IBC, the distribution of the assets shall have
to be made as per Section 53 of the IBC subject to Section 36(4) of the IBC, in case of
liquidation of company under IBC.

Conclusion –
The Court held the above principles.

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E. VISTRA ITCL (INDIA) Ltd vs. Dinkar Venkatasubramanian

[SC]

Facts:
A. The Resolution Professional (respondent herein) of the corporate debtor Amtek Auto Ltd filed
I.A. No.225 of 2020 before the Adjudicating Authority seeking approval of the resolution plan.
B. The Adjudicating Authority dismissed the application filed by the appellants being I.A. No.62
of 2020 seeking to include its claim in the resolution plan and observed that the appellants
have not lent any money to the Corporate Debtor and the Corporate Debtor did not owe any
financial debt to the appellants except the pledge of shares was to be executed. Therefore, the
NCLT observed that the appellants not having advanced any money to the Corporate Debtor
as a financial debt would not be coming within the purview of financial creditor of the Corporate
Debtor.
C. Making above observations, the NCLAT dismissed the appeal. Hence the present appeal before
the Supreme Court.

Decision –
The Court decided partially in favour of both the parties.

Legal Principles held / Observations made –

1. That one recourse would be to treat the secured creditor as a financial creditor of the Corporate
Debtor to the extent of the estimated value of the pledged share on the date of commencement
of the CIRP. This would make it a member of the CoC and give it voting rights, equivalent to
the estimated value of the pledged shares. However, in the context of the present case, the
said solution would not be viable as the resolution plan had already been approved by the CoC
without Vistra being a member of the CoC.
2. That the second recourse would be to treat Vistra as a secured creditor in terms of Section 52
read with Section 53 of the Code and give option to the successful resolution applicant – DVI
(Deccan Value Investors) to treat Vistra as a secured creditor, who will be entitled to retain
the security interest in the pledged shares, and in terms thereof, would be entitled to retain
the security proceeds on the sale of the said pledged shares under Section 52 of the Code read
with Rule 21A of the Liquidation Process Regulations.

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Conclusion –
The Court held the above principles.

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COMPETITION LAWS

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A. United Breweries Ltd. vs. CCI & Ors [NCLAT]

Facts :
A. On the basis of an application filed under Section 46 of the Act read with Regulation 5 of the
Competition Commission of India (Lesser Penalty) Regulations, 2009 by Crown Beers India
Ltd and SABMiller India Pvt Ltd against all the Respondents alleging cartelisation in relation
to the production, marketing, distribution and sale of Beer in India, suo moto proceeding was
initiated which was numbered as Suo Moto Case No.6/2017.
B. CCI formed an opinion that prima facie the conduct of appellants and private respondents in
contravention of provisions of Section 3(1) read with Section 3(3)(a) of the Act and by its
order directed the Director Generalto conduct investigation and submit report.
C. CCI directed the parties to cease and desist in future from indulging in any
practice/conduct/activity, which was found in the to be in contravention of the Act.
D. Aggrieved by the Order of CCI Appeal before the National Company Law Appellate Tribunal.
During the hearing the Appellants inter alia have raised the contention that there was no
'judicial member' in the CCI and hence the entire proceedings are void.

Decision –
The Court decided in favour of the Respondent (CCI).

Legal Principles held / Observations made–

1. That on perusal of provisions it is evident that nowhere it has been indicated that CCI must
consist a Judicial Member.
2. That there is a selection committee presided over by Hon'ble the CJI or his nominee besides
other three Members. It is settled that if a statute speaks to do it in a particular manner that
has to be done in the same manner not in other way.
3. That since the statute does not speak about inclusion of Judicial Member the objection raised
by learned counsel for appellant that in absence of Judicial Member order impugned is illegal
has got no substance

Conclusion –
NCLAT held that there was no problem in the validity of the order.

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INTERPRETATION OF STATUTES

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A. Cholamandalam Investment and Finance Company Ltd. vs. Amrapali Enterprises

and Ors. (Cal)

Facts :
A. This application was filed under Section 36 of the Arbitration and Conciliation Act, 1996 by
Cholamandalam Investment and Finance Company Ltd. seeking execution of an arbitral award
passed by Sole Arbitrator.
B. Amprapali submitted that the impugned award had been challenged under Section 34 of the
Act before the City Civil Court.

Decision –
The Court laid down the following principles.

Legal Principles held / Observations made–

1. That compliance with Section 12(5) read with Schedule VII is sine qua non for any arbitral
reference to gain recognition and validity before the Courts.
2. That Section 12(5) read with Schedule VII of the Act states that persons who are unilaterally
appointed lack inherent jurisdiction unless an express written approval is given by the parties
subsequent to disputes having arisen.
3. That an arbitral reference which itself began with an illegal act has vitiated the entire arbitral
proceedings from its inception and the same cannot be validated at any later stage.
4. That the impugned award, which was passed by a dejure ineligible arbitrator, suffers from a
permanent and indelible mark of bias and prejudice which cannot be washed away at any stage
including the execution proceedings.
5. That as the arbitrator was dejure ineligible to perform his functions and therefore lacked
inherent jurisdiction or competence to adjudicate the disputes in hand, the impugned award
cannot be accorded the privileged status of an award.

Conclusion –
The Court set aside the impugned award.

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