TaxTMI Updates e-Newsletter
Mar 10,2021

Opportunity of being heard - audi alteram partem - refund of unutilized input tax credit - export of services - intermediary services - Rule 92(3) of the CGST Rules - section 54 of the CGST Act - judicial review under Article 226 - remand for fresh decision

Rule 92(3) of the CGST Rules - opportunity of being heard - refund of unutilized input tax credit - Whether the impugned orders rejecting the petitioner's refund claims were passed in violation of the proviso to sub rule (3) of Rule 92 by not giving the petitioner an opportunity of being heard. - HELD THAT: - Rule 92(3) requires that where the proper officer is satisfied that refund is not admissible, a notice in FORM GST RFD 08 must be issued and, after considering the applicant's reply, an order allowing or rejecting the refund made; the proviso expressly prohibits rejection without giving the applicant an opportunity of being heard. The court examined the chronology: show cause notices were issued, some documents were submitted in person on 16.03.2020 and further documents were requested, large number of e mails were exchanged, and respondent relied on a Trade Circular of 17.03.2020 to treat e mail submissions as hearing. The Trade Circular however related to time barred VAT assessments and could not be validly applied to dispense with personal hearing for refund rejection. Telephonic calls and brief e mails, for which no record of their content was maintained and which were primarily for document collection, could not be equated with an opportunity of being heard within the meaning of the proviso. The court confined its review to the decision making process and concluded that no effective hearing on merits was afforded before rejection; hence the impugned orders violated Rule 92(3) and the audi alteram partem principle. [Paras 34, 35, 36, 37]

Impugned orders rejected the refund claims in breach of the proviso to Rule 92(3) and the principles of natural justice; the procedure adopted by respondent No.4 was invalid.

Audi alteram partem - judicial review under Article 226 - Whether availability of an alternative statutory remedy of appeal precludes exercise of writ jurisdiction where the impugned order is vitiated by breach of natural justice. - HELD THAT: - The court recalled established authorities that an order in violation of natural justice is non est and need not be relegated to an appellate remedy; relying on precedent it emphasized that where the first stage decision is tainted by denial of a fair hearing, the remedy of appeal is not an adequate substitute. Having found breach of audi alteram partem in the adjudicatory process, the High Court held that the existence of an appellate remedy under the MGST Act did not bar exercise of extraordinary writ jurisdiction under Article 226 in the present case. [Paras 19, 20, 38, 39]

Availability of a statutory appeal did not preclude judicial review under Article 226 because the impugned orders were vitiated by violation of natural justice.

Remand for fresh decision - refund of unutilized input tax credit - What relief is appropriate where the impugned refund rejection orders are set aside for procedural infirmity? - HELD THAT: - Given that respondent No.4 had already expressed an adverse view on the merits, the court directed that the matter be remitted for de novo consideration to ensure fairness. It ordered that another competent officer be assigned by respondent No.3 to decide the petitioner's refund applications afresh in accordance with law after giving an opportunity of being heard. A timeframe of three months from receipt of this order by respondent No.3 was prescribed for disposal, and all contentions were kept open for fresh adjudication on merits. [Paras 40, 41]

Impugned orders set aside; refund applications remitted for fresh hearing and decision by a different proper officer within three months.

Final Conclusion: The High Court set aside the five orders dated 26.06.2020 rejecting the petitioner's refund claims for breach of the proviso to Rule 92(3) and the audi alteram partem principle; the matters are remitted to a newly assigned proper officer to be decided de novo after giving the petitioner an opportunity of being heard within three months, with all contentions kept open.

Provisional attachment of bank accounts - interim lifting of attachment subject to conditions - security by deposit and deposit of title deeds - use of released funds for payment of employees' salaries only - leave to re-attach and sell immovable property on breach - respondents' liberty to move court against company or directors

Provisional attachment of bank accounts - interim lifting of attachment subject to conditions - Order for interim lifting of provisional attachment on eleven specified bank accounts subject to stipulated conditions. - HELD THAT: - The Court directed that the provisional attachment vis-a -vis the eleven bank accounts listed in the order shall stand lifted, but this relief is conditional upon the petitioner complying with monetary and documentary obligations set out by the Court. The direction to lift the attachment is granted to enable the petitioner-company to make operative its accounts for meeting salaries and statutory dues and to facilitate payment towards the respondents' claimed dues, subject to the security and deposit conditions that follow.

Provisional attachment of the eleven bank accounts is lifted subject to compliance with the Court's deposit and security directions.

Security by deposit and deposit of title deeds - Requirement that the petitioner retain only a limited balance in the released accounts and deposit the excess with the respondents, and deposit original title deeds of five properties as security. - HELD THAT: - The Court ordered that the petitioner-company shall retain a cumulative amount of Rs. 2.00 crores in the eleven bank accounts and, within two days of receipt of the order, deposit any excess balance in those accounts with the respondents. Separately, the petitioner must deposit the original title deeds of the five immovable properties referred to earlier with the respondents within two days. These measures operate as security for the respondents' claim pending further proceedings.

Petitioner to retain only Rs. 2.00 crores in the specified accounts, deposit the excess with respondents within two days, and hand over original title deeds of five properties within two days.

Interim lifting of attachment subject to conditions - Staged monetary payment obligations imposed on the petitioner to secure respondents' claimed dues. - HELD THAT: - The Court mandated that the petitioner deposit a first tranche of Rs. 5.00 crores with the respondents on or before 31.03.2021, in addition to the excess amount from the bank accounts. Timelines for further tranches were left to be fixed once the initial payments and other directions are fulfilled. These stipulated payments form part of the conditional regime permitting the accounts to be made operable.

Petitioner to deposit Rs. 5.00 crores by 31.03.2021 as the first tranche, with further tranches to be scheduled later.

Use of released funds for payment of employees' salaries only - Limitation on the permitted retained funds to be used solely for payment of employees whose details were filed by the petitioner. - HELD THAT: - The Court clarified that the Rs. 2.00 crores permitted to be retained in the released accounts shall be used only to pay salaries of the employees whose particulars are contained in the affidavit filed by the petitioner. This restriction is integral to the conditional relief granted to the petitioner to ensure protection of employee interests while the tax claim remains contested.

The retained Rs. 2.00 crores may be used exclusively for payment of the employees listed in the petitioner's affidavit.

Leave to re-attach and sell immovable property on breach - respondents' liberty to move court against company or directors - Consequences of non-compliance with the Court's directions: respondents granted liberty to attach/sell immovable property and to move the Court against the company and/or its directors. - HELD THAT: - The Court warned that any infraction of its directions would entitle the respondents to attach the immovable properties and proceed to sell them. Additionally, the respondents were given leave to immediately approach the Court for appropriate orders against the petitioner-company and/or its directors. These provisions preserve the respondents' enforcement rights in the event of non-compliance.

On breach of the directions, respondents may attach and sell the immovable properties and are at liberty to seek appropriate orders against the company and its directors.

Final Conclusion: The High Court permitted interim lifting of provisional attachment on eleven specified bank accounts subject to the petitioner depositing excess balances and a first tranche payment, depositing original title deeds of five properties, restricting use of retained funds to employee salaries, and granted respondents liberty to enforce and seek further orders in case of non-compliance.

Summons under Section 70 of the CGST Act, 2017 - interim protection against coercive action - infructuous writ application - obligation to comply with departmental summons - challenge to summons on legality grounds - proceed in accordance with law

Summons under Section 70 of the CGST Act, 2017 - interim protection against coercive action - infructuous writ application - obligation to comply with departmental summons - Whether the writ applicants were entitled to continue interim protection against coercive action and whether the summons issued under Section 70 were legally unsustainable. - HELD THAT: - The Court found on the record that the writ applicant had appeared before the authority pursuant to the summons and was interrogated, and on a subsequent summons failed to produce the requisite documents relevant to the department's investigation. The Court recorded that the writ applications appeared to have been instituted primarily to evade arrest and that there were no legal grounds shown to impugn the validity of the summons issued under Section 70 of the CGST Act, 2017. In view of these findings and the respondents' expressed position that the applicants' presence was no longer required, the Court concluded that the interim protection previously granted had become unnecessary and the writ applications were effectively infructuous. Consequently, there was no cause to continue the interim protection and the authorities were entitled to proceed further in accordance with law. [Paras 10, 11, 12, 13, 14]

Both writ applications are disposed of as infructuous; notice discharged and the interim protection earlier granted is vacated; respondents are at liberty to proceed in accordance with law.

Final Conclusion: The writ petitions challenging the summons under Section 70 of the CGST Act, 2017 were dismissed as having become infructuous; the interim protection previously granted is vacated and the respondents may proceed in accordance with law.

Enforcement of contractual obligation - liability of deductor to remit tax deducted - reversal of Input Tax Credit - interest and penal consequences for non-remittance

Enforcement of contractual obligation - liability of deductor to remit tax deducted - reversal of Input Tax Credit - Validity of the communication directing recovery from vendors for GST collected but not remitted and whether the writ court should interfere with that communication. - HELD THAT: - The impugned communication merely enforces the contractual allocation of GST liability between NLC and its vendors, where the contract provides that the consideration is inclusive of GST and vendors are to discharge the GST liability. Admitted non-remittance by vendors resulted in reversal of Input Tax Credit claimed by NLC and consequent demand, which NLC has discharged. The obligation of a deductor to remit tax deducted is absolute; failure exposes the deductor to interest and penal consequences. Given these facts, the exercise in the communication is to recover amounts due under the contract and to protect NLC's position following reversal of Input Tax Credit. The matter does not call for judicial interference in exercise of writ jurisdiction and, if vendors seek more time to remit short or non-deducted amounts, they are at liberty to apply to NLC for indulgence, which NLC may consider on its own merits.

Writ petition dismissed; impugned communication upheld as a contractual and enforceable step and not amenable to interference.

Final Conclusion: The petition challenging the communication calling upon NLC vendors to remit GST collected but not deposited is dismissed; the communication is an enforceable step under the contract and the statutory responsibility of deductors to remit tax deducted (with attendant interest and penal consequences for default) remains unaffected.

Anti-profiteering - investigation by Director General of Anti-Profiteering (DGAP) - jurisdiction of National Anti-Profiteering Authority (NAPA) - opportunity to file objections to investigation report - personal hearing before NAPA - requirement of a speaking order - right to seek judicial remedy against adverse NAPA order - temporary non-operation of adverse order for three weeks

Investigation by Director General of Anti-Profiteering (DGAP) - opportunity to file objections to investigation report - Petitioner entitled to receive the DGAP investigation report and to file objections thereto. - HELD THAT: - The Court noted that the DGAP has completed its investigation and generated a report dated 25.02.2021. In order to enable adjudication on merits (including any challenge to jurisdiction) before the National Anti-Profiteering Authority, the petitioner must be furnished with a copy of that report and given a specific, time bound opportunity to submit objections. The writ petition was disposed directing that the report be furnished to the petitioner within two weeks and that the petitioner be permitted to file objections within two weeks of receipt of the report. [Paras 3, 4]

DGAP to furnish the report dated 25.02.2021 to the petitioner within two weeks; petitioner granted two weeks thereafter to file objections.

Jurisdiction of National Anti-Profiteering Authority (NAPA) - personal hearing before NAPA - requirement of a speaking order - NAPA must afford personal hearing and pass a speaking order on the objections filed by the petitioner. - HELD THAT: - Given that the matter will proceed to NAPA for consideration of the DGAP report and the petitioner's objections, the Court directed that NAPA grant a personal hearing to the petitioner's authorised representative in respect of those objections and that NAPA render a speaking order. This ensures that the petitioner's contentions, including any challenge to NAPA's jurisdiction, are considered with reasons recorded in a form that can be subject to subsequent challenge if necessary. [Paras 4]

NAPA to grant personal hearing to petitioner's authorised representative and to pass a speaking order; copy to be furnished to the petitioner.

Right to seek judicial remedy against adverse NAPA order - temporary non-operation of adverse order for three weeks - Petitioner permitted to seek appropriate legal remedies against any adverse NAPA decision; any adverse order will not be given effect for three weeks from service. - HELD THAT: - The Court preserved the petitioner's right to pursue statutory or judicial remedies in the event NAPA renders a decision adverse to its interests. Additionally, to afford a practical window for such recourse, the Court directed that an adverse order by NAPA shall not be given effect for three weeks from the date it is served on the petitioner, thereby providing time to initiate challenge as permitted by law. [Paras 4]

Petitioner may seek appropriate remedy against an adverse NAPA decision; any such adverse order shall not be given effect for three weeks from service.

Final Conclusion: Writ petition and interlocutory application disposed: DGAP to supply its report to the petitioner; petitioner granted time to file objections; NAPA to afford personal hearing and pass a speaking order; petitioner entitled to legal remedies if aggrieved and any adverse NAPA order shall not operate for three weeks from service.

Re-opening of assessment under Section 148 for escaped assessment - Failure to disclose fully and truly all material facts - Assessing Officer's reason to believe - Enabling versus mandatory clauses in partnership deed regarding interest on capital and remuneration - Deduction under Section 80IB(10) and its relation to computation of business income

Re-opening of assessment under Section 148 for escaped assessment - Failure to disclose fully and truly all material facts - Enabling versus mandatory clauses in partnership deed regarding interest on capital and remuneration - Deduction under Section 80IB(10) and its relation to computation of business income - Assessing Officer's reason to believe - Validity of notices issued under Section 148 to reopen assessments on the ground that deduction under Section 80IB(10) was claimed excessively by not providing interest on capital and remuneration as per partnership deed - HELD THAT: - The Court examined the partnership deeds (including clauses providing for interest on capital and for remuneration) and the subsequent amendment effective 01.04.2009 which expressly provided that no interest would be payable to partners. The clauses in the earlier deeds were found to be enabling and subject to mutual agreement of the partners; they did not operate as mandatory obligations to pay interest or remuneration. There was no material on record to show that interest on capital or remuneration had in fact been paid to partners for the years in question. The Assessing Officer's conclusion that the assessee had failed to disclose fully and truly all material facts and therefore income had escaped assessment was held to be contrary to law and without jurisdiction, because mere incorporation of provisions in a partnership deed does not, without evidence of payment or binding obligation, justify reopening assessments beyond the statutory period. The Court applied the ratio of the earlier decision in Alidhara TaxSpin (as considered by this Court) which reached the same conclusion that the mere provision for interest/remuneration in the deed does not mandate payment and does not sustain a reason to believe that income had escaped assessment. On these grounds, the impugned notices under Section 148 were quashed. [Paras 16, 18, 19, 20, 21]

Re-opening of the assessments for the stated years on the ground of non-payment of interest and remuneration as per partnership deed is unjustified; the notices under Section 148 are quashed and subsequent proceedings are terminated.

Final Conclusion: Writ applications allowed; impugned notices dated 26.03.2018 under Section 148 for A.Y. 2011-12, 2012-13 and 2013-14 quashed and all consequent proceedings terminated.

Estimation of income under section 44AF - estimation of taxable income by adopting a percentage of turnover - treatment of unexplained bank deposits as income from other sources - additions under section 69C and section 68 as unexplained expenditure/unexplained cash credits - remand for verification of nexus between credit card withdrawals and business receipts - suspension of limitation due to Covid-19

Suspension of limitation due to Covid-19 - Delay in filing the appeals was held excused and appeals were treated as timely filed. - HELD THAT: - The registry recorded a 36-day delay in filing appeals from the date of receipt of the CIT(A)'s orders. In view of the Supreme Court's suo moto order suspending limitation due to the Covid-19 pandemic, the Tribunal found that the period was excluded and therefore there was no delay in filing the appeals. The appeals were accordingly entertained as being within time. [Paras 2]

No delay; appeals treated as timely filed.

Reopening of assessment under section 147 read with section 148 - Ground challenging reopening of assessment was not pressed and was dismissed as not pressed. - HELD THAT: - Although the assessee raised a challenge to the validity of reopening under the provisions relating to reassessment, counsel did not press this ground before the Tribunal. The Tribunal therefore dismissed that ground as not pressed and did not adjudicate its merits. [Paras 3]

Challenge to reopening dismissed as not pressed.

Estimation of income under section 44AF - estimation of taxable income by adopting a percentage of turnover - Income estimated by the Assessing Officer at 10% of turnover was reduced to 8% of turnover by the Tribunal. - HELD THAT: - The Assessing Officer estimated the assessee's income at 10% of gross turnover because the assessee did not maintain verifiable books. The assessee's declared net profit rates fluctuated between approximately 4.08% and 7.91% across years. Having considered the volatility in declared rates, the absence of verifiable books and the material on record, the Tribunal concluded that an 8% net profit rate on turnover strikes a fair balance between the assessee's declared return and the AO's estimate. The Tribunal therefore modified the AO's estimation and directed income to be computed at 8% of turnover instead of 10%. [Paras 4, 5, 6]

Income estimated at 8% of gross turnover for the assessment years instead of 10% adopted by the AO.

Treatment of unexplained bank deposits as income from other sources - additions under section 69C and section 68 as unexplained expenditure/unexplained cash credits - remand for verification of nexus between credit card withdrawals and business receipts - Additions made under sections 69C and 68 in respect of credit card payments/bank deposits were remanded to the Assessing Officer for verification of nexus with business use. - HELD THAT: - The AO made additions treating certain credit card payments and bank deposits as unexplained expenditure/cash credits under sections 69C and 68 after examining bank and credit card statements. The assessee contended that credit card payments were met from earlier withdrawals used for business and subsequently redeposited, but did not furnish sufficient evidence before the AO to establish that nexus. The Tribunal held that the question whether credit card withdrawals had been used for business purposes and whether subsequent deposits legitimately represent business receipts requires factual verification. Consequently, the Tribunal remitted the issue to the AO for adjudication and verification of the claimed nexus between credit card withdrawals, their use for business, and repayment from business receipts. [Paras 7, 8, 9]

Additions under sections 69C/68 remitted to the AO for verification of the nexus between credit card withdrawals and business receipts; matter not decided on merits by the Tribunal.

Final Conclusion: The appeals were partly allowed: (a) delay in filing was held excused; (b) challenge to reopening was dismissed as not pressed; (c) estimation of income by reference to turnover was reduced from 10% to 8%; and (d) additions under sections 69C/68 in respect of credit card/bank deposits were remanded to the Assessing Officer for fresh verification of nexus with business receipts.

Foreign tax credit - elimination of double taxation - subjected to tax - ordinary credit versus full credit - refund of foreign taxes by the residence State - section 90 and relief under DTAAs - section 91 unilateral relief - deduction of taxes paid abroad in computation of business income - interpretation of tax treaties in light of object and purpose (VCLT principles)

Foreign tax credit - subjected to tax - refund of foreign taxes by the residence State - section 90 and relief under DTAAs - section 91 unilateral relief - ordinary credit versus full credit - Claim for refund/credit of taxes paid abroad (treaty, non treaty and dividend taxes) was allowable such that India would refund taxes paid to foreign jurisdictions. - HELD THAT: - The Tribunal held that treaty and domestic credit mechanisms operate on the credit method which limits credit to the Indian tax attributable to the foreign income and presupposes that the income has been actually "subjected to tax" in India as well as in the source State. The phrase "subjected to tax" requires actual taxation (a present liability), not merely inclusion or liability in an abstract sense. International commentary and authorities (ordinary credit limitation, academic writings and model commentaries) show that credits cannot exceed domestic tax liability and residence States do not refund excess foreign tax; at best excess may be carried forward or lost depending on domestic law. On the facts for AY 2012-13 the assessee had no Indian tax payable and the foreign income was not subjected to tax in India; therefore credit (and any refund of taxes paid abroad) could not be granted under the respective DTAA provisions or section 91. Reliance on Wipro and similar authorities was examined and distinguished on facts, scope and jurisdictional weight; treaty interpretation principles (VCLT/objects and purpose) and the ordinary meaning of credit rules were applied to reject the refund/credit claim. The Tribunal dismissed the claims for tax credits/refund for treaty jurisdictions, non treaty jurisdictions and dividend withholding taxes for the year under appeal. [Paras 18, 21, 26, 39, 74]

Claim for foreign tax credits/refund of Rs. 182,64,22,948 (aggregate of treaty, non treaty and dividend taxes) is rejected; no refund by Indian tax authorities is permissible for the assessment year 2012 13.

Deduction of taxes paid abroad in computation of business income - section 90 and section 91 interaction with domestic deduction provisions - binding effect of jurisdictional High Court precedent - Whether taxes paid abroad (for which foreign tax credit was not allowed) are deductible in computing business income of the assessee. - HELD THAT: - Applying binding precedent of the jurisdictional High Court (Reliance Infrastructure Ltd.), the Tribunal held in principle that taxes paid abroad, in respect of which no foreign tax credit was allowed, may be allowed as a deduction in computing business income. The Tribunal examined contrary benches and decisions but considered the jurisdictional High Court ruling binding on this bench and directed that the Assessing Officer examine the matter afresh. The grant of deduction was accepted in principle subject to limited factual verification by the Assessing Officer (i.e., verification of facts necessary to allow the deduction consistent with the High Court decision and applicable provisions). [Paras 76, 79, 80]

Deduction of the taxes paid abroad is allowed in principle; the matter is remitted to the Assessing Officer for limited factual verification and consequential computation.

Final Conclusion: Appeal partly allowed: foreign tax credit/refund claims for taxes paid abroad are dismissed for AY 2012 13; however, the assessee is entitled in principle to deduction of those taxes in computing business income and the matter is remitted to the Assessing Officer for limited factual verification and re computation.

Admissibility of statement recorded under section 132(4) and requirement of corroborative evidence - voluntary surrender/offers made during search and their evidentiary value - doctrine of promissory estoppel / legitimate expectation in search proceedings - deemed dividend under section 2(22)(e) - distinction between commercial/trade advances and loans/advances to shareholders - exemption of long term capital gains under section 10(38) and proof of bogus/arranged transactions - addition under section 69 for unexplained investments and requirement of supporting evidence

Admissibility of statement recorded under section 132(4) and requirement of corroborative evidence - voluntary surrender/offers made during search and their evidentiary value - Whether the addition of Rs. 20 crores as undisclosed income can be sustained on the basis of the assessee's statement recorded under section 132(4). - HELD THAT: - The Tribunal held that a statement recorded under section 132(4) is an important piece of evidence but is not conclusive and requires corroboration by incriminating material. The lower authorities relied on an adhoc offer made during search to "buy peace" without linking it to corroborative evidence relating to the assessee in his individual capacity for the relevant year. Much of the sworn statement referred to transactions of the company LJM; only limited items related to the assessee individually and those were already quantified for other years. In absence of independent incriminating material tying the Rs. 20 crores to the assessee for AY 2015-16, the addition was found to be founded on suspicion and surmise and therefore unsustainable. [Paras 7]

Addition of Rs. 20 crores as undisclosed income deleted.

Deemed dividend under section 2(22)(e) - distinction between commercial/trade advances and loans/advances to shareholders - commercial transactions vs advances for applicability of section 2(22)(e) - Whether the cumulative credit balance of Rs. 76,19,00,000/- in the books of M/s. AK Exports due to M/s. Infinity Jewellers and M/s. Mariyam Creations can be treated as deemed dividend under section 2(22)(e). - HELD THAT: - The Tribunal examined the factual matrix and legal principles and concluded that section 2(22)(e) applies to payments by a company by way of loans or advances to a shareholder/concern in which he has substantial interest, but commercial trade advances or running accounts in the ordinary course of business do not fall within the deeming provision. The AO's theory of circuitous/diversionary transactions was held to be based on conjecture: the third party concerns filed returns, carried on trading in high value goods (gold) where high turnover from limited space is plausible, and account copies showed continuing commercial transactions. There was no evidence of personal benefit to the shareholder or that funds left the business circle; moreover the funds were ultimately invested back into the company. In view of judicial precedents and CBDT guidance distinguishing trade advances from deemed dividends, the addition was not sustainable. [Paras 8]

Addition treated as deemed dividend under section 2(22)(e) deleted.

Exemption of long term capital gains under section 10(38) and proof of bogus/arranged transactions - requirement of linking assessee's transactions to investigation material before treating LTCG as bogus - Whether long term capital gains of Rs. 16,24,68,072/- from sale of shares can be disallowed as bogus and treated as unexplained income in the absence of direct evidence linking the assessee to the alleged organized racket. - HELD THAT: - The Tribunal found that the AO and CIT(A) relied on generalized investigation reports and conjectural modus operandi without producing specific incriminating material tying the assessee's transactions to the alleged racket. The assessee produced contemporaneous documents (bank payments, demat entries, broker contract notes) and maintained he was a regular investor; purchase was through banking channels and shares were dematerialised and sold through recognised brokers. The AO did not place on record the specific investigation material or confront the assessee with it. Absent direct evidence rebutting the documentary proof of genuine acquisition and sale, the denial of exemption on mere suspicion was held to be impermissible. [Paras 9]

Addition of long term capital gains disallowed as bogus deleted; exemption under section 10(38) restored.

Addition under section 69 for unexplained investments and requirement of supporting evidence - Whether the addition of Rs. 10,17,000/- towards excess jewellery found during search is sustainable under section 69. - HELD THAT: - The Tribunal observed that there was a discrepancy in declared and found diamond caratage and the assessee explained that certain jewellery belonged to his wife and arose on marriage but failed to substantiate that explanation with supporting evidence. Unlike other additions where documentary corroboration was absent for the Department, here the assessee did not produce adequate proof to explain the discrepancy. On the facts, the finding of the lower authorities that the unexplained jewellery amount was taxable under section 69 was upheld. [Paras 10]

Addition of Rs. 10,17,000/- under section 69 upheld.

Final Conclusion: Appeal partly allowed: additions of Rs. 20 crores as undisclosed income, and Rs. 76,19,00,000/- as deemed dividend, and the addition disallowing exemption under section 10(38) were set aside for lack of corroborative evidence; the addition under section 69 in respect of unexplained jewellery was upheld.

Allowability of depreciation on goodwill acquired in a slump sale - reliability of valuation reports based on management assumptions and appointment by related parent - purchase price allocation and balancing entry treated as goodwill - application of Explanation 3 to section 43(1) for determination of actual cost where transfer may be for tax avoidance - limitations on depreciation under the fifth proviso to section 32(1) in cases of succession/amalgamation or similar transfers - application of the third proviso to section 43(1) where transfer price fixation is part of an intra-group arrangement

Allowability of depreciation on goodwill acquired in a slump sale - purchase price allocation and balancing entry treated as goodwill - reliability of valuation reports based on management assumptions and appointment by related parent - application of Explanation 3 to section 43(1) for determination of actual cost where transfer may be for tax avoidance - limitations on depreciation under the fifth proviso to section 32(1) in cases of succession/amalgamation or similar transfers - application of the third proviso to section 43(1) where transfer price fixation is part of an intra-group arrangement - Depreciation claimed on goodwill and other intangibles arising from the purchase of the industrial packaging unit was not allowable and the disallowance of Rs. 44,04,03,000/- was confirmed. - HELD THAT: - The Tribunal upheld the findings of the AO and the CIT(A) that the large goodwill figure recorded by the assessee was a balancing entry arising from the lump-sum purchase price allocation rather than an identifiable intangible transferred with independent commercial rights. The valuation reports relied upon were appointed by the parent group and expressly based on management business plans without independent verification; the valuer's scope and assumptions limited their reliability. The business transfer agreement disallowed allocation of price to specific assets and certain intellectual property was retained by the transferor, undermining the claim that identifiable intangible assets had been transferred. In these circumstances the authorities were entitled to treat the enhanced amount recorded as goodwill as fictional for income-tax purposes and to examine the valuation under Explanation 3 to section 43(1). The Tribunal also noted the relevance of the proviso to section 32(1) and of the overall intra-group reorganisation context (including applicability of the third proviso to section 43(1)) in concluding that depreciation on the alleged goodwill could not be allowed. The Tribunal found the case law and submissions of the assessee insufficient to rebut these factual and legal conclusions and recorded that no infirmity existed in the concurrent findings of the AO and CIT(A). [Paras 7]

Disallowance of depreciation on goodwill amounting to Rs. 44,04,03,000/- confirmed and grounds contesting that disallowance dismissed.

Assessment rectification under section 154 and scope of appellate consideration - limits of appellate adjudication where enhancement was not before the first appellate authority - The contention that the CIT(A) ought to have decided the appeal against the enhanced disallowance pursuant to the AO's order under section 154 (raising the disallowance to Rs. 99,09,96,797/-) was not entertained. - HELD THAT: - The Tribunal examined the record and found that the CIT(A) had confined his decision to the assessment order passed under section 143(3) which showed disallowance of Rs. 44,04,43,000/-. Although the AO later issued a rectification under section 154 enhancing the disallowance, the assessee's grounds before the CIT(A) did not seek adjudication of that rectified enhancement and the CIT(A) accordingly did not address it. The Tribunal held that the issue of enhancement raised before the Tribunal for the first time could not be entertained because it was not decided by the CIT(A). [Paras 7]

Ground alleging failure to adjudicate the enhanced disallowance under section 154 is dismissed as not entertained below and therefore not admitted on appeal.

Final Conclusion: The Tribunal dismissed the assessee's appeal: the disallowance of depreciation on alleged goodwill of Rs. 44,04,03,000/- was upheld on the grounds that the valuation and allocation were unreliable and the recorded goodwill was a balancing/fictional entry in the context of an intra-group slump sale; the claim that the CIT(A) should have decided the later rectified enhancement under section 154 was not entertained because that enhancement was not raised before the CIT(A).

Article 13(4) of India-Singapore DTAA - Limitation of Benefit (LOB) clause / Article 3 of the Protocol - taxability of capital gains of a non-resident on sale of shares of an Indian company - Tax Residency Certificate (TRC) and its evidentiary value - application of Section 90(2) of the Income-tax Act

Article 13(4) of India-Singapore DTAA - Limitation of Benefit (LOB) clause / Article 3 of the Protocol - Tax Residency Certificate (TRC) and its evidentiary value - taxability of capital gains of a non-resident on sale of shares of an Indian company - application of Section 90(2) of the Income-tax Act - Whether BG Asia Pacific Holdings Pte. Ltd., a Singapore resident, is entitled to the Article 13(4) exemption from Indian tax on capital gains arising on sale of shares of Gujarat Gas Company Ltd. in view of the LOB conditions in Article 3 of the Protocol and, if so, whether the capital gains are not taxable in India. - HELD THAT: - Article 13(4) provides that gains derived by a resident of a Contracting State from alienation of property not covered by paragraphs 1-3 shall be taxable only in the State of residence. The Protocol introducing Article 13(4) also imposes LOB conditions in Article 3 which BG Asia had to satisfy to claim the exemption. The Authority examined whether BG Asia's affairs were arranged with the primary purpose of obtaining the treaty benefit, whether BG Asia had bona fide business activities, whether it was a shell/conduit company, whether its total annual expenditure on operations in Singapore in the 24 months preceding the gain met the S$200,000 threshold, and whether control and management were in Singapore. On facts - BG Asia's incorporation in 1995, acquisition of GGCL shares in 1997-1999 (with subsequent involuntary allotments), the board resolution to divest in 2012 as part of a global business reorganisation, continuation of other substantial investments, audited accounts showing recurring administrative and other operating expenditures, Singapore Profit & Loss statements and returns, and TRCs issued by Singapore tax authorities - the Authority found no material to show the affairs were arranged primarily to obtain treaty benefits. Judicial precedents recognising investment-holding as bona fide business activity (including Vodafone and Sanofi) were applied to reject the contention that holding activity per se disqualifies treaty benefits. The TRCs and other evidences were considered: while certificates on interpretation of treaty clauses may be rebuttable, the Revenue produced no adverse material to contradict the Singapore authorities' certificates or the operational expense evidence. The Authority computed and accepted the administrative/operational expenditures (including allocated administrative recharges) for the period 01/06/2011-31/05/2013 and found they met the S$200,000 threshold. Board meetings and returns supported that control and management were exercised in Singapore. In sum, all LOB conditions in Article 3 were found satisfied and BG Asia was held eligible for Article 13(4) relief. Applying Section 90(2), the DTAA provision being more beneficial governed the taxability question; accordingly, the capital gains on sale of GGCL shares were held taxable only in Singapore and not in India. [Paras 32, 33, 34, 35, 36]

BG Asia satisfies the LOB conditions in Article 3 of the Protocol and is entitled to the Article 13(4) exemption; the capital gains arising on the sale of GGCL shares are taxable only in Singapore and not in India, so the questions on rate of tax and withholding under section 195 are rendered infructuous.

Final Conclusion: The Authority ruled that BG Asia Pacific Holdings Pte. Ltd. is not liable to capital gains tax in India on the sale of its GGCL shares because Article 13(4) of the India-Singapore DTAA applies (Article 3 LOB conditions being satisfied); consequently questions on applicable rate and TDS under section 195 need not be answered.

Admission under section 245R(2) - design for avoidance of tax (prima facie test) - business connection / Permanent Establishment - merits to determine taxability

Design for avoidance of tax (prima facie test) - admission under section 245R(2) - Whether the application discloses a prima facie design to avoid tax such as to justify rejection of the application at the threshold. - HELD THAT: - The Revenue relied on the CIT report alleging that the transaction was structured to avoid tax, pointing to assumed responsibility by the applicant for care, custody, risk of loss and insurance until delivery in India. The Authority examined the material placed by the Department and found no evidence that the arrangement disclosed an illegal or improper design to avoid tax at the prima facie stage. The Authority observed that factual contentions about risk allocation and contractual liabilities go to merits and require fuller consideration during the substantive hearing. In absence of material establishing a prima facie case of tax avoidance, the Authority concluded that the statutory threshold for rejecting admission was not crossed and admitted the application for hearing under section 245R(2). [Paras 3]

No prima facie design to avoid tax was found; the application is admitted under section 245R(2) for merits hearing.

Business connection / Permanent Establishment - merits to determine taxability - Whether the transaction gives rise to a business connection or Permanent Establishment in India and the consequent tax attribution. - HELD THAT: - The Authority recorded the CIT's contention that the applicant's assumed responsibilities might indicate a business connection or Permanent Establishment in India requiring attribution of profits. The Authority did not decide this question on the admission stage, noting that the existence of a Permanent Establishment and the attribution of profits are substantive issues requiring detailed consideration at the merits hearing. Accordingly, the question of Permanent Establishment and any consequential tax liability was left open for adjudication during the substantive proceedings. [Paras 3]

Existence of a business connection / Permanent Establishment and related tax consequences remitted for determination on the merits at the substantive hearing.

Final Conclusion: The Authority found no prima facie design to avoid tax and admitted the applicant's reference under section 245R(2); issues of Permanent Establishment and taxability are left for decision at the merits hearing.

Validity of notice under Section 148 of the Income Tax Act, 1961 - Requirement of prior administrative approval for reopening assessments under Section 151(2) - Effect of filing of income tax return on the maintainability of reopening under Section 147/148 - Non-Filers Monitoring System (NMS) and notice initiation

Requirement of prior administrative approval for reopening assessments under Section 151(2) - Validity of notice under Section 148 of the Income Tax Act, 1961 - Whether the notice dated 27.03.2018 under Section 148 was validly issued having regard to the timing and proof of administrative approval. - HELD THAT: - The Court examined the record and observed an unexplained discrepancy between the impugned order dated 28.09.2018, which stated that administrative approval of the Pr. CIT was taken on 30.03.2018, and the counter-affidavit averring that such approval was obtained on 26.03.2018. The Revenue did not place on record the relevant file noting or any contemporaneous extract evidencing the approval, nor otherwise reconcile the two statements. In the absence of a satisfactory explanation or documentary proof of the requisite administrative approval prior to issuance of the notice, the Court found the justification for reopening to be deficient and the issuance of the notice to be tainted by that unexplained inconsistency. The Court therefore concluded that the notice could not be sustained on that footing. [Paras 5]

The notice dated 27.03.2018 is quashed insofar as it was issued without a satisfactory record of prior administrative approval.

Effect of filing of income tax return on the maintainability of reopening under Section 147/148 - Non-Filers Monitoring System (NMS) and notice initiation - Whether the notice dated 27.03.2018 and the order disposing the objection dated 28.09.2018 were untenable in view of the assessee's filing and acknowledgement of the income tax return for AY 2011-2012. - HELD THAT: - The Court noted that the petitioner-assessee produced documents evidencing filing and acknowledgement of the return for AY 2011-2012 (Annexure P-4) and that the Revenue did not dispute the authenticity or effect of those documents. Although the Revenue relied on an NMS-generated communication and attempted service, the undisputed proof of filing and acknowledgment rendered the reopening notice and the order disposing the objection unsustainable. Given that the foundational premise for issuing the notice was contradicted by the acknowledged filing, the Court held that the challenge to the notice and the impugned order must succeed on that ground. [Paras 2, 4, 5]

The impugned notice dated 27.03.2018 and the order dated 28.09.2018 are quashed because the return for AY 2011-2012 was filed and acknowledged and this fact was not disputed by the Revenue.

Final Conclusion: Writ petition allowed; the notice dated 27.03.2018 under Section 148 and the order dated 28.09.2018 are quashed. Revenue directed to pay costs to the petitioner as ordered.

Tax deduction certificate under Section 197 - withholding tax rate for offshore supplies - interim equitable relief - undertaking to deposit deficit

Tax deduction certificate under Section 197 - withholding tax rate for offshore supplies - interim equitable relief - Direction for issuance of tax deduction certificate for FY 2020-2021 at the same rate applied for FY 2018-2019 and FY 2019-2020 - HELD THAT: - The Court noted that earlier Tribunal orders for prior years resulted in tax deduction certificates being issued at the lower rate applied for offshore supplies and that the Revenue had raised the rate to 10% for FY 2020-2021. Although the Revenue submitted a change in circumstances for FY 2020-2021 and that detailed enquiry is not normally undertaken at the certificate-issuance stage, the Court found prima facie merit in the petitioner's contention that, even if the Revenue contends a Permanent Establishment, the rate for offshore supplies could not, at this interim stage, be treated as higher than the rate applied in the immediately preceding years. For interim relief, the Court directed issuance of the certificate for FY 2020-2021 in line with the rate applied for FY 2018-2019 and FY 2019-2020, while preserving the Revenue's and parties' rights to contest the matter on merits subsequently. [Paras 6]

For the moment, the tax deduction certificate under Section 197 for FY 2020-2021 shall be issued at the same rate as applied for FY 2018-2019 and FY 2019-2020.

Undertaking to deposit deficit - interim equitable relief - Requirement for petitioner to file an affidavit undertaking to deposit any deficit if the petition ultimately fails - HELD THAT: - The Court conditioned the interim direction on the petitioner filing an affidavit within ten days undertaking that, should it ultimately fail in the writ petition, it will deposit the deficit amount within four weeks of such direction. This preserves the Revenue's interest and balances the interlocutory relief granted, ensuring that the interim benefit can be restored if the final adjudication goes against the petitioner. [Paras 6]

Petitioner to file an affidavit within ten days undertaking to deposit the deficit within four weeks if the writ petition is finally decided against it.

Final Conclusion: Interim relief granted: tax deduction certificate under Section 197 for FY 2020-2021 to be issued at the same rate as for FY 2018-2019 and FY 2019-2020, subject to the petitioner filing an affidavit undertaking to deposit any deficit if it ultimately fails in the petition; matter listed for further hearing.

Reopening of assessment under Section 147 - reasons to believe - failure to disclose fully and truly all material facts - borrowed satisfaction - change of opinion - assessment already made under Section 143(3) - reassessment beyond four years

Reopening of assessment under Section 147 - assessment already made under Section 143(3) - failure to disclose fully and truly all material facts - borrowed satisfaction - change of opinion - Whether the reassessment notice dated 28.03.2019 under Section 148 read with Section 147 was legally valid in respect of the amount already dealt with in the original scrutiny assessment. - HELD THAT: - The Court examined the reasons recorded for reopening and the factual matrix showing that the disputed transaction (approx. Rs. 7,50,055/-) had already been examined and added to income under Section 68 in the original scrutiny assessment framed under Section 143(3). The reasons recorded for reopening were founded solely on information from the Investigation Wing and did not demonstrate any independent application of mind by the Assessing Officer that income chargeable to tax had escaped assessment for the assessment year in question. The material relied upon did not show a distinct transaction or new material separate from what had been earlier considered; accordingly there was no tangible material justifying reopening. The Court noted that mere reliance on investigation inputs without independent satisfaction amounted to borrowed satisfaction, and that the reopening could not be sustained where it amounted to a roving or fishing inquiry or a change of opinion in respect of a matter already adjudicated in the original assessment. Applying these principles, the Court held that the assumption of jurisdiction to reopen was without authority of law. [Paras 15, 16, 17, 18, 19]

The reassessment notice dated 28.03.2019 was quashed as the Assessing Officer acted on information from the investigation wing without independent reasons to believe that income had escaped assessment, and the amount in question had already been dealt with in the original assessment.

Final Conclusion: Writ petition allowed; impugned notice dated 28.03.2019 under Section 148 is quashed and set aside as the reopening was unsustainable in law.

Re-assessment procedure under Section 147/148 - Requirement to furnish reasons and opportunity to file objections - Duty to pass a speaking order on assumption of jurisdiction - Non-compliance with the procedure laid down in GKN Driveshafts (India) Ltd.

Re-assessment procedure under Section 147/148 - Requirement to furnish reasons and opportunity to file objections - Duty to pass a speaking order on assumption of jurisdiction - Non-compliance with the procedure laid down in GKN Driveshafts (India) Ltd. - Validity of the reassessment order dated 31.12.2019 for Assessment Year 2012-13 in view of alleged non-compliance with the procedure mandated by the Supreme Court in GKN Driveshafts - HELD THAT: - The Court examined the timeline following issuance of notice under Section 148 (dated 29.03.2018) and the petitioner's request (09.04.2019) for the reasons for reopening and adoption of the return. The assessing authority did not furnish reasons promptly but instead sought material on merits (communication dated 16.08.2019), furnished reasons only on 29.12.2019, issued a notice under Section 143(2) on 30.12.2019 and passed the assessment order on 31.12.2019 the same day the assessee responded. This procedure ran counter to the mandate in GKN Driveshafts that reasons must be supplied within a reasonable time, the assessee be afforded an opportunity to file objections to the issuance of notice, and the assessing officer dispose of such objections by a speaking order before proceeding to assess on merits. The Court found these stages absent and concluded that the assumption of jurisdiction under Section 147/148 was not procedurally regular in the present case. [Paras 3, 4, 5, 6]

The reassessment order dated 31.12.2019 is annulled for failure to follow the procedure prescribed in GKN Driveshafts; the writ petition is allowed.

Final Conclusion: The assessment order passed on 31.12.2019 for AY 2012-13 is set aside due to non-compliance with the Supreme Court's procedural requirements for reassessment (furnishing reasons, opportunity to object, and a speaking order on assumption of jurisdiction); the writ is allowed and connected matters closed.

Revisional jurisdiction under section 263 - erroneous and prejudicial to the interest of the revenue - reopening of assessment under section 147 - onus to prove identity, creditworthiness and genuineness of share subscribers - dual role of Assessing Officer as investigator and adjudicator

Revisional jurisdiction under section 263 - erroneous and prejudicial to the interest of the revenue - onus to prove identity, creditworthiness and genuineness of share subscribers - dual role of Assessing Officer as investigator and adjudicator - Whether the Principal CIT validly invoked revisional jurisdiction under section 263 in respect of the reassessment order dated 29.12.2017 for AY 2012-13. - HELD THAT: - The Tribunal examined whether the twin conditions for exercise of revisional power - that the AO's order is erroneous and prejudicial to the revenue - were satisfied. The AO had reopened the original scrutiny assessment under section 147 on information from the Investigation Wing and conducted extensive enquiries: multiple hearings, notices under sections 142(1), 143(2), summons under section 131, notices under section 133(6) to the five share applicants, and independent verification of documents including PANs, ITRs, bank statements, company master data and valuation report. Two of the subscribing companies had themselves undergone scrutiny assessments for the same year. On this material the AO accepted the identity, creditworthiness and genuineness of the share capital and premium and passed the reassessment order dated 29.12.2017. The Tribunal held that such enquiries satisfied the AO's investigatory and adjudicatory function under the law applicable to AY 2012-13 (where proof of 'source of source' and taxation of premium arose only in subsequent years). The AO's view was a plausible one and not unsustainable in law. The Principal CIT, before invoking section 263, should have demonstrated deficiency in the AO's enquiry or conducted a preliminary enquiry himself to show infirmity in the material relied upon by the AO; the PCIT did not do so and mischaracterised the AO's proceedings as 'no enquiry' and erred in criticising the AO for not pursuing cash-trails that were not required under the law for the year in question. Consequently the condition precedent for assuming revisional jurisdiction was not satisfied and the PCIT's action was held to be bad in law and quashed. [Paras 11, 12, 14, 20, 21]

The invocation of revisional jurisdiction by the Principal CIT under section 263 was quashed for want of jurisdiction as the AO's reassessment order was not shown to be erroneous and prejudicial to the revenue.

Additional ground not adjudicated - academic issue - Disposition of the additional ground challenging jurisdictional defects in the reassessment order. - HELD THAT: - The assessee raised further grounds alleging jurisdictional defects in the AO's reopening (no satisfaction recorded, mechanical or borrowed satisfaction, scanty reasons, fishing enquiries). Having quashed the PCIT's section 263 action as ab initio void for lack of jurisdiction, the Tribunal declined to adjudicate these additional grounds as they had become academic. The Tribunal left those contentions open without decision. [Paras 17]

The additional ground was not decided as it became academic after quashing the revisional action and was left open.

Final Conclusion: The appeal is allowed: the Principal CIT's order under section 263 (dated 03.06.2020) interfering with the AO's reassessment dated 29.12.2017 for AY 2012-13 is quashed for want of jurisdiction; ancillary jurisdictional grounds were left undecided as academic.

Deduction under section 80IA(4)(iii) - Approval by Ministry of Commerce and Industry for an Industrial Park - Duty of CBDT to notify approved industrial parks and effect of delay in notification - Completion/occupancy certificate and commencement of operations as evidentiary basis for allowance of deduction - Reopening of assessment under section 147

Deduction under section 80IA(4)(iii) - Approval by Ministry of Commerce and Industry for an Industrial Park - Duty of CBDT to notify approved industrial parks and effect of delay in notification - Completion/occupancy certificate and commencement of operations as evidentiary basis for allowance of deduction - Whether the assessee was entitled to deduction under section 80IA(4)(iii) for the assessment year 2009-10 - HELD THAT: - The Tribunal reversed the rejection of the claim for deduction under section 80IA(4)(iii). It followed the coordinate bench decision in the assessee's own case and noted that the Industrial Park had been approved by the Ministry of Commerce and Industry and that the Central Government by notification S.O. 3035(E) dated 8th September 2020 had included M/s Softzone Tech Park Ltd for the relevant scheme period. The Tribunal applied existing judicial authorities holding that once the Ministry has approved an industrial park the CBDT is obliged to notify it and that delay by the CBDT in issuing the notification does not warrant denial of the tax benefit (discussion referring to CIT Vs. Ittina Properties , CIT Ackruti City Ltd , Creative Infocity Ltd. , and Silver I Developers (P) Ltd. & Ors. ). The Tribunal accepted factual material showing commencement and readiness of the park (lease agreements, completion/occupancy-related certificates and electrical completion) and held that the grounds on which the assessing officer disallowed the deduction were not legally and factually sustainable. For these reasons the claim of deduction was allowed. [Paras 7, 8]

Deduction under section 80IA(4)(iii) allowed; grounds 6, 7 and 8 of the appeal are allowed.

Reopening of assessment under section 147 - Validity of proceedings under section 147 as raised in grounds 1 to 5 - HELD THAT: - The assessee did not press grounds 1 to 5 before the Tribunal because the substantive issue on the merits (entitlement to deduction) was decided in the assessee's favour. Having regard to that concession, the Tribunal dismissed these grounds without further adjudication. [Paras 9]

Grounds 1 to 5 dismissed as not pressed; no interference with the reopening was pursued in view of the favourable decision on merits.

Final Conclusion: The Tribunal allowed the appeal in part by reversing the denial of deduction under section 80IA(4)(iii) for AY 2009-10 (grounds 6-8 allowed) and dismissed grounds 1-5 as not pressed; appeal allowed in part.

Person responsible for paying - tax deduction at source under section 194C of the Income-tax Act, 1961 - assessee in default under section 201 of the Income-tax Act, 1961 - remitter versus payer distinction - principle of substance over form - CBDT circulars binding on tax authorities - amendment to section 204 - clause (v) effective from 1.4.2020 - LEX NON COGIT AD IMPOSSIBLIA

Person responsible for paying - tax deduction at source under section 194C of the Income-tax Act, 1961 - remitter versus payer distinction - Whether UISPL can be treated as the 'person responsible for paying' and thus as an 'assessee in default' liable to deduct tax under section 194C for disbursements to Driver-Partners. - HELD THAT: - The Tribunal held that three conditions must co-exist for s.194C to apply: (i) the payer must be the 'person responsible for paying' within section 204, (ii) the payment must be for work carried out for that payer, and (iii) there must be a contract between payer and contractor. On the material before it, UISPL merely acted as a payment and collection service provider collecting on behalf of Uber B.V. and remitting at Uber B.V.'s instruction; it did not contract with Driver-Partners, was not the payer of the sums for carriage services, and did not stand to receive the services. The Tribunal relied on the fact that Users could pay Driver-Partners directly in cash (showing UISPL's limited role), on RBI directions that necessitated local collections, on evidence that the Indian bank account was operated for Uber B.V., and on prior departmental treatment of UISPL as a marketing/support entity without invocation of Chapter XVII-B consequences. The Tribunal further relied on binding CBDT circulars and judicial authorities holding a mere remitter is not a person responsible for payment. Applying the principle that law cannot compel performance where impossible (LEX NON COGIT AD IMPOSSIBLIA), the Tribunal concluded UISPL cannot be treated as person responsible for paying and therefore cannot be an 'assessee in default' under section 201 for failure to deduct under section 194C.

UISPL is not the 'person responsible for paying' and s.194C does not apply; UISPL cannot be treated as an 'assessee in default' for the years under consideration.

Tax deduction at source under section 194C of the Income-tax Act, 1961 - principle of substance over form - CBDT circulars binding on tax authorities - Whether the substance-over-form doctrine or service-tax characterisation (aggregator) could override the contractual arrangements and require UISPL to deduct tax under section 194C. - HELD THAT: - The Tribunal acknowledged the revenue's submission to look at substance over form but held that the contractual arrangements (agreements between Uber B.V. and Driver-Partners and between Uber B.V. and Users) consistently record that lead-generation services are provided by Uber B.V., transportation services are provided directly by Driver-Partners, and UISPL provides support/collection services to Uber B.V. The Tribunal observed that one arm of the legislature had classified Uber (as aggregator) for service-tax purposes, which supports treatment of the transportation activity as between Driver-Partner and User, not UISPL. The Tribunal also relied on CBDT circulars (e.g., Circulars 487, 715, 5/2002) clarifying that intermediaries/remitters acting on behalf of another are not required to deduct TDS, and held that the department cannot take a contrary view for the years under consideration where assessments treated UISPL as a support/marketing entity without invoking Chapter XVII-B. Accordingly, the substance-over-form argument did not lead to imposition of TDS obligation on UISPL.

The substance-over-form contention and service-tax characterisation do not make UISPL liable to deduct tax under section 194C in the facts of the case.

Amendment to section 204 - clause (v) effective from 1.4.2020 - Whether the Finance Act 2020 amendment inserting clause (v) in section 204 (bringing authorised agents and agents of non-residents within 'person responsible for paying') applies retrospectively to make UISPL liable for earlier years. - HELD THAT: - The Tribunal noted that clause (v) to section 204 was inserted with effect from 1.4.2020 (applicable from AY 2020-21) and is not expressed to be retrospective or 'for removal of doubts'. The amendment expressly covers authorised persons/agents of non-residents, but its effective date confines its operation to periods on or after 1.4.2020. The Tribunal held that applying this amendment to the years before its effective date would render the legislative insertion otiose and is impermissible; consequently the amendment could not be invoked to fasten liability on UISPL for AYs 2016-17 and 2017-18.

The amendment to section 204 by Finance Act 2020 is prospective from 1.4.2020 and does not make UISPL liable for the years before that date.

Penalty proceedings under section 271C - Whether penalty proceedings under section 271C should be adjudicated at this stage. - HELD THAT: - The Tribunal observed that initiation or adjudication of penalty under section 271C is premature at the present stage of proceedings. As the primary liability under sections 201/194C was negatived, substantive consideration of penalty was not required. The Tribunal therefore left any penalty proceedings to be considered at the appropriate stage.

Penalty proceedings under section 271C are premature and not adjudicated in this order.

Final Conclusion: Appeals allowed. For AYs 2016-17 and 2017-18 the Tribunal held that UISPL was a mere payment/collection service provider and not the 'person responsible for paying' within the meaning of section 194C read with section 204; accordingly UISPL is not an 'assessee in default' under section 201 and no TDS liability under section 194C was attracted for the years under consideration. The 2020 amendment to section 204 is prospective (from 1.4.2020) and does not apply to these years; interest/penalty consequences were left consequential or premature as recorded.

Apportionment of head office expenses between agricultural and non-agricultural income - Deductibility of head office expenses against business (interest) income - Director's remuneration attributable to agricultural operations - Principle of consistency in income-tax proceedings - Res judicata inapplicable to income-tax proceedings

Apportionment of head office expenses between agricultural and non-agricultural income - Director's remuneration attributable to agricultural operations - Whether head office expenses could be apportioned to agricultural income for assessment year 2014-15 and, if so, the extent of such apportionment - HELD THAT: - The Tribunal accepted that the assessee maintained separate books for agricultural operations and head office and that, except for director's remuneration, the head office expenses did not bear upon agricultural activity. The assessee had admitted that the director personally supervised estate activity; accordingly only the director's remuneration was found to have a live link with agricultural operations. The Assessing Officer's broad apportionment of all head office expenses to agricultural income (by ratio of agricultural to non agricultural income) was held to be unjustified. The Tribunal restricted apportionment to the director's remuneration and deleted the apportioned treatment of all other head office expenses for assessment year 2014 15. [Paras 7, 8]

Apportionment restricted to director's remuneration; apportionment of all other head office expenses to agricultural income deleted for 2014-15.

Principle of consistency in income-tax proceedings - Apportionment of head office expenses between agricultural and non-agricultural income - Whether the Assessing Officer was correct in disallowing all head office expenses in assessment year 2015-16 when in the immediately preceding year he had apportioned such expenses between agricultural and non-agricultural income - HELD THAT: - The Tribunal noted that while res judicata is not applicable to income tax proceedings, the Assessing Officer is required to follow a consistent approach where facts remain unchanged. Having accepted in the preceding year that head office expenses required apportionment, the Assessing Officer's subsequent wholesale disallowance for 2015 16 (without change in facts) was inconsistent and erroneous. The Tribunal applied the same reasoning as for the preceding year and directed that only director's remuneration be apportioned to agricultural operations for 2015 16, deleting the disallowance of other head office expenses. [Paras 9, 11]

Disallowance of all head office expenses for 2015-16 set aside; only director's remuneration to be apportioned to agricultural operations.

Deductibility of head office expenses against business (interest) income - Proper head under which interest income should be assessed for 2015-16 and whether head office expenses (other than director remuneration) are allowable against that interest income - HELD THAT: - The Tribunal observed that in the earlier year interest income had been accepted as business income by the Assessing Officer, and there was no change in facts to justify reclassifying it as income from other sources for 2015 16. The Tribunal directed the Assessing Officer to treat interest income for 2015 16 under the head 'income from business' as claimed by the assessee and to allow head office expenses (other than director's remuneration) against that interest income. [Paras 10]

Interest income for 2015-16 to be treated as business income and head office expenses (except director's remuneration) allowed against it.

Final Conclusion: Both appeals are partly allowed: for 2014 15 apportionment of head office expenses to agricultural income is limited to the director's remuneration and other apportionments deleted; for 2015 16 the total disallowance of head office expenses is set aside, only director's remuneration is to be apportioned to agricultural operations, and interest income is to be taxed as business income with head office expenses (other than director's remuneration) allowable against it.

Contempt of court - compliance with court order - apology and condonement - provisional release - pass appropriate order in accordance with law

Contempt of court - apology and condonement - The validity and consequence of the answering respondent's inadvertent non-compliance with the High Court's earlier order and the effect of the apology tendered. - HELD THAT: - The Court recorded the affidavit of the Joint Commissioner of Customs explaining that the non-compliance arose from a misperception of paragraphs 11 and 12 of the earlier order and from a panicked, but sincere, attempt to comply within the prescribed time. The answering respondent unequivocally apologised on record, disavowing any wilful or deliberate disregard of the Court's directions, and undertook that the incident would not recur. The Court noted the explanation and the expression of regret and accepted the apology as a basis for taking a magnanimous view of the matter rather than treating the act as deliberate contempt. [Paras 1, 4, 5, 7, 9]

Apology accepted and the non-compliance treated as inadvertent; the Court declined to label the conduct as wilful contempt.

Compliance with court order - provisional release - pass appropriate order in accordance with law - Requirement that the respondent pass a fresh order complying with the High Court's directions regarding provisional release. - HELD THAT: - The Court noted the respondent's undertaking to obtain legal opinion and to pass a fresh provisional release order in accordance with law. The learned Standing Counsel assured that an appropriate order would be passed within 48 hours. The Court directed Mr. Sankhesh Mehta, the Joint Commissioner of Customs, to revisit the order dated 11.01.2021 and to pass an appropriate order in accordance with law, thereby requiring fresh administrative action to give effect to the Court's earlier directions. [Paras 1, 2, 3]

Respondent directed to pass an appropriate order in accordance with law (including on provisional release) within the timeframe indicated; civil application disposed accordingly.

Final Conclusion: The Court accepted the answering respondent's unconditional apology for inadvertent non-compliance, declined to treat the conduct as wilful contempt, directed the Joint Commissioner to pass a fresh order in accordance with law (including on provisional release) within the timeframe indicated by the respondent, and disposed of the civil application.

Constitution of National Tribunals Commission - Administrative independence of tribunals - Filling up of vacancies and appointments to tribunals - Tribunals wing in the Ministry of Finance as an interregnum measure - Judicial independence of tribunals

Filling up of vacancies and appointments to tribunals - Administrative independence of tribunals - Tribunals wing in the Ministry of Finance as an interregnum measure - Whether the petitioner's prayers for directions to assess the requirement of NCLT benches and to formulate a rolling recruitment plan are maintainable and require independent relief from this Court. - HELD THAT: - The High Court examined the Supreme Court's decision in Madras Bar Association v. Union of India and observed that that judgment has already directed the setting up of a National Tribunals Commission and, as an interim measure, the creation of a separate tribunals wing in the Ministry of Finance to address administrative, staffing and infrastructural needs of tribunals. The Court noted that the Supreme Court's directions specifically cover selection, re appointment, inquiry against members, monitoring of functioning, filling up of vacancies and ensuring adequate infrastructure and IT support. Having found that the reliefs sought in the petition (assessment of requirement of NCLT benches and a rolling recruitment plan) are comprehensively addressed by the Supreme Court's directions, the High Court held that separate relief from this Court was not called for. The Court nevertheless emphasised that the respondents must implement the Supreme Court's directions expeditiously. [Paras 6, 7, 9]

Petition dismissed as the reliefs claimed are covered by the Supreme Court's directions in Madras Bar Association; respondents directed to implement those directions expeditiously; petition disposed of.

Final Conclusion: The petition seeking directions for assessment of NCLT benches and a rolling recruitment plan is disposed of as the Supreme Court's directions for establishment of a National Tribunals Commission and, meanwhile, a tribunals wing in the Ministry of Finance already address the matters raised; the respondents are directed to implement those directions expeditiously.

Appointment of whole-time Company Secretary - e-form ACTIVE (INC-22A) - non-compliance with Section 203 - penalties for default under Section 203 - power to proceed under the Companies Act - interim permission

E-form ACTIVE (INC-22A) - appointment of whole-time Company Secretary - interim permission - Petitioners permitted, on a provisional basis, to file e-form ACTIVE (INC-22A) without insisting on appointment of a whole-time Company Secretary. - HELD THAT: - The court recorded that interim orders had earlier been passed permitting the petitioners to file e-form ACTIVE, Form PAS-03 and Form DIR-12 without insisting on appointment of a whole-time Company Secretary provisionally pending further orders (record of earlier interim relief). While noting the existing rules obliging companies with paid-up capital above the specified threshold to appoint a whole-time Company Secretary, the court sustained the provisional permission to file the e-form without deciding the legality of the requirement. The court expressly clarified that the interim orders are provisional and do not constitute a determination on the merits of Section 203 or Rule 8A. [Paras 5, 9]

Provisional permission to file e-form ACTIVE (INC-22A) without a whole-time Company Secretary maintained; interim character of relief affirmed.

Non-compliance with Section 203 - penalties for default under Section 203 - power to proceed under the Companies Act - Respondents are entitled to proceed against the petitioner-companies for non-compliance with Section 203 in accordance with law; legality of Section 203 and Rule 8A not adjudicated. - HELD THAT: - The court observed that the petitioner-companies have not adhered to the statutory requirement concerning appointment of Key Managerial Personnel and noted the statutory penal consequences for default under Section 203, including company and officer-level penalties and continuing default penalties. On that basis the court disposed of the petitions while granting liberty to the respondents to initiate proceedings against the companies if so advised. The court explicitly refrained from pronouncing on the merits or legality of Section 203 or Rule 8A, leaving those questions open for determination in appropriate proceedings. [Paras 9, 10]

Liberty granted to the respondents to proceed against the petitioners for alleged violations of Section 203; no adjudication on the legality of Section 203 or Rule 8A.

Final Conclusion: Writ petitions disposed: provisional interim permission to file e-form ACTIVE (INC-22A) without a whole-time Company Secretary is maintained as interim relief, while the respondents are granted liberty to take action for non-compliance with Section 203; the court did not decide the legality of Section 203 or Rule 8A.

Family settlement - Board resolution as source of shareholder rights - Maintainability of civil suit vis-a -vis jurisdiction of the NCLT - Section 430 of the Companies Act, 2013 - ouster of civil court jurisdiction - Piercing the corporate veil - Order VI Rule 2 CPC - requirement of pleading material facts - Order XII/Order XXII Rule 6 CPC - summary adjudication on admissions - Enforceability of shareholders' arrangements/agreements against the company - Specific performance and Section 41(h) of the Specific Relief Act - injunction as alternate remedy

Family settlement - Order VI Rule 2 CPC - requirement of pleading material facts - Whether the plaint pleaded a family settlement sufficient to found the suit. - HELD THAT: - The Court held that the plaint did not plead the material facts necessary to establish a family settlement. While paras 8-11 made passing references to an "understanding" and to a Board Resolution dated 21.07.1990, those averments were unspecific and vague and did not disclose the particulars or parties to a family settlement or seek specific performance thereof. A suit must be founded upon the material facts pleaded; parties cannot travel beyond pleadings at trial. The change in course of submissions during hearings to invoke a family settlement could not cure the omission in pleadings, and evidence could not be permitted to supplement the deficiency. The learned Single Judge's finding that no foundational pleading of a family settlement existed was upheld. [Paras 5, 6, 7, 8]

No sufficiently pleaded family settlement; plaint deficient under Order VI Rule 2 CPC and suit cannot proceed on that unpleaded basis.

Board resolution as source of shareholder rights - Maintainability of civil suit vis-a -vis jurisdiction of the NCLT - Section 430 of the Companies Act, 2013 - ouster of civil court jurisdiction - Enforceability of shareholders' arrangements/agreements against the company - Whether the alleged Board Resolution (21.07.1990) could be enforced by the appellant in a civil suit or whether the dispute falls within the jurisdiction of the NCLT. - HELD THAT: - Assuming, for argument, that the Board Resolution existed, the Court held that any right asserted under it related to management of the company's affairs and therefore fell within the special jurisdictional domain designated for corporate-management disputes. Section 430 of the Companies Act, 2013 ousts civil court jurisdiction over matters within the NCLT's competence. Even absent Section 430 (i.e., historically), jurisprudence disallows civil courts from adjudicating pure management disputes of a company. The appropriate remedy for an aggrieved shareholder challenging corporate management decisions is before the NCLT (or the statutory forum then available). Consequently, the suit seeking enforcement/allotment under the Board Resolution was not maintainable in a civil court. [Paras 9, 12, 13]

The appellant's claim, being a management dispute under the Board Resolution, is not maintainable in a civil suit and must be pursued before the NCLT; civil court relief was properly declined.

Deepa Anant authorities - Enforceability of shareholders' arrangements/agreements against the company - Whether reliance on Deepa Anant-1990 supported the proposition that a family arrangement is binding on the company. - HELD THAT: - The Court observed that the appellant relied on the earlier decision of Deepa Anant-1990 for the proposition that a family arrangement may bind a company. The Court noted that the 1990 decision did not sustain that reasoning on appeal and that the matter was subsequently set aside/compromised (1994), facts not placed before the court. In any event, since no family settlement was properly pleaded or proved, the precedent did not assist the appellant. The Single Judge's treatment of the authorities was therefore upheld. [Paras 15]

The appellant's reliance on Deepa Anant-1990 is misplaced and does not support enforceability of the alleged family arrangement against the company in the circumstances of this case.

Order XII/Order XXII Rule 6 CPC - summary adjudication on admissions - Whether the learned Single Judge was justified in invoking summary adjudication under Order XII/Order XXII Rule 6 CPC in dismissing the suit. - HELD THAT: - The Court held that the learned Single Judge properly examined maintainability at the stage after issues were framed and legitimately exercised the power under Order XII/Order XXII Rule 6 CPC to deliver judgment based on admissions or on the absence of a pleaded cause of action. The provision is to be interpreted broadly to effectuate its objective; the jurisdiction to determine maintainability at that stage is not precluded. The pleaded case did not disclose material facts to sustain the reliefs claimed, and thus summary dismissal was legally permissible. [Paras 16]

Exercise of summary adjudication jurisdiction under Order XII/Order XXII Rule 6 CPC was correct.

Piercing the corporate veil - Enforceability of shareholders' arrangements/agreements against the company - Whether the appellant had pleaded facts to justify lifting the corporate veil so as to bind the company to the alleged family arrangement. - HELD THAT: - The Court reiterated that piercing the corporate veil is an exception requiring specific and particular pleadings of circumstances such as fraud, misrepresentation or diversion of assets. No such foundation was laid in the plaint. General or bald averments regarding family ownership without particularised pleading do not suffice to attract the exceptional doctrine. The Single Judge correctly held that there was no case made out to lift the corporate veil. [Paras 3, 11, 12]

No pleaded foundation for piercing the corporate veil; the company cannot be bound by the alleged inter-se family arrangement on the present pleadings.

Final Conclusion: The impugned judgment dismissing the suit for lack of a properly pleaded and enforceable family settlement and for being a management dispute within the NCLT's jurisdiction is affirmed; the appeal is dismissed, with the appellate court reducing the costs awarded to the respondent to Rs. 50,000 and disposing of pending applications.

Restrictions on appearance under Rule 121 of the National Company Law Tribunal Rules, 2016 - Standards of Professional Conduct and Etiquette (Bar Council of India) - Rule 33 - Conflict of interest and duty to disclose prior engagements by counsel - Disciplinary jurisdiction of the Bar Council under the Advocates Act, 1961 - Scope of Tribunal's jurisdiction to entertain complaints of professional misconduct

Disciplinary jurisdiction of the Bar Council under the Advocates Act, 1961 - Scope of Tribunal's jurisdiction to entertain complaints of professional misconduct - Whether the Tribunal can entertain and decide complaints alleging violation of professional conduct and etiquette by advocates or whether such complaints fall within the disciplinary jurisdiction of the Bar Council - HELD THAT: - The Tribunal examined Rule 33 of the Standards of Professional Conduct and Etiquette (Bar Council of India) and relevant provisions of the Advocates Act, 1961 (Sections 35, 36 and 36B), and considered precedents addressing conflict-of-interest and professional misconduct. Having regard to the statutory scheme which vests disciplinary functions in State Bar Councils and the Bar Council of India and prescribes the procedure for disposal of complaints, the Tribunal concluded that it lacks jurisdiction to entertain or decide complaints of professional misconduct against advocates. The Tribunal therefore did not adjudicate the merits of the allegations (such as alleged breaches of Rule 121 of the NCLT Rules or Rule 33 of the BCI standards), but directed that the Applicants may seek redressal before the appropriate Bar Council, observing that disciplinary remedy lies under the Advocates Act and related rules. [Paras 24, 25, 26, 27, 28]

Tribunal has no jurisdiction to entertain complaints of professional misconduct; Applicants directed to approach the Bar Council for redressal and the interlocutory application is disposed of.

Final Conclusion: Interlocutory Application disposed of on the ground that allegations of professional misconduct by advocates fall within the disciplinary jurisdiction of the Bar Council under the Advocates Act, 1961; Applicants advised to approach the Bar Council for remedy.

Validity of rights/further issue of shares and compliance with the statutory offer procedure under Section 62(1)(a) - Issue of shares to persons other than existing shareholders and the role of special resolution and valuation under Section 62(1)(c) - Conversion of accrued professional fees into loan accounts and classification of liabilities in financial statements - Allegation of acceptance of deposits and applicability of the deposit provisions - Vacating of office of Additional Directors by operation of law under the limited tenure of appointment - Shifting of registered office outside local limits and its relevance to oppression and mismanagement - Relief under the oppression and mismanagement jurisdiction of Sections 241 and 242 and the requirement of continuous, prejudicial conduct

Validity of rights/further issue of shares and compliance with the statutory offer procedure under Section 62(1)(a) - Issue of shares to persons other than existing shareholders and the role of special resolution under Section 62(1)(c) - Whether the allotment of the impugned shares was made in violation of the Companies Act and is liable to be set aside - HELD THAT: - The Tribunal examined the statutory scheme for further issue of share capital and the conditions for a rights offer. The record showed that Letters of Offer were issued to the petitioners in respect of the impugned allotments and that where shareholders did not accept within the notice period the board was entitled to dispose of the shares in a manner not disadvantageous to shareholders and the company. The Tribunal took into account the company's financial position and the need to raise capital, observed that audited accounts and AGM documents demonstrating awareness were available, and noted the petitioners' attendance at certain AGMs and board-related documents relied upon by respondents. Applying the principle that an unaccepted offer is deemed declined and having found compliance with the procedural conditions of a rights offer, the Tribunal held that the allotments (including the 11,420,200 shares specifically impugned) were valid and not in contravention of Section 62(1)(a). The Tribunal therefore found no ground to order rectification of the register or cancellation of those allotments. [Paras 38, 39, 40, 41, 44]

The allotment of the impugned shares is validly done and is not to be set aside.

Conversion of accrued professional fees into loan accounts and classification of liabilities in financial statements - Applicability of deposit provisions and Section 73 - Whether the transfer of amounts shown as professional fees to unsecured loans and any alleged acceptance of deposits contravened the Act - HELD THAT: - The Tribunal considered the board minutes and attendance register for the relevant board meeting where the agenda to transfer professional fees to loan accounts was placed and recorded that the petitioners were present and had signed the attendance register. The minutes reflected a discussion on the company's poor financial position and a decision to transfer professional fees to loan accounts with an undertaking to pay when the financial position improved. On the question of deposits, the Tribunal noted the respondents' contention that no public deposits were accepted and that classification of a liability under a particular head in financial statements is a business/accounting decision subject to accounting standards. In the factual matrix, the Tribunal treated the corporate action as having been taken by the board and found no established contravention warranting relief under Sections 241/242. [Paras 35, 45, 46]

The transfer of professional fee entries to unsecured loans was effected pursuant to a board decision and no violation was established that would warrant remedy under Sections 241/242; allegations under Section 73 were not made out.

Vacating of office of Additional Directors by operation of law under the limited tenure of appointment - Whether the petitioners continued to be directors as Additional Directors beyond the statutory tenure - HELD THAT: - The Tribunal applied the rule relating to appointment of Additional Directors and their tenure until the ensuing annual general meeting (or the last date on which it should have been held). On the admitted facts, the petitioners had been appointed as Additional Directors on 04.11.2013 and, under the operation of law, ceased to hold office when the requisite general meeting was not held to regularize their appointment. The Tribunal therefore rejected the petitioners' contention that they continued to hold directorships and observed that respondents were entitled to file forms and that the petitioners ceased to be directors by operation of law. [Paras 42, 43]

The petitioners ceased to be Additional Directors by operation of law and did not retain directorship thereafter.

Shifting of registered office outside local limits and its relevance to oppression and mismanagement - Whether the shifting of the registered office amounted to oppressive conduct or mismanagement warranting relief - HELD THAT: - The Tribunal noted the facts that the registered office was shifted to the hospital address and that AGMs/adjourned AGMs were held there with attendance by the petitioners. The Tribunal observed that shifting a registered office, by itself, does not constitute oppression or mismanagement unless shown to have caused loss or to have been undertaken to impose oppressive pressure. The petitioners failed to demonstrate that the shift caused prejudice or wasteful expenditure, and therefore the allegation of shifting was insufficient to found relief under Sections 241/242. [Paras 46, 47]

Shifting of the registered office did not constitute oppression or mismanagement warranting interference.

Relief under the oppression and mismanagement jurisdiction of Sections 241 and 242 and the requirement of continuous, prejudicial conduct - Whether the petitioners established a case of oppression or mismanagement that would warrant relief under Sections 241 and 242 - HELD THAT: - The Tribunal reviewed authoritative principles that relief for oppression/mismanagement requires demonstration of continuous acts prejudicial to members and that isolated or unproven acts do not suffice. Applying these principles to the aggregate of allegations-including alleged forged minutes, irregular allotments, conversion of fees to loans and shifting of office-the Tribunal found that the petitioners failed to prove continuing oppressive conduct up to the date of filing. The Tribunal also noted the absence of specific prayers for forensic examination of signatures or cancellation of particular board resolutions. In exercise of its evaluative and equitable jurisdiction, the Tribunal concluded that the facts did not justify intervention or winding up and that the petitioners had not established the requisite oppression/mismanagement. [Paras 49, 50, 52, 53, 56]

The petitioners did not prove oppression or mismanagement; no relief under Sections 241/242 is warranted and the petition is to be dismissed.

Final Conclusion: The Tribunal dismissed the company petition under Sections 241 and 242, holding that the impugned allotments were validly made in compliance with the rights offer procedure, that the conversion of professional fees to loan accounts was effected by board decision and no violation of deposit provisions was established, that the petitioners had ceased as Additional Directors by operation of law, and that the petitioners failed to prove continuing oppression or mismanagement. The petition is dismissed and connected interlocutory application closed.

Jurisdiction of the National Company Law Tribunal under Section 60(5)(c) of the Insolvency and Bankruptcy Code - residuary jurisdiction in matters arising out of or in relation to insolvency resolution proceedings - ipso facto clauses and their enforceability in insolvency - moratorium and protection of going concern under Section 14 of the IBC - instrument having effect by virtue of any law and Section 238 of the IBC - preservation of corporate debtor as a going concern and duties of the resolution professional - relation between sectoral/regulatory fora (GERC) and NCLT jurisdiction

Jurisdiction of the National Company Law Tribunal under Section 60(5)(c) of the Insolvency and Bankruptcy Code - residuary jurisdiction in matters arising out of or in relation to insolvency resolution proceedings - relation between sectoral/regulatory fora (GERC) and NCLT jurisdiction - Whether the NCLT/NCLAT could exercise jurisdiction under Section 60(5)(c) of the IBC over the dispute concerning termination of the PPA. - HELD THAT: - Section 60(5)(c) confers on the NCLT a wide, residuary jurisdiction to entertain any question of law or fact arising out of or in relation to insolvency resolution or liquidation under the Code. That jurisdiction must be read in the context and object of the IBC - to avoid multiplicity of fora and to ensure timely resolution and preservation of the corporate debtor as a going concern. Where a dispute arises solely from, or is directly connected to, the insolvency resolution process (for example, where termination of a contract is sought solely because CIRP has been commenced), it falls within Section 60(5)(c) and may be adjudicated by the NCLT. This does not mean NCLT has blanket jurisdiction over all contractual or public-law disputes; issues that do not arise from or relate to the insolvency of the corporate debtor remain for the appropriate fora (for example, the State Commission under the Electricity Act) and NCLT must not usurp jurisdiction in such matters. In the facts of this case the termination was predicated solely on the initiation of CIRP and thus had the necessary nexus with the insolvency proceeding to invoke NCLT jurisdiction. [Paras 67, 69, 72, 73, 173]

NCLT/NCLAT had jurisdiction under Section 60(5)(c) to adjudicate the dispute because the termination of the PPA arose solely out of and in relation to the insolvency resolution of the corporate debtor.

Ipso facto clauses and their enforceability in insolvency - moratorium and protection of going concern under Section 14 of the IBC - instrument having effect by virtue of any law and Section 238 of the IBC - Whether the appellant's termination of the PPA under Articles 9.2.1(e) and 9.3.1 could be set aside by the NCLT/NCLAT in the facts of this case. - HELD THAT: - The broader, general question of the legal validity of ipso facto clauses in India is complex and raises policy considerations appropriately addressed by Parliament; the Court declines to formulate an exhaustive rule and invites legislative clarification. On the facts, the PPA was the corporate debtor's sole contract and essential to its existence as a going concern. The termination notice relied solely on the initiation of CIRP (an ipso facto trigger). Given (a) the centrality of the PPA to the corporate debtor's ability to continue as a going concern and (b) the IBC's object to preserve value and maximise prospects of resolution, the adjudicating authority (NCLT) was empowered under Section 60(5)(c) to restrain the termination. The Court emphasised that such intervention is limited to cases where termination would effectively cause the corporate death of the debtor; it should not be used to set aside contractual terminations that merely diminish value but do not jeopardize the survival of the corporate debtor. [Paras 69, 153, 165, 166, 173]

The NCLT/NCLAT correctly stayed the appellant's termination of the PPA because, in the facts of this case, termination (being solely on the ground of insolvency) would have rendered the corporate debtor defunct and thereby jeopardised the CIRP.

Residuary jurisdiction in matters arising out of or in relation to insolvency resolution proceedings - Whether NCLAT could, in its appellate order, alter or delete the NCLT's observation permitting termination in the event of liquidation (paragraph 35 of NCLT order). - HELD THAT: - The NCLT had observed that termination could be permissible if liquidation proceedings were initiated. That observation was not challenged by the appellant in the pleadings before NCLAT and no pleadings or prayers were made on that specific point. NCLAT deleted paragraph 35 and held that termination would not be permitted even on liquidation. The Supreme Court held that NCLAT exceeded its jurisdiction in doing so because the issue of termination on liquidation was not before it; consideration of that hypothetical question in the absence of pleadings was beyond the scope of the appeal and would be academic. [Paras 171]

NCLAT exceeded its jurisdiction by addressing and deleting the NCLT's paragraph 35 regarding termination on liquidation; that issue was not properly before NCLAT.

Actus curiae neminem gravabit and liability for acts performed under court orders - Whether the appellant is liable to pay for electricity injected by the corporate debtor after the date it purported to terminate the PPA but during which interim injunctions prevented termination. - HELD THAT: - The appellant served a termination notice effective from 7 June 2019 but injunctions prevented exercise of the termination. The Court held that because the termination has been set aside and the PPA continues to operate, the appellant is liable to pay for electricity procured after 7 June 2019. The appellant's contention that it should be indemnified for actus curiae neminem gravabit was rejected because the termination could not lawfully be effected while the injunctions were in place and relief against payment therefore does not arise. Consequential claims for termination compensation do not arise while termination is restrained. [Paras 172]

The appellant is liable to pay for electricity supplied after 7 June 2019; its claim to compensation for termination does not arise while termination is restrained.

Ipso facto clauses and their enforceability in insolvency - Whether the Court should decide the broader legal question of the general validity or invalidity of ipso facto clauses in India. - HELD THAT: - The Court recognized that the doctrine engages complex policy choices and detailed exceptions that bear on separation of powers and commercial certainty. Comparative jurisprudence shows diverse approaches and many jurisdictions address the matter legislatively. Given the practical difficulties and the wide implications of any general rule, the Court declined to pronounce a definitive, general rule on ipso facto clauses. Instead it left the broader issue open for Parliament, while articulating the considerations relevant to legislative deliberation and limiting its own intervention to the present factual matrix. [Paras 140, 141, 173]

The broader question of the validity or invalidity of ipso facto clauses is left open for legislative determination; the Court will not lay down an exhaustive rule in this case.

Final Conclusion: The appeal is dismissed. The NCLT/NCLAT were within their jurisdiction under Section 60(5)(c) of the IBC to restrain termination of the PPA because the termination was predicated solely on the initiation of CIRP and, in the unique factual matrix where the PPA was the corporate debtor's sole contract, termination would have caused the corporate debtor's death and defeated the CIRP; the broader legal question on ipso facto clauses is left to the legislature; NCLAT exceeded jurisdiction in deleting the NCLT's observation on liquidation; and the appellant must pay for electricity supplied after 7 June 2019.

Admission of claim in CIRP - registration of instrument and relation back - proof of payment / consideration for assignment - assignment of debt and stepping into the shoes of the assignor - related party under Section 5(24) and implications for Committee of Creditors - role and duties of the Resolution Professional in prima facie scrutiny

Registration of instrument and relation back - admission of claim in CIRP - Effect of non-registration of the Assignment Deed at the time the claim was made before the Resolution Professional - HELD THAT: - The Tribunal recorded that when the claim was presented to the Resolution Professional the Assignment Deed dated 18th May, 2020 remained unregistered and that this defect was specifically noted by the Resolution Professional in his communication dated 11.06.2020. Although the Appellant later registered the Assignment Deed, it did not re-submit the claim to the Resolution Professional after registration. Consequently the Adjudicating Authority rightly treated the Resolution Professional's refusal to act on an unregistered document at the time of claim as justified. The observation that registration within the four months permitted under the Registration Act may relate back does not alter the fact that the claim before the Resolution Professional had been made on the basis of an unregistered deed which the Resolution Professional could lawfully ignore in the admission exercise. [Paras 18, 19]

The Adjudicating Authority correctly held that the Resolution Professional was entitled to disregard the unregistered Assignment Deed when the claim was originally made; later registration without re-filing the claim did not cure the deficiency for the purpose of that admission.

Proof of payment / consideration for assignment - admission of claim in CIRP - Sufficiency of evidence of payment of consideration stated in the Assignment Deed - HELD THAT: - The Resolution Professional recorded that no satisfactory documentary evidence (such as bank statements) was produced to demonstrate receipt of the stated consideration by the assignor. The Appellant and assignor did not place contemporaneous bank evidence before the Resolution Professional; the assignor itself accepted that such bank statements were not filed. In a summary admission exercise the absence of satisfactory proof of payment on the face of the material before the Resolution Professional justified declining to act on the assignment. [Paras 9, 10, 21]

The Resolution Professional was justified in treating the absence of adequate proof of payment as a ground for not accepting the Assignment Deed for admission of the claim.

Assignment of debt and stepping into the shoes of the assignor - related party under Section 5(24) and implications for Committee of Creditors - Whether the Appellant could be treated as an independent non-related Financial Creditor or must be regarded as having stepped into the shoes of the assignor who had earlier been held a related party - HELD THAT: - An earlier order of the Adjudicating Authority dated 20.11.2019 had held the assignor to be a related party and that order was not challenged and attained finality. Even though the Assignment Deed purported to transfer only receivables and not shares, the Tribunal held that, on the available record, the Appellant would be treated as having stepped into the shoes of the assignor. The Tribunal noted that if the Appellant and assignor can place evidence of actual payment before the Resolution Professional, the Resolution Professional may treat the Appellant as a related party Financial Creditor to the extent of admitted/non-admitted claims as was earlier recognised by the Interim Resolution Professional. The Tribunal therefore declined to disturb the Adjudicating Authority's conclusion that the Appellant could not claim independent non-related status for admission into the CoC on the existing material. [Paras 14, 15, 22]

In view of the final finding that the assignor was a related party, and absent satisfactory evidence to the contrary, the Appellant must be regarded as having stepped into the shoes of the assignor and cannot be admitted to the CoC as an independent non-related Financial Creditor on the then-available record.

Role and duties of the Resolution Professional in prima facie scrutiny - Extent of Resolution Professional's power to decline admission of a claim on prima facie examination - HELD THAT: - The Tribunal accepted that the Resolution Professional does not possess adjudicatory powers to finally decide complex disputes of title, but he is required to perform a prima facie scrutiny of documents placed before him for admission of claims. Where the Assignment Deed was unregistered at the time of claim and where evidence of payment was not satisfactorily produced, the Resolution Professional's decision not to act upon the assignment in the admission process was within his functions and not interfered with by the Adjudicating Authority. [Paras 6, 16, 21]

The Resolution Professional acted within his remit in declining to admit the claim on the basis of the material before him; the Adjudicating Authority did not err in upholding that approach.

Final Conclusion: The Tribunal declined to interfere with the Impugned Order rejecting the Appellant's application; the appeal is dismissed. The Resolution Professional's refusal to admit the claim based on the unregistered Assignment Deed at the time of filing and lack of satisfactory proof of consideration was upheld, and, in the absence of fresh evidence placed before the Resolution Professional, the Appellant cannot be admitted as an independent non-related Financial Creditor to the CoC.

Liquidation proceedings extension - private sale of assets under liquidation - reserve price reduction by 25% - mode of sale under Regulation 33 of IBBI (Liquidation Process) Regulations, 2016 - prohibition on private sale to related parties and collusion - recording liquidator's address with Registrar of Companies

Liquidation proceedings extension - Extension of the liquidation period of the corporate debtor for one year from 15.01.2021 to 15.01.2022. - HELD THAT: - The Tribunal considered the liquidator's affidavit, the 12th progress report and the disruption caused by lockdown and paucity of bidders despite multiple e-auctions and publicity. On examining the material filed, the Tribunal found it necessary to enable the liquidator to continue discharge of duties and complete the liquidation process. Having regard to these circumstances and the absence of successful realisations to date, the Tribunal exercised its power to extend the liquidation period for a further year to allow completion of the liquidation process. [Paras 10, 11]

Liquidation proceedings extended from 15.01.2021 to 15.01.2022.

Private sale of assets under liquidation - mode of sale under Regulation 33 of IBBI (Liquidation Process) Regulations, 2016 - reserve price reduction by 25% - prohibition on private sale to related parties and collusion - Permission to effect a private sale of the 9 cents of land to Sh. Mishael Jose for Rs. 6 lakhs subject to compliance with the IBBI (Liquidation Process) Regulations, 2016 and Schedule I. - HELD THAT: - The Tribunal reviewed the history of three unsuccessful e-auctions, the valuation report filed by the registered valuer, the classification of the land as wetland with attendant restrictions affecting marketability, and the prospective buyer's interest arising from familial connection. Regulation 33 permits private sale in specified circumstances and allows reduction of the reserve price by up to 25% where applicable, but bars private sale without prior authority to related parties and where collusion is suspected. Having received the valuer's certificate valuing the land at approximately the liquidation value and noting poor market response despite advertisement and attempts to solicit creditors' interest, the Tribunal concluded that a private sale in the present facts is permissible. The Tribunal therefore authorised the liquidator to sell the specified land to the named purchaser for the stated amount, strictly following the IBC Regulations and Sub clause 4(A) of Clause I of Schedule I. [Paras 7, 9, 11]

Private sale to Sh. Mishael Jose for Rs. 6 lakhs permitted, subject to strict compliance with Regulation 33, Schedule I and related safeguards.

Recording liquidator's address with Registrar of Companies - Direction to the Registrar of Companies, Kerala to record the liquidator's address as the company's address for communication until conclusion of the CIRP. - HELD THAT: - The liquidator sought that the Ministry of Corporate Affairs records his office address as the communication address of the corporate debtor to facilitate the liquidation process and to avoid recurring costs arising from occupation of premises on a rental basis. The Tribunal directed the ROC, Kerala to record the liquidator's address as specified, while expressly prohibiting any further change of that recorded address by the liquidator until the corporate insolvency resolution process is concluded, thereby ensuring stability of contact details during liquidation. [Paras 6, 11]

ROC Kerala directed to record the liquidator's address as specified; liquidator not permitted to change that address until conclusion of the CIRP.

Final Conclusion: The Tribunal allowed the liquidator's application: liquidation extended to 15.01.2022; private sale of the 9 cents land to the named purchaser at the approved price authorised subject to strict compliance with the IBBI (Liquidation Process) Regulations, 2016 and Schedule I; and the ROC, Kerala directed to record the liquidator's address as the company's address for communication until CIRP concludes.

Delay in compliance with tribunal order - principles of natural justice in claim verification under CIRP - verification of claims by Resolution Professional - reliance on ledger and Form 26AS for claim computation - Vigilantibus et non dormientibus jura subveniunt

Delay in compliance with tribunal order - Vigilantibus et non dormientibus jura subveniunt - Whether the applicant complied with the Tribunal's order dated 14.12.2020 by submitting documents within the prescribed time and whether late submission justified rejection of the claim. - HELD THAT: - The Tribunal recorded that the order in MA/177/KOB/2020 required the applicant to produce documents within two weeks from 14.12.2020. The 14-day period expired on 27.12.2020, whereas the applicant submitted documents on 28.12.2020. The Tribunal applied the well established principle that the law assists the vigilant and not those who sleep over their rights (Vigilantibus Et Non Dormientibus Jura Subveniunt), observing that the applicant waited until the final stages of consideration of a Resolution Plan and thus could not rely on the late submission to frustrate the CIRP. On this basis the Tribunal found no error in the Resolution Professional declining to consider the claim submitted after the prescribed period and after the Committee of Creditors had acted. [Paras 11, 12, 13]

The applicant did not comply with the time fixed by the Tribunal; the late submission justified non consideration of the claim.

Verification of claims by Resolution Professional - principles of natural justice in claim verification under CIRP - reliance on ledger and Form 26AS for claim computation - Whether the documents produced by the applicant (including bank statements, Form 16 and an unsigned salary summary) substantiate the claimed salary and entitlements such that the Resolution Professional's recomputation was incorrect or unlawful. - HELD THAT: - The Tribunal examined the material placed before it and the RP's verification. The record showed that ledger entries of the Corporate Debtor reflected audit reversal entries from January 2018 and that Form 26AS for FY 2017 18 recorded the reduced salary figure. The applicant's submissions did not clearly demonstrate how any alleged earlier revision to a higher salary was credited monthly in the ledger for the claim period; supporting documents relied upon by the applicant included unsigned or uncertified records and bank statements or Form 16 entries for earlier years which the RP treated as not directly relevant to the claimed period. The RP recomputed the claim based on available ledger data and internal records, and identified payments shown as advances in the ledger which the claim did not address. In light of these deficiencies the Tribunal found the documents insufficient to substantiate the higher salary claimed and upheld the RP's approach to verification and recomputation. [Paras 5, 6, 9, 10]

The documents produced by the applicant were inadequate to substantiate the claimed salary and entitlements; the Resolution Professional's verification and recomputation were upheld.

Final Conclusion: The Interlocutory Application is dismissed: the applicant failed to comply with the Tribunal's timeline for document production and did not produce adequate evidence to substantiate the claimed salary and entitlements, and therefore the Resolution Professional's rejection of the claim was upheld.

Admission of petition under section 9 of the Insolvency and Bankruptcy Code, 2016 - corporate insolvency resolution process - default of operational debt - moratorium under section 14 of the IBC - service of statutory demand under section 8 of the IBC - competency of person affirming petition authorised by board resolution - burden to prove pre existing dispute / reconciliation not a bar to admission without substantiation

Default of operational debt - admission of petition under section 9 of the Insolvency and Bankruptcy Code, 2016 - The petition is not time barred and the default required for admission under section 9 is established. - HELD THAT: - All invoices on which the claim is predicated were raised between 30.03.2019 and 19.10.2019 and the petition was filed on 17.12.2019, which falls within the applicable time limit. The Corporate Debtor has not discharged the onus of showing that the petition is barred by acquiescence, waiver, estoppel or analogous principles. The ledger, invoices, bank statements and related correspondence demonstrate supply, delivery and non payment after 05.09.2019, establishing default of a debt in excess of the statutory minimum at the relevant time. [Paras 8, 14, 15]

Petition held timely and default established; petition admitted.

Competency of person affirming petition authorised by board resolution - The affirmation of the petition by the person on record is competent and validly authorised. - HELD THAT: - The Corporate Debtor challenged competency of the person affirming the petition. The Operational Creditor produced a Board Resolution dated 01.12.2019 authorising Mr. Rajkumar Kedia to affirm the petition and perform specified acts. The record thus shows requisite authorisation for affirmation. [Paras 9]

Objection to competency of the affirmant is rejected; affirmation valid.

Service of statutory demand under section 8 of the IBC - The statutory demand (demand notice) was duly served and acknowledged by the Corporate Debtor. - HELD THAT: - Although the Corporate Debtor disputed service, the demand notice dated 01.12.2019 appears to have been delivered on 02.02.2019 and bears the Corporate Debtor's seal and signature acknowledging receipt. The record therefore supports effective service as required. [Paras 10]

Objection to service of demand notice is rejected; service is held to be properly effectuated.

Burden to prove pre existing dispute / reconciliation not a bar to admission without substantiation - Allegations of dispute on quality of goods and of ongoing reconciliation do not preclude admission where the Corporate Debtor has not substantiated a pre existing dispute. - HELD THAT: - The Corporate Debtor raised for the first time in its reply a contention of inferior quality of supplied goods and relied on correspondence indicating a process of reconciliation. However, no evidence was produced to substantiate defects in quality or a concluded dispute existing prior to the demand. The letters relied upon acknowledged amounts and, in part, admitted inability to pay due to cash flow constraints rather than denying liability. Reconciliation correspondence, without an express denial of liability or evidence of a bona fide dispute, is insufficient to defeat the operational creditor's claim at the section 9 admission stage. [Paras 11, 12, 13]

Quality and reconciliation contentions are unsubstantiated and do not bar admission of the petition.

Corporate insolvency resolution process - moratorium under section 14 of the IBC - appointment of Interim Resolution Professional - On admission, CIRP is ordered with an interim moratorium and an IRP is appointed to manage the Corporate Debtor until constitution of the Committee of Creditors or further orders. - HELD THAT: - Having found the petition complete and default established, the Adjudicating Authority admitted the petition and ordered initiation of CIRP. Consequential directions include imposition of the moratorium with effect from the order, requirement for public announcement, appointment of the proposed Interim Resolution Professional who submitted Form 2, and vesting of management in the IRP with obligations to invite claims and submit periodical reports. The Operational Creditor was directed to deposit funds to meet CIRP publicity expenses and the Registrar of Companies was directed to update master data. [Paras 15, 16, 17]

CIRP initiated; moratorium imposed; IRP appointed and directed to perform statutory functions.

Final Conclusion: The Tribunal admitted the section 9 petition, holding the claim timely and default established; objections as to competency of the affirmant, service of the demand notice, and alleged disputes on quality or reconciliation were rejected for want of substantiation; CIRP ordered, moratorium imposed and the proposed IRP appointed to carry out statutory functions.

Corporate insolvency resolution process - operational debt - default - pre-existing dispute - demand notice under section 8 of the Insolvency and Bankruptcy Code, 2016 - service of demand notice - admission under section 9 of the Insolvency and Bankruptcy Code, 2016 - moratorium under section 14(1) of the Insolvency and Bankruptcy Code, 2016 - appointment of interim resolution professional

Pre-existing dispute - operational debt - Whether the corporate debtor's prior complaint about delayed supply amounted to a pre-existing dispute disentitling the operational creditor to seek initiation of CIRP under section 9. - HELD THAT: - The Tribunal found that although some materials were supplied after an inordinate delay and the corporate debtor initially complained about shortfall and late delivery prior to the demand notice, the operational creditor later supplied the remaining items which the corporate debtor accepted without protest. Acceptance of the remaining goods after supply, without contemporaneous repudiation or continued protest, meant the earlier complaint did not constitute a subsisting pre-existing dispute preventing admission of the section 9 application. The Tribunal accordingly treated the delay-related grievance as not a bar to initiating CIRP. [Paras 7]

The prior grievance about delayed supply did not amount to a pre-existing dispute; it did not defeat the operational creditor's claim.

Demand notice under section 8 of the Insolvency and Bankruptcy Code, 2016 - service of demand notice - admission under section 9 of the Insolvency and Bankruptcy Code, 2016 - Whether the demand notice was duly served on the corporate debtor and whether compliance with statutory pre-conditions to maintain the section 9 application was satisfied. - HELD THAT: - The Tribunal examined the Form V filed by the operational creditor which showed the corporate debtor's registered office address, and the registered post acknowledgment due address to which the demand notice was sent. The postal track report indicated delivery, and it was not disputed that the corporate debtor did not reply within ten days pointing out any dispute. Relying on settled principle that service of the notice under section 8 is sine qua non for proceeding under section 9, the Tribunal concluded that the demand notice was rightly sent and served and that the operational creditor complied with the statutory requirements under section 9(3)(b) and (c). [Paras 12, 13]

The demand notice was duly served and the statutory pre-conditions for filing the section 9 application were fulfilled.

Admission under section 9 of the Insolvency and Bankruptcy Code, 2016 - moratorium under section 14(1) of the Insolvency and Bankruptcy Code, 2016 - appointment of interim resolution professional - Whether the section 9 application should be admitted and consequential reliefs (moratorium and appointment of IRP) ordered. - HELD THAT: - Having held that there was default on an operational debt and that no subsisting pre-existing dispute or defect in service of the demand notice precluded the application, the Tribunal found the application to be in order. The Tribunal admitted the corporate insolvency resolution process under section 9, declared the moratorium in terms of section 14(1), and appointed an interim resolution professional as no name had been proposed by the operational creditor. The Tribunal also directed the IRP to undertake statutory functions and made ancillary directions concerning public announcement, claims, and cooperation from the corporate debtor's personnel. [Paras 13]

The section 9 application is admitted; moratorium is declared and an interim resolution professional is appointed.

Final Conclusion: The Tribunal admitted the operational creditor's section 9 application: it held that the delay-related grievance did not constitute a pre-existing dispute, the demand notice was duly served, and accordingly initiated CIRP by declaring the moratorium and appointing an interim resolution professional.

Default - corporate insolvency resolution process under section 7 of the Insolvency and Bankruptcy Code, 2016 - presumption from delivery of cheque towards consideration - minimum threshold for filing under the Code - moratorium under section 14 of the Insolvency and Bankruptcy Code, 2016

Default - presumption from delivery of cheque towards consideration - Whether the corporate debtor committed default in repaying the financial debt advanced by the financial creditor. - HELD THAT: - The Tribunal found as an admitted fact that the financial creditor disbursed a loan of Rs. 10 lakhs and that the corporate debtor paid Rs. 70,200 on June 23, 2018 towards interest, after which no further payments were made. Applying the definition of default under the Code as non-payment when any part of the debt has become due and payable, the Tribunal held that failure to pay interest instalments and periodic instalments amounted to default. Although the corporate debtor contended that the disputed cheque was handed over only as security and not for repayment, the Tribunal observed that, on the material before it, it was unnecessary to adjudicate that controversy and drew a permissible presumption from the fact of handing over the cheque that it was towards the consideration shown; the dishonour of the cheque supported the finding of default. The Tribunal therefore concluded that the financial creditor established both the existence of a debt above the statutory threshold and the corporate debtor's default in payment. [Paras 10, 11, 12, 15, 16]

The corporate debtor had committed default in repayment of the financial debt.

Corporate insolvency resolution process under section 7 of the Insolvency and Bankruptcy Code, 2016 - minimum threshold for filing under the Code - moratorium under section 14 of the Insolvency and Bankruptcy Code, 2016 - Whether the section 7 application was maintainable and, if so, the consequential orders to be passed. - HELD THAT: - Having found that a debt existed and that default had occurred, and noting that the amount in default exceeded the minimum threshold prescribed under the Code by the time of filing, the Tribunal held the section 7 application to be maintainable. Consequentially the Tribunal admitted the corporate debtor into CIRP, declared the moratorium operative in terms of the Code, and directed institutional steps attendant to admission. The Tribunal also noted the financial creditor's proposed interim resolution professional and appointed him to act as IRP, directing the IRP to carry out duties and make public announcement and to manage the debtor's affairs as a going concern while preserving its assets. [Paras 13, 16, 18]

The section 7 application was admitted; CIRP is initiated, moratorium declared and the proposed interim resolution professional appointed.

Final Conclusion: The application under section 7 is admitted: the corporate debtor is in corporate insolvency resolution process; moratorium is declared; and the nominated interim resolution professional is appointed to conduct the CIRP.

Financial creditor - financial debt - allottee/home buyer as financial creditor - default - section 7 application under the Insolvency and Bankruptcy Code, 2016 - admission of section 7 application and initiation of corporate insolvency resolution process - moratorium under section 14 of the Code - appointment of interim resolution professional - verification of claims by the IRP/RP - promoter's refund obligation under RERA

Financial creditor - financial debt - allottee/home buyer as financial creditor - The applicant/allottee qualifies as a "financial creditor" and the amounts paid to the corporate debtor constitute "financial debt" within the meaning of the Code. - HELD THAT: - The Tribunal applied the amended definition of "financial debt" (including the Explanation inserted by the Insolvency and Bankruptcy (Second Amendment) Act, 2018) and the Supreme Court's pronouncement in Pioneer Urban Land and Infrastructure Ltd. to conclude that amounts raised from an allottee under a real estate project have the commercial effect of borrowing and fall within the definition of "financial debt". Consequently, an allottee/real estate buyer is to be regarded as a "financial creditor" and may invoke remedies under the Code. The fact that the applicant had paid the agreed consideration for commercial space and the respondent failed to deliver possession or refund the amount does not alter the character of the amount as a financial debt, even though the applicant had earlier sought cancellation by e-mail; that communication only fixes the date from which amounts became payable but does not change the nature of the debt. [Paras 12, 13, 14, 15, 16]

Applicant is a financial creditor and the amounts paid by him to the corporate debtor are financial debt.

Default - promoter's refund obligation under RERA - The corporate debtor has committed default in repayment of the financial debt owed to the applicant. - HELD THAT: - On the record the applicant produced agreements, receipts and other documents evidencing payment to the corporate debtor and the corporate debtor itself admitted an outstanding liability to the applicant. Reliance was also placed on statutory rights under RERA to seek refund with interest where possession is not delivered. The Tribunal found that possession was not given and the corporate debtor had not returned the amounts collected since 2014; the corporate debtor's admission of a portion of the outstanding amount corroborates default. The default exceeds the statutory minimum threshold for invoking section 7. [Paras 21, 22, 23, 25, 26]

There is established default by the corporate debtor in repayment of the financial debt to the applicant.

Section 7 application under the Insolvency and Bankruptcy Code, 2016 - admission of section 7 application and initiation of corporate insolvency resolution process - appointment of interim resolution professional - moratorium under section 14 of the Code - verification of claims by the IRP/RP - The section 7 application is complete and admitted; IRP is appointed, deposit directed, public announcement to be made and moratorium is declared; verification of claims and contested allegations to be carried out by IRP/RP. - HELD THAT: - Having found that the applicant is a financial creditor and that there is default, the Tribunal observed that the application in Form 1 filed under section 7 read with the Rules was complete and required admission. The Tribunal admitted the application under section 7(5)(a), appointed the proposed interim resolution professional who had consented to act, directed the applicant to deposit an advance to meet IRP expenses, and directed the IRP to make the public announcement. The moratorium under section 14 was declared and its statutory prohibitions reiterated. The Tribunal also recorded that allegations of fabrication of documents and related criminal complaints do not defeat the admission and can be examined by the IRP/RP during verification of claims in the resolution process. [Paras 29, 30, 31, 33, 34]

Section 7 application admitted, IRP appointed, deposit and public announcement directed, moratorium imposed; contested issues regarding documents to be verified by the IRP/RP.

Verification of claims by the IRP/RP - Allegations that the memorandum of understanding and related documents are fabricated are not adjudicated at admission and are remitted to the IRP/RP for verification during the resolution process. - HELD THAT: - Although the corporate debtor alleged fabrication of the memorandum of understanding and lodged a criminal complaint, the Tribunal noted the corporate debtor's admission of part of the outstanding amount and held that such factual disputes regarding fabrication are matters for the IRP or resolution professional to examine while verifying the claim after initiation of CIRP. The admission and documentary record suffice for admission; verification and adjudication of contested factual allegations will follow in the claims process. [Paras 24]

Allegation of fabrication remitted to the IRP/RP for verification; not a bar to admission of the section 7 application.

Final Conclusion: The Tribunal admitted the section 7 application: it held that the applicant/allottee is a financial creditor and the sums paid constitute financial debt, found that the corporate debtor is in default, appointed the nominated interim resolution professional, directed deposit for IRP expenses, ordered public announcement and declared the moratorium; allegations of fabricated documents are to be verified by the IRP/RP during the resolution process.

Finality of approved resolution plan - claim in CIRP - public notice for filing claims in insolvency proceedings - time-bar/late claim in insolvency proceedings - invocation of moratorium under the IBC

Claim in CIRP - public notice for filing claims in insolvency proceedings - time-bar/late claim in insolvency proceedings - finality of approved resolution plan - Whether a financial creditor's claim filed after the resolution plan had been approved could be entertained. - HELD THAT: - The Tribunal observed that the resolution plan in respect of the corporate debtor had been approved on March 19, 2020. CIRP claims are required to be filed in response to the public notice issued by the interim-resolution professional/resolution professional during the insolvency process. Where a resolution plan has already been approved, a fresh claim filed thereafter (the appellant filed its claim on June 15, 2020) cannot be entertained. The court noted that proceedings under the IBC are initiated by public notice and that the timing for filing claims is governed by that process; consequently, claims made after approval of the resolution plan are not maintainable. The Tribunal further indicated that alleged non-disclosure or conduct by the resolution professional, or earlier orders passed by other courts, did not suffice to reopen or undo the approved resolution plan in the circumstances of this case.

The claim filed after approval of the resolution plan could not be entertained and the appeal was without merit.

Final Conclusion: The appeal is dismissed as lacking merit; the claim filed after the resolution plan's approval could not be entertained and the order of the Adjudicating Authority rejecting the review/application is upheld.

Entitlement of an assignee/financial creditor under an assignment deed - duty to follow up and ascertain liabilities post-assignment - condonation of delay in filing claims in CIRP - finality of approval of a resolution plan and non-reversibility of completed CIRP - time bound nature of insolvency resolution process - doctrine of caveat emptor in post assignment creditor conduct

Entitlement of an assignee/financial creditor under an assignment deed - duty to follow up and ascertain liabilities post-assignment - condonation of delay in filing claims in CIRP - Claim of the assignee (Kotak Mahindra Bank Ltd.) for admission of its financial debt though it failed to submit its claim within the CIRP period and sought condonation of delay - HELD THAT: - The Tribunal found that Kotak Mahindra Bank Ltd. had acquired the liability from L&T Finance Ltd. by a deed of assignment and therefore had the primary duty to follow up the corporate debtor and pursue realisation, particularly in view of the earlier consent award. The Adjudicating Authority had admitted CIRP and published the public announcement inviting claims. The applicant's plea of ignorance of the CIRP was held to be not credible given the nature and quantum of the debt, prior reminders between 2016-2020, and the assignment executed on March 29, 2019. The applicant approached the IRP only after the resolution plan had already been approved (approach on April 18, 2020 after approval on March 19, 2020) and filed the instant application belatedly. For these reasons the Tribunal refused to condone the delay and rejected the claim as not maintainable. [Paras 4, 5, 6, 8]

Application for admission of the delayed claim and condonation of delay rejected; claim held not maintainable.

Finality of approval of a resolution plan and non-reversibility of completed CIRP - time bound nature of insolvency resolution process - Whether the completed CIRP and approved resolution plan could be reversed or reopened to admit the applicant's belated claim - HELD THAT: - The Tribunal observed that the resolution plan was approved by the Adjudicating Authority on March 19, 2020 and the RP had become functus officio. The corporate debtor had been acquired by the successful resolution applicant in due course and the CIRP had been completed in a time bound manner. There is no provision under the Code to reverse the completed process to accommodate a belated claim after approval and implementation of the resolution plan. Consequently, permitting the applicant's belated claim would require reversal of the concluded process which the Tribunal held was impermissible. [Paras 6, 7]

CIRP held final and not susceptible to reversal to admit the belated claim; relief sought for review/reopening declined.

Final Conclusion: The application under section 60(5) seeking review/reopening to admit a belated claim was dismissed: the assignee failed in its duty to follow up post assignment, delay in claim submission was not condoned, and the approved resolution plan/CIRP was held final and cannot be reversed.

Equitable treatment of similarly situated creditors - priority and value of security interest as a consideration in approval of a resolution plan - amendment to Section 30(4) of the I&B Code vesting discretion in the Committee of Creditors to take into account value of security interest - statutory waterfall priority among creditors including secured creditors' priority and value of security interest under Section 53 - business decision / commercial wisdom of the Committee of Creditors - limited judicial review of commercial decisions of the Committee of Creditors under Section 61(3) of the I&B Code - distinction between secured, unsecured and dissenting secured financial creditors under Regulation 39(4) of the IBBI Regulations

Amendment to Section 30(4) of the I&B Code vesting discretion in the Committee of Creditors to take into account value of security interest - priority and value of security interest as a consideration in approval of a resolution plan - business decision / commercial wisdom of the Committee of Creditors - Whether the Committee of Creditors is required, as a matter of law, to consider the value of a secured creditor's security interest when approving a resolution plan after the amendment to Section 30(4). - HELD THAT: - The Tribunal held that the amendment to Section 30(4) confers a discretion on the Committee of Creditors to take into account the priority and value of a secured creditor's security interest when considering feasibility and viability of a resolution plan. The provision uses 'may' and therefore operates as a guideline to inform the commercial judgment of the Committee rather than an imperative statutory obligation mandating a particular outcome. The appellate review cannot substitute judicial assessment for the business decision made by the requisite majority of the Committee of Creditors. The judgment of the Supreme Court in Committee of Creditors of Essar Steel India Ltd. v. Satish Kumar Gupta was followed to the effect that valuation and security considerations are relevant inputs for the Committee's commercial wisdom, but the exercise of that discretion is part of a business decision and not automatically amenable to interference absent infirmity in the fairness accorded to similarly situated creditors. [Paras 6, 7]

The Committee of Creditors may, but is not legally obliged to, consider the value of a secured creditor's security interest; that is a discretionary guideline informing its commercial decision which ordinarily does not attract appellate interference.

Equitable treatment of similarly situated creditors - limited judicial review of commercial decisions of the Committee of Creditors under Section 61(3) of the I&B Code - distinction between secured, unsecured and dissenting secured financial creditors under Regulation 39(4) of the IBBI Regulations - Whether the impugned approval of the resolution plan can be set aside on the ground that the Successful Resolution Applicant and the Committee of Creditors failed to consider the appellant's security valuation and thereby denied fair treatment. - HELD THAT: - The Tribunal applied the principles that equitable treatment applies to similarly situated creditors and that differential payments to different classes or creditors may be commercial outcomes of negotiation by the Committee. The Court observed that the purpose of the amendment was to broaden considerations available to the Committee to take an informed business decision, not to create a justiciable entitlement for each secured creditor to have its security valuation determinatively dictate the distribution. Judicial intervention is warranted only where a class of similarly situated creditors is not given fair and equitable treatment. Absent a demonstration that similarly situated creditors were denied fair treatment, mere non-consideration or differing weight accorded to an individual creditor's security valuation does not invalidate the Committee's commercial decision. Applying these principles, the Tribunal found no merit in the appellant's challenge and dismissed the appeal. [Paras 4, 7, 8]

Failure, in the present case, to accept the appellant's contention regarding its security valuation did not vitiate the resolution approval; there was no basis for interference and the appeal was dismissed.

Final Conclusion: The appeal is dismissed. The amendment to Section 30(4) empowers the Committee of Creditors to consider, as a discretionary guideline, the priority and value of secured creditors' security interests in assessing feasibility and viability of a resolution plan, but such commercial decisions by the Committee are ordinarily beyond judicial interference under the limited review permitted by the Code unless similarly situated creditors are denied fair and equitable treatment.

Eligibility under Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 - cut-off date of 30.06.2019 for scheme eligibility - treatment of appeal remanded by appellate authority and effect on original order - principle of liberal and pragmatic approach to amnesty schemes - requirement of opportunity of hearing before rejecting a declaration

Eligibility under Sabka Vishwas (Legacy Dispute Resolution) Scheme, 2019 - cut-off date of 30.06.2019 for scheme eligibility - treatment of appeal remanded by appellate authority and effect on original order - requirement of opportunity of hearing before rejecting a declaration - Validity of rejection of the petitioners' declaration dated 12.12.2019 under the litigation category of the Scheme on the ground that the appeal was finally heard before 30.06.2019. - HELD THAT: - CESTAT, by order dated 08.11.2019, set aside the order in original dated 16.06.2015 and remanded the matter to the adjudicating authority for fresh decision limited to the question of limitation, after permitting the petitioner to be heard. The High Court held that setting aside the original order erased that order from the record and reverted the petitioner to the stage of adjudication on the show cause notice; consequently, the appellant was not to be treated as having a subsisting appellate order which would render it ineligible under section 125(1)(a) merely because the appeal was heard earlier (10.05.2019). The Court observed that the Board's FAQs and earlier decisions of this Court support a liberal, pragmatic approach in administering the Scheme and that post cut off developments may be relevant to eligibility. The designated committee had also rejected the declaration without affording any opportunity of hearing. On these grounds the Court found the rejection dated 13.01.2020 to be erroneous and liable to interference. [Paras 30, 31, 33, 34]

The order of rejection dated 13.01.2020 is set aside; the declaration dated 12.12.2019 is to be treated as valid and the designated committee (respondent No.2) is directed to decide the declaration afresh in accordance with law after affording the petitioners an opportunity of hearing and to pass a speaking order within six weeks.

Final Conclusion: Writ petition allowed to the extent that the rejection dated 13.01.2020 of the declaration filed on 12.12.2019 under the litigation category is set aside and the matter is remitted to respondent No.2 for fresh consideration after hearing; no order as to costs.

Eligibility under SVLDRS - meaning of "quantified" for SVLDRS - written communication/admission of duty liability - enquiry or investigation - relief linked to amount quantified on or before the relevant date

Meaning of "quantified" for SVLDRS - written communication/admission of duty liability - eligibility under SVLDRS - Whether the petitioner's communication dated 18.06.2019 amounted to "quantification" of tax dues so as to render him eligible to file a declaration under SVLDRS for the period 2014-15 to June 2017. - HELD THAT: - The Scheme requires that, for cases linked to an enquiry or investigation, the amount of duty must have been "quantified" on or before 30.06.2019. "Quantified" is defined as a written communication of the amount of duty payable. The CBIC circulars clarify that "quantified" includes written communication such as a letter intimating duty demand or admission by the person during enquiry, provided the quantification is effectively communicated on or before the relevant date. Where an investigation is pending as on introduction of SVLDRS, however, the Court held that quantification must be effected by the department during the investigation and communicated by it; unilateral quantification by the declarant in a communication to the department does not amount to departmental quantification for purposes of eligibility. The petitioner's letter of 18.06.2019, though stating an amount and thereby amounting to an admission, did not constitute departmental quantification prior to 30.06.2019; the departmental SCN issued later effected the quantification. Because the declarant did not have an amount quantified by the department on or before the cut-off date, the petitioner fell within the ineligible category under the Scheme and the rejection of his FORM SVLDRS-1 on that ground was sustainable. [Paras 12, 13, 14, 15, 16]

The communication dated 18.06.2019 by the petitioner did not amount to departmental quantification on or before 30.06.2019 and therefore did not render the petitioner eligible under SVLDRS; the rejection of the declaration is upheld.

Final Conclusion: The petition is dismissed. The declaration under SVLDRS was rightly rejected because the amount was not quantified by the department on or before the relevant cut-off date; the petitioner retains the statutory remedies to challenge the subsequently issued SCN.

Writ petition against show cause notice - entertainment of writ at show cause notice stage - principles of natural justice - alternative statutory remedy under the Finance Act, 1994 - right to reply and personal hearing - finality of adjudication after reply and hearing

Writ petition against show cause notice - entertainment of writ at show cause notice stage - alternative statutory remedy under the Finance Act, 1994 - right to reply and personal hearing - Whether the High Court should entertain the writ petition at the stage of show cause notice when the petitioner has the opportunity to file reply and avail statutory appellate remedies. - HELD THAT: - The Court held that the matter was at the stage of a show cause notice and the petitioner continued to have the opportunity to file a reply and seek personal hearing; issuance of a show cause notice reflects a prima facie view and does not constitute final adjudication. The High Court declined to interfere at the notice stage, observing that excise/GST law provides a complete code and the petitioner has alternative statutory remedies under the Finance Act, 1994, including an appeal to the Appellate Authority and further appellate remedy to the Appellate Tribunal. The Court considered and applied the reasoning in earlier Supreme Court decisions relied upon by the parties - M/s. Siemens Ltd. , Oryx Fisheries Pvt. Ltd. , Union of India & Ors. v. Coastal Container Transporters Association & Ors. , Commissioner of Central Excise, Haldia v. Krishna Wax Pvt. Ltd. , and Malladi Drugs & Pharma Ltd. v. Union of India - and concluded that interference at the show cause notice stage was not warranted where no pleaded violation of principles of natural justice or lack of jurisdiction was shown and where statutory remedies remain available. [Paras 9, 10]

Writ petition dismissed as premature; petitioner to avail statutory remedies after adjudication.

Final Conclusion: The writ petition was dismissed on the ground that the challenge to a show cause notice at the pre-adjudication stage was premature, the petitioner had the opportunity to reply and seek personal hearing, and effective statutory remedies under the Finance Act, 1994 (appeal to the Appellate Authority and further to the Appellate Tribunal) were available.

Summary order. Special Leave Petition under Article 136 of the Constitution dismissed.

Classification of goods between Chapter 85 and Chapter 86 - application of the General Rules for Interpretation (Rule 1, Rule 2(b), Rule 3(a)) - Note 2(f) of Section XVII excluding electrical machinery from parts of Chapter 86 - Note 3 of Section XVII - suitability for use / sole or principal use test - binding effect of an approved classification list - time-bar under Section 11A of the Central Excise Act, 1944 and availability of extended limitation only on proof of fraud, collusion, wilful misstatement or suppression

Classification of goods between Chapter 85 and Chapter 86 - Note 2(f) of Section XVII excluding electrical machinery from parts of Chapter 86 - Note 3 of Section XVII - suitability for use / sole or principal use test - application of the General Rules for Interpretation (Rule 1, Rule 2(b), Rule 3(a)) - binding effect of an approved classification list - Relays manufactured by the assessee, used solely as part of railway signalling equipment, are to be classified under Chapter Heading 8608 and not under Heading 8536 - HELD THAT: - The authorities erred in invoking General Rule 3(a) after having proceeded on the premise that Note 2(f) of Section XVII excluded electrical machinery from being treated as parts of Chapter 86. Rule 1 requires use of headings and chapter/section notes first; Rule 3 applies only where goods are prima facie classifiable under two or more headings. Note 3 of Section XVII mandates that references to "parts" in Chapters 86-88 do not apply to parts not suitable for use solely or principally with articles of those Chapters; thus the "suitability for use" or "sole/principal use" test governs classification of parts. The relays in question are admitted to be used solely as railway signalling/traffic control equipment and therefore fall within Chapter 8608 notwithstanding the general exclusion in Note 2(f). Further, the assessee's specific classification list dated 27.08.1993, which was approved by the competent authority, reinforces that the Revenue could not rightly invoke Note 2(f) to reclassify the goods. Applying these principles, the Court answered the classification question in favour of the assessee. [Paras 35, 36, 37, 38, 39]

Classification placed under Chapter Heading 8608; answer given in favour of the appellant and against the Revenue.

Time-bar under Section 11A of the Central Excise Act, 1944 and availability of extended limitation only on proof of fraud, collusion, wilful misstatement or suppression - normal period of limitation applicable prior to 12.05.2000 - effect of prior approval of classification list on limitation and penalty - Show cause cum demand notices issued during 1995-1999 were time barred and liable to be set aside where no fraud, collusion, wilful misstatement or suppression was alleged despite prior approval of classification - HELD THAT: - The Court noted that the relevant show cause notices were issued prior to 12.05.2000 when the normal limitation period under Section 11A was six months. There was no allegation or finding of fraud, collusion, wilful misstatement or suppression that would permit invocation of extended limitation. The Department, having approved the assessee's reclassification on 27.08.1993 and the dispute being one of classification (not invoice centric), could not revive the approved classification by issuing separate notices covering later periods; several notices were at least partly beyond the normal limitation period. Because the extended period was not available on the facts, and the authorities failed to address limitation for each notice, the invocation of Section 11A in the circumstances was untimely and the show cause notices had to be set aside. [Paras 41, 43, 44, 45, 46]

Show cause cum demand notices quashed as time barred; appeals allowed on limitation grounds in favour of the appellant.

Final Conclusion: Both questions were answered in favour of the appellant: the relays are classifiable under Chapter Heading 8608, and the show cause cum demand notices issued for the periods in question are time barred and are set aside. The Orders in Original, the Order of the Appellate Authority and the Order of the CESTAT are set aside; no order as to costs.

Assessment by best judgment in the absence of acceptable evidence - factual determination of damaged goods and taxable turnover - penalty under Section 13 of the Tripura Sales Tax Act - requirement of hearing under principles of natural justice - revisional interference and effect on consequential penalty

Assessment by best judgment in the absence of acceptable evidence - factual determination of damaged goods and taxable turnover - Validity of the assessment which added turnover on the basis that the petitioner failed to prove that certain cement bags were damaged and sold at low rates. - HELD THAT: - The Court held that the controversy as to whether substantial quantities of cement were damaged in transit and sold at low rates was essentially a question of fact. The Assessing Officer declined to accept the petitioner's claim in the absence of reliable corroborative proof and exercised judgment accordingly; the revisional authority re-examined records and declined to set aside the assessment. No perversity in the factual findings or legal error in applying the statutory assessment procedure was demonstrated to warrant interference by the High Court. [Paras 8]

The assessment insofar as it relates to additional tax assessed by the Assessing Officer is confirmed.

Penalty under Section 13 of the Tripura Sales Tax Act - requirement of hearing under principles of natural justice - revisional interference and effect on consequential penalty - Validity of the penalty imposed for concealment where the Assessing Officer proceeded orally and where the revisional authority altered the quantum of additions. - HELD THAT: - The Court found two independent objections to the penalty. First, the Commissioner's revisional order did not sustain all additions made by the Assessing Officer; because the penalty was predicated on the entire original additions, it could not survive in its present form. Second, the procedure adopted by the Assessing Officer for imposing penalty fell short of the statutory requirement of affording a reasonable opportunity to be heard under sub-section (2) of Section 13 and the obligations of natural justice. In light of both defects the Court set aside the penalty but did not permanently foreclose penal proceedings; it directed that the Assessing Officer may issue fresh notice and pass a fresh order after affording a proper hearing, subject to the timetable indicated by the Court. [Paras 9, 10, 11]

The penalty order is set aside and the matter is remitted to the Assessing Officer to issue fresh notice and decide the penalty afresh after hearing the petitioner.

Final Conclusion: The High Court confirmed the assessment for additional tax for the years 2001-2002 to 2004-2005 but set aside the penalty order for procedural and consequential defects, permitting the Assessing Officer to issue fresh notice and decide penalty after giving the petitioner a proper hearing.

Recording of reasons - principles of natural justice - non-speaking order - reopening of assessment - remand for fresh consideration

Non-speaking order - recording of reasons - principles of natural justice - Validity of the impugned assessment orders in view of failure to consider objections and absence of reasons - HELD THAT: - The Court found that the assessing authority did not deal with the specific objections raised by the petitioner, including the explanation that certain sales, though not shown in the main column of Form I, were disclosed in Annexure II. The impugned orders therefore lack findings addressing that explanation and are virtually non-speaking. Relying on the principle that an administrative/quasi judicial authority must record reasons so as to indicate that it has given due consideration to points in controversy, the Court held that failure to consider the objections and to record reasons vitiates the proceedings unless the requirement to record reasons has been expressly or by necessary implication dispensed with. As no such dispensation appears, the absence of considered findings renders the orders unsustainable. [Paras 4, 5]

Impugned orders quashed for being non-speaking and for failure to consider the petitioner's objections; proceedings vitiated.

Remand for fresh consideration - reopening of assessment - Relief and further course of action following quashment of the orders - HELD THAT: - Having quashed the impugned orders on the ground that objections were not considered and reasons were not recorded, the Court remitted the matter to the assessing authority for fresh consideration. The second respondent is directed to issue a fresh hearing notice, hear the petitioner on the points raised, and pass a fresh order in accordance with law, thereby permitting the assessing authority to examine the explanation regarding disclosure in Annexure II and to record reasoned findings on the same. [Paras 5]

Matter remitted to the assessing authority for fresh hearing and reasoned decision in accordance with law; no order as to costs.

Final Conclusion: Writ petitions allowed; impugned assessment orders quashed for being non-speaking and for failure to consider objections; matter remitted for fresh hearing and reasoned orders in accordance with law (assessment years 2012-13 and 2013-14).

Dismissal for default - Non-appearance of petitioner - Refund claim - Allegation of bogus C forms

Dismissal for default - Non-appearance of petitioner - Petition dismissed for want of prosecution due to non-appearance of the petitioner or counsel. - HELD THAT: - The Court recorded that despite earlier directions and repeated listings before the Joint Registrar, the petitioner and its counsel failed to appear on multiple dates and also did not file a rejoinder to the respondent's counter-affidavit. Having observed continued non-prosecution and absence of interest by the petitioner in pursuing the matter, the Court concluded that the petition should be dismissed in default. [Paras 3]

Petition dismissed in default for non-appearance.

Refund claim - Allegation of bogus C forms - The substantive refund claim for the periods 2015-16 and 2016-17 was not adjudicated on merits and remained undecided in view of dismissal for default. - HELD THAT: - Although an earlier order (dated 10 October 2018) had directed the respondent to process the refund application, the respondent filed a counter-affidavit alleging that the refunds were claimed on the basis of concessional sales supported by C forms which were found to be bogus by Haryana and Uttar Pradesh authorities. Those allegations and the petitioner's claim were not finally examined because the petition was dismissed for non-prosecution. [Paras 1, 2, 3]

Refund claim and allegations regarding C forms remain undecided on merits due to dismissal in default.

Final Conclusion: The petition seeking refund for 2015-16 and 2016-17 is dismissed in default for non-appearance; the substantive refund claim and the respondent's allegations about C forms were not adjudicated on merits.

Presumption under Section 139 of the Negotiable Instruments Act - Rebuttal of presumption by leading evidence - Service of notice under Section 138 of the Negotiable Instruments Act and effect of summons as deemed notice (C.C. Alavi principle) - Scope and limits of revisional jurisdiction under Sections 397/401 Cr.P.C. - Compensation by court under Section 357(3) Cr.P.C. - Contempt for breach of undertaking to the court

Presumption under Section 139 of the Negotiable Instruments Act - Rebuttal of presumption by leading evidence - The presumption in favour of the cheque-holder under Section 139 NI Act was not rebutted by the petitioner. - HELD THAT: - The Court examined the petitioner's two defences: that the cheque was handed to a third person (Mahesh) who misused it, and that the complainant's bank statement did not support a loan of Rs. 1,00,000/-. The alleged recipient Mahesh (DW-2) disowned having received the cheque, and therefore the defence that the cheque was given to him failed. The Court further noted that the petitioner did not lead evidence to show repayment of amounts reflected in the complainant's bank statement or otherwise negate the presumption arising from the cheque bearing the petitioner's signature. Absent probative evidence to the contrary, the statutory presumption under Section 139 remains unrebutted and the findings of the courts below on this point are sustained. [Paras 10, 11, 12]

Presumption under Section 139 NI Act not rebutted; conviction on merit upheld.

Service of notice under Section 138 of the Negotiable Instruments Act and effect of summons as deemed notice (C.C. Alavi principle) - The notice under Section 138 was held to have been sent to the correct address and, even if service were contested, receipt of summons operates as notice under the principle in C.C. Alavi Haji. - HELD THAT: - The Court observed that the address to which the statutory notice was sent matched the address furnished by the petitioner in court documents and personal bond. The petitioner appeared in response to summons, and relying on C.C. Alavi Haji the Court held that where summons of complaint have been received, the drawer cannot avoid liability by contending non-service of the statutory notice if he did not make payment within the period allowed after receipt of summons. The finding of proper service by the subordinate courts is therefore not susceptible to reversal. [Paras 13, 14]

Service held proper; receive of summons treated as complying with notice requirement where applicable.

Scope and limits of revisional jurisdiction under Sections 397/401 Cr.P.C. - High Court will not interfere under revisional jurisdiction where the subordinate courts' findings are not perverse, untenable or grossly erroneous. - HELD THAT: - Citing authoritative precedents, the Court reiterated that revisional power is supervisory and not appellate: it should not re-appreciate evidence merely because another view is possible. Interference is warranted only where the impugned finding is perverse, based on no material, or where there is palpable misreading or non-consideration of relevant material. The Court found no such perversity or miscarriage of justice in the concurrent findings of the Magistrate and the Additional Sessions Judge and therefore declined to disturb them. [Paras 15, 16, 17]

No interference in revisional jurisdiction; concurrent findings affirmed.

Compensation by court under Section 357(3) Cr.P.C. - Contempt for breach of undertaking to the court - The compensation order under Section 357(3) Cr.P.C. was valid and the petitioner's failure to honour an undertaking to pay amounts disentitled him to further indulgence. - HELD THAT: - The Court noted statutory power to award compensation when passing sentence under Section 357(3) Cr.P.C. and relied on precedent concerning the scope and implementation of compensation orders. The petitioner had undertook to pay the awarded compensation in instalments and to deposit prescribed amounts with the Delhi High Court Legal Services Committee but defaulted. The Court treated the petitioner's reneging on an undertaking to the Court as an abuse of indulgence and amounting to contempt, thereby justifying refusal of further relief and upholding the compensation and sentence. [Paras 18, 20]

Compensation sustained; petitioner not entitled to indulgence for breach of undertaking.

Final Conclusion: The revision petition is dismissed; the conviction, sentence and compensation awarded by the courts below are affirmed and the petitioner's request for indulgence is refused for breach of undertaking.

Offence under Section 138 of the Negotiable Instruments Act - Compensatory character of remedy and civil overlay of Section 138 - Imposition of compensation under Section 357(3) - Limitations on enhancement of sentence by the Appellate Court under Section 386 Cr.P.C. - Deterrent object of punishment for cheque dishonour - Direction to surrender and coercive measures for non compliance

Limitations on enhancement of sentence by the Appellate Court under Section 386 Cr.P.C. - Validity of imposition by the Appellate Court of an additional fine when no appeal for enhancement of sentence was preferred by respondent - HELD THAT: - The appellate court, while hearing the appeal filed by the parties, imposed an additional fine of Rs. 10,000/- for each of the four counts though the respondent had not filed any appeal for enhancement of sentence. The court applied the scope of the appellate power under Section 386 Cr.P.C., observing that an Appellate Court cannot enhance the sentence beyond what was imposed by the trial Court unless the respondent has preferred an appeal seeking enhancement and the accused has had an opportunity to show cause. On that basis the additional fine imposed by the appellate Court was held to be an apparent error and was set aside. [Paras 7, 8]

Additional fine of Rs. 10,000/- for each of the four counts imposed by the Appellate Court is set aside.

Offence under Section 138 of the Negotiable Instruments Act - Compensatory character of remedy and civil overlay of Section 138 - Deterrent object of punishment for cheque dishonour - Whether the sentence of rigorous imprisonment for one year awarded to applicant No.1 should be reduced in view of the civil/compensatory nature of the offence under Section 138 - HELD THAT: - The Court considered the submissions that Section 138 is essentially compensatory and carries a civil overlay, but also examined precedents recognising the deterrent and punitive aspect of imprisonment for cheque dishonour. The applicant's conduct-acceptance of advance, failure to supply goods, issuance and repeated dishonour of cheques, and non compliance with earlier court directions including withholding a bank draft-was treated as aggravating. Having regard to the legislative intent to deter dishonour of cheques and the applicant's conduct (including failure to surrender after temporary bail), the Court found no cogent reason to reduce the one year RI and refused to shorten the sentence to the period already undergone. [Paras 9, 10, 14, 15, 16]

Sentence of one year's rigorous imprisonment awarded to applicant No.1 is affirmed and not reduced.

Imposition of compensation under Section 357(3) - Direction to surrender and coercive measures for non compliance - Status of compensation awarded to the respondent and consequential directions for payment and surrender - HELD THAT: - The appellate Court had affirmed the compensation amount fixed by the trial Court under Section 357(3). This Court affirmed the remaining sentences and the compensation order, while setting aside only the additional fine. The Court directed the applicant to surrender within 15 days to undergo remaining sentence and ordered the trial Court to take coercive measures and recover the compensation if not paid within the stipulated time. It also directed that if the applicant pays the full amount, the bank draft deposited earlier be returned (noting the draft's limited validity). [Paras 5, 17, 18, 19]

Compensation as affirmed by the appellate Court is upheld; applicant directed to surrender within 15 days and trial Court authorised to take coercive steps to secure presence and recover compensation; bank draft to be returned if full payment is made.

Final Conclusion: Criminal revision is partly allowed: the additional fine imposed by the Appellate Court is set aside for lack of power to enhance sentence in absence of an appeal for enhancement; all other determinations including conviction, the one year RI for applicant No.1 and the compensation awarded are affirmed; applicant directed to surrender and trial Court permitted to take coercive measures to secure compliance.

Post-dated cheque issued as security not attracting Section 138 of the Negotiable Instruments Act - distinction between cheque issued for a debt in presenti (payable in future) and cheque issued by way of security - dishonour of cheque for insufficiency of funds as criminal liability contingent on legally enforceable debt - prosecution burden and criminal standard of proof versus preponderance of probabilities for defence

Distinction between cheque issued for a debt in presenti (payable in future) and cheque issued by way of security - post-dated cheque issued as security not attracting Section 138 of the Negotiable Instruments Act - Nature of the cheques issued by the respondent - whether they were issued in discharge of an existing legally enforceable debt thereby attracting criminal liability under Section 138, or were given as security. - HELD THAT: - The Court examined the chronology and contemporaneous events and concluded that the cheques were furnished at the time the loan was advanced and were effective only for repayment in the future (promised repayment in November 2014). Applying the settled principle that a cheque issued for a debt in presenti (albeit payable later) is different from a cheque issued purely as security for a contingent liability, the Court held that the cheques in question were security cheques taken by the complainant to advance the loan rather than cheques issued towards discharging any past or existing liability. Consequently, the statutory ingredients of Section 138, which require that the cheque be drawn for the discharge of a legally enforceable debt or liability, were not attracted. [Paras 11, 12, 15]

The cheques were held to be security cheques and therefore did not attract criminal liability under Section 138.

Dishonour of cheque for insufficiency of funds as criminal liability contingent on legally enforceable debt - prosecution burden and criminal standard of proof versus preponderance of probabilities for defence - Whether the prosecution proved beyond reasonable doubt that the complainant had an existing legally enforceable debt and the requisite proof of entitlement to advance the complaint under Section 138. - HELD THAT: - The Court noted deficiencies in the complainant's evidence: the complainant did not establish the source of funds for advancing the loan nor produce corroborative documentary proof of financial capacity despite alleging he was an income-tax payer. The respondent's evidence, including his account of handing over blank/undated cheques in connection with an NGO project and steps taken to report loss, was considered. Applying the criminal standard of proof, the Court found that the prosecution failed to establish that the cheques were issued in discharge of a legally enforceable debt beyond reasonable doubt. Even on the civil standard of preponderance of probabilities, the materials did not sufficiently displace the defence that the cheques were security or had been misused. [Paras 13, 14, 16]

Prosecution failed to prove existence of a legally enforceable debt and thereby failed to establish the offence under Section 138; the respondent's acquittal was maintained.

Final Conclusion: The appellate court's judgment of acquittal was affirmed: the cheques were held to be security cheques not attracting Section 138, and the prosecution failed to prove the existence of a legally enforceable debt beyond reasonable doubt; the criminal appeal is dismissed and the acquittal maintained.

Power of the Appellate Court under Section 148(1) of the Negotiable Instruments Act to direct deposit pending appeal (minimum twenty per cent) - interim compensation under Section 143A of the Negotiable Instruments Act - enhancement of deposit/ interim security during pendency of appeal - modification of appellate order and setting aside of subsequent appellate direction - obligation to furnish undertaking and restitution with interest where interim withdrawal is permitted - issue of conviction warrant for non-deposit of court-ordered amount

Power of the Appellate Court under Section 148(1) of the Negotiable Instruments Act to direct deposit pending appeal (minimum twenty per cent) - enhancement of deposit/ interim security during pendency of appeal - Enhancement of the amount to be deposited by the accused in the Registry of the Appellate Court during the pendency of the appeal. - HELD THAT: - The Court examined the scope of Section 148(1) read with the proviso to that provision and Section 143A and held that while Section 148(1) mandates a minimum deposit of twenty per cent, the proviso and the scheme permit the Appellate Court to direct additional interim deposits. Having regard to the protracted delay in trial (nearly ten years), the conduct of the accused in prolonging proceedings and the Appellate Court's own observation that the appeal would take considerable time, the High Court found the previously directed deposit of 25% inadequate. In exercise of supervisory jurisdiction, the Court enhanced the interim deposit to 50% of the total compensation and directed payment into the Registry within four weeks from uploading of the Order. [Paras 14, 15]

Deposit to be enhanced to 50% of total compensation to be paid into the Appellate Court Registry within four weeks; the direction is recorded and implemented.

Modification of appellate order and setting aside of subsequent appellate direction - issue of conviction warrant for non-deposit of court-ordered amount - Modification of the Appellate Court's Order dated 27th February 2020 and consequent setting aside of the Appellate Court's refusal to modify its earlier order. - HELD THAT: - The High Court held that Clause No.3 of the Appellate Court's operative order (which permitted interested-bearing deferral) was to be deleted in consequence of the enhanced deposit direction. The Court therefore allowed the complainant's application for modification to that limited extent and set aside the Appellate Court's Order rejecting modification. The Court further directed that if the accused fails to deposit the enhanced amount within the stipulated period, the Appellate Court shall issue a conviction warrant against the accused. [Paras 15, 16]

Clause No.3 of the Appellate Court Order deleted; the Order rejecting modification is set aside to the extent of the enhancement; conviction warrant to be issued on non-deposit.

Obligation to furnish undertaking and restitution with interest where interim withdrawal is permitted - interim compensation under Section 143A of the Negotiable Instruments Act - Permissibility of complainant's withdrawal of deposited amount subject to conditions and undertaking. - HELD THAT: - Recognising the modification directing a larger deposit, the Court found no necessity to restrain the complainant from withdrawing the amount deposited (or to prohibit release ordered earlier). However, to protect the interests of the accused pending final adjudication, the Court required the complainant to file an undertaking before the Appellate Court undertaking that if he does not succeed in the appeal he will repay the entire withdrawn amount along with reasonable interest prescribed by the Reserve Bank of India prevailing on the date of the Appellate Court's judgment, within 60 days of that judgment, in addition to the usual conditions. [Paras 17]

Complainant may withdraw the deposited amount subject to executing an undertaking to restore the amount with RBI-prescribed interest if the appeal succeeds for the accused.

Final Conclusion: The Writ Petition filed by the complainant is allowed insofar as the interim deposit directed by the Appellate Court is enhanced to 50% and Clause No.3 of that Order is deleted; the Appellate Court's refusal to modify its order is set aside to that extent. The accused's petition is dismissed; failure to deposit will attract issuance of a conviction warrant. The complainant may withdraw the deposited amount subject to executing the stipulated undertaking to refund with interest if required.