Kar Vivad Samadhan settlement extinguishes co-noticee penalties when the principal noticee's liability no longer survives.

Where the principal noticee's liability is fully settled under the Kar Vivad Samadhan Scheme, the adjudication order ceases to survive and the consequential penalty proceedings against co-noticees also abate. The Tribunal applied its earlier view that, once the basis of the main demand is extinguished by settlement, penalties imposed on co-noticees cannot be sustained. The resulting penalty liability on the co-noticees therefore did not survive, and the appeals became infructuous.

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Issues: Whether penalties imposed on co-noticees survive after the principal noticee settles the dispute under the Kar Vivad Samadhan Scheme.

Analysis: The dispute concerned penalties imposed on co-noticees where the principal noticee had obtained full settlement under the Kar Vivad Samadhan Scheme. The Tribunal followed its earlier view that, once the liability of the principal noticee is settled and the adjudication order no longer survives, the proceedings against co-noticees also abate and the penalties imposed on them cannot be sustained.

Conclusion: The penalties on the appellants did not survive and the appeals became infructuous.

Final Conclusion: The settlement in favour of the principal noticee extinguished the basis for proceeding against the co-noticees, leaving no surviving penalty liability against them.

Ratio Decidendi: Where the principal noticee's liability is fully settled under the Kar Vivad Samadhan Scheme, the adjudication order ceases to survive and the consequential penalty proceedings against co-noticees abate as well.

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