Insolvency and Bankruptcy Code

Recently, the Supreme Court, in the case of Gaurav Agarwal vs CA Devang P. Sampat, has issued notice to the parties for adjudicating the crucial question of law pertaining to the ‘Period of Limitation’ for preferring an appeal under Section 61 of Insolvency and Bankruptcy Code, 2016 (“the Code”).

Continue Reading Limitation under Section 61 of Insolvency and Bankruptcy Code: Too Strict Interpretation of the Law?

Commercial Contract

Does the arbitration clause in a commercial contract becomes unenforceable due to non-payment of stamp duty, or it is preserved by the separability doctrine? This question has riddled the Supreme Court of India (“SC”) repeatedly and has resulted in contrary views being adopted by various three-judge benches. The issue has been finally laid to rest by a constitution bench of the SC through its judgment dated April 25, 2023 in M/s N. N. Global Mercantile Private Limited v. M/s. Indo Unique Flame Ltd. & Ors.[i] , wherein it held that an unstamped instrument in need of stamping is not a contract and not enforceable in law. Therefore, the arbitration clause contained therein is also unenforceable. Similarly, an arbitration agreement, which attracts stamp duty but is not stamped or insufficiently stamped, cannot be acted upon. Interestingly, the decision has not been unanimous since two Hon’ble Judges have dissented. 

Continue Reading Does Non-Stamping of a Contract Render an Arbitration Clause Contained in it Unenforceable? The Supreme Court Says Yes

Arbitration Agreement

Introduction

The issue of enforceability of an arbitration clause contained in an unstamped/ insufficiently stamped agreement has been the subject of various judicial pronouncements. Conflicting decisions have been delivered by various High Courts and even the Supreme Court (“SC”) did not lay down a conclusive position. Recently though, a five judge bench of the apex court, through its judgment in N.N. Global Mercantile Private Limited v. Indo Unique Flame Limited[1] (“NN Global”), finally settled the law on enforceability of arbitration agreements contained in unstamped/ insufficiently stamped arbitration agreements.

Continue Reading Enforceability of an Unstamped Arbitration Agreement

Criminal Law

Introduction

The powers of revision serve to provide an important avenue to an accused or the prosecution seeking to remedy any patent defect in the finding of a trial court through different stages of a criminal trial. However, a key stakeholder in a criminal trial, as has been recognized by the Supreme Court of India, from time to time is also the complainant,[1] who may also be the victim of the alleged criminal act. It would, therefore, not be out of place to assess the role that a complainant/informant plays in revisionary proceedings before a superior court. It is this aspect that forms the subject matter of the present blog. In an effort to situate the role of a complainant in criminal revision proceedings, in the following segments, we discuss: (i) the scope and powers of a revision court; (ii) the locus standi of a complainant/informant; (iii) the circumstances whereunder a complainant/informant is permitted to intervene in revision proceedings and the extent of such intervention and (iv) nuances surrounding  a revision application which has already been preferred by the State.

Continue Reading Intervention in Criminal Revision Petitions by the Complainant

Banks and Financial Institution

Introduction

The Hon’ble Supreme Court of India (“Hon’ble SC”) in its recent judgment dated March 27, 2023, in State Bank of India & Ors. v. Rajesh Agarwal & Ors.[i], has conclusively decided on the question of whether the principles of natural justice should be read into the provisions of the Reserve Bank of India (“RBI”) (Fraud Classification and Reporting by Commercial Banks and Select FIs) Directions, 2016[ii] (“Master Directions on Frauds”). The question, which has been pending before various High Courts and was raised before the Hon’ble SC in numerous appeals, has now been answered in the affirmative by the Hon’ble SC by holding that the principles of natural justice, particularly the rule of audi alteram partem, has to be necessarily read into the Master Directions on Frauds to save it from vice of arbitrariness as classification of an account as fraud entails serious civil consequences for the borrowers.

Continue Reading Principles of Natural Justice Prevail: Supreme Court Reads Rule of Audi Alteram Partem into Master Directions on Frauds

On July 12, 2022, the Supreme Court of India (“Supreme Court”) passed a judgment in Vidarbha Industries Power Limited v. Axis Bank Limited[1] (“Vidarbha”), which considered the question whether Section 7(5)(a) of the Insolvency and Bankruptcy Code, 2016 (“Code”), is mandatory or discretionary in nature. Section 7(5)(a) of the Code states that the National Company Law Tribunal (“NCLT”) “may” admit an Application filed under Section 7 of the Code (“Application”), if (a) a default has occurred; (b) the Application is complete; and (c) there is no disciplinary proceeding pending against the proposed resolution professional. The Supreme Court held that Section 7(5)(a) of the Code allows the NCLT to reject an Application even if the financial creditor establishes ‘debt’ and ‘default’ on the part of the corporate debtor.

Continue Reading The Vidarbha Aftermath

Arbitration Act and FEMA

The judgments of the Delhi HC in Cruz City and SRM Exploration, discussed in Part 1, appears to ignore the earlier decision of the SC in Dropti Devi v Union of India[1], where the SC held (in the context of prosecution under the Conservation of Foreign Exchange and Prevention of Smuggling Activities Act) that the legislative objectives of FERA and FEMA are identical, namely, preservation of the foreign exchange resources of the country.

Continue Reading Legislative gap between the Arbitration Act and FEMA: Should Parliament step in? – Part II

Arbitration Act and FEMA

Background

India is one of the few countries that still has exchange controls and does not have full capital account convertibility.

The Foreign Exchange Management Act, 1999 (“FEMA”), empowers the Reserve Bank of India (“RBI”) to frame regulations, master directions and issue circulars for the enforcement of the FEMA (“FEMA Regulatory Regime”). The FEMA Regulatory Regime contemplates prior RBI approval for certain categories of capital account transactions between residents and non-residents.

The enforcement of international arbitration awards in India, where there is going to be a remittance of foreign exchange from a resident to a non-resident, would invariably have FEMA implications. FEMA implications may also arise in situations where the foreign award provides for transfer of shares between residents and non-residents. If the foreign award is not in conformity with the FEMA Regulatory Regime, in such a situation, can the court, where the enforcement action is filed, decline enforcement on the ground that the foreign award would be contrary to the country’s ‘public policy’.

Continue Reading Legislative gap between the Arbitration Act and FEMA: Should Parliament step in? – Part I

Mediation in India

Introduction:

As per the latest statistics available on the National Judicial Data Grid, impending cases before the District & Taluka Courts[1] stand at over 40 million, the backlog waiting to be heard at various High Courts[2] is close to 5.9 million, and the pending case inventory before the Hon’ble Supreme Court of India[3] totals approximately 71,000.

Continue Reading Analysis: Mediation in India

Legal Regime of Negotiable Instruments

Introduction

Section 138 of the Negotiable Instruments Act, 1881 (“NI Act”), ascribes criminal liability for dishonour of a cheque. The purpose of the provision has been held by the Hon’ble Supreme Court to be the promotion of efficacy of banking operations and to ensure credibility in transacting business through cheques.[i] Since a large number of such transactions and cheque payments are done by companies, the very same intent appears to be captured in Section 141 of the NI Act, which extends vicarious criminal liability on officers associated with the company or firm. The law on Section 141 of the NI Act has been clarified and elaborated upon from time to time. However, the broad principle guiding the extent of liability remains the involvement of the director concerned in the day-to-day business affairs of the company. This is, however, not a straight-jacket formula, and the nuances determining the extent of liability need to be examined closely.

Continue Reading Directors’ Vicarious Liability under Current Legal Regime of Negotiable Instruments Act: An Analysis of Evolving Judicial Precedents