TaxTMI Updates e-Newsletter
Jun 13,2022

Export of services - zero rated supply - refund of unutilised input tax credit - incidence of tax passed on - unjust enrichment - deduction of refunded tax from production expenses

Export of services - zero rated supply - refund of unutilised input tax credit - Services provided by the petitioner to ASCL qualify as export of services and are zero-rated entitling the petitioner to refund of unutilised input tax credit. - HELD THAT: - The court examined the statutory definition of export of services and the facts on record, including the agreement showing that the petitioner (supplier) is located in India, the recipient (ASCL) is located outside India and the place of supply is outside India. The services were held to fall within the expression 'export of services' and therefore within the scope of zero rated supply, making refund of unutilised input tax credit available under the refund provisions. The court relied on the principle that services rendered and consumed abroad attract export treatment and that consequential reliefs for exports are to be applied rather than denied. Applying that legal principle to the agreed facts, the petitioner's supplies qualified for refund relief and the authorities' contrary conclusion that GST applied to these supplies was erroneous. [Paras 13, 14, 15, 16, 22]

The supplies were export of services and the petitioner was entitled to claim refund in respect of the periods in dispute.

Incidence of tax passed on - unjust enrichment - deduction of refunded tax from production expenses - The refund could not be denied on the ground of unjust enrichment because the revenue failed to establish that the incidence of tax had been passed on to the recipient. - HELD THAT: - The court considered the statutory bar against refund where the applicant has passed on the incidence of tax and scrutinised the agreement between the parties. Clause 4.10 of the agreement, providing that any tax refund received would be deducted from production expenses (i.e., from the consideration payable), demonstrated that the petitioner did not pass on the final incidence of tax to ASCL. The Appellate Authority's treatment of the petitioner's alternative contention regarding issuance of credit notes as an admission was rejected. As the revenue did not establish that the burden of GST was shifted to the overseas recipient, refusal of refund on the ground of unjust enrichment was unsustainable. [Paras 17, 18, 19, 20, 22]

The authorities erred in holding that incidence of tax had been passed on and in denying refund on the ground of unjust enrichment.

Final Conclusion: Impugned orders rejecting the petitioner's refund claims for the specified periods were set aside and the writ petition was allowed, with the court holding that the supplies were export of services (zero-rated) and that the revenue failed to prove passing on of the incidence of tax such as to bar refund.

Interpretation of contract - obligation to provide welcome drink under tender and annexures - applicability of Railway Board circulars - reimbursement of GST on production charges upon proof of payment - partial/interim arbitral award - arbitral fact finding and scope of judicial review

Obligation to provide welcome drink under tender and annexures - interpretation of contract - applicability of Railway Board circulars - Whether the respondent was contractually obliged to provide welcome drink during the initial temporary licence period and whether IRCTC could deduct the cost of welcome drink from the respondent's bills - HELD THAT: - The Court accepted the arbitrator's factual and contractual analysis that Annexure E (sector wise services) did not include a requirement to serve a welcome drink and that the 2017 policy (letter dated 07.02.2017) imposing the welcome drink obligation was a post contract decision implemented after the contract had commenced. Bidders were invited under a partial unbundling model and rates for welcome drink were not called for in the tender; consequently the respondent did not bid for it. The arbitrator noted that the respondent only agreed to provide the welcome drink as a condition for extension of the licence after IRCTC's communication of 06.04.2017 and that for the initial contract period the respondent was not obliged to supply the welcome drink. On these findings the Court held that IRCTC could not lawfully deduct amounts it had spent on welcome drink from the respondent's bills for the period when the respondent had no contractual obligation to supply it. [Paras 23, 24, 25, 26, 29]

The award holding that the respondent was not obliged to provide welcome drink during the initial six month contract period is upheld and IRCTC could not deduct the expenses for welcome drink from the respondent's bills for that period.

Reimbursement of GST on production charges upon proof of payment - applicability of Railway Board circulars - partial/interim arbitral award - Whether IRCTC is obliged to reimburse GST on production charges paid by the respondent after 01.07.2017 on production of proof of payment - HELD THAT: - The Court agreed with the arbitrator's application of CC 32/2014 and CC 44/2017 which provide that applicable taxes are to be reimbursed to the licensee/service provider subject to proof of payment. The tender and circulars distinguished service/production charges and envisaged reimbursement of applicable taxes. The arbitrator found, on evidence including challans and PW 2's testimony regarding GSTR filings, that GST had been deposited by the respondent. The Court noted that IRCTC had recovered GST in the train fare and that Input Tax Credit considerations did not negate the contractual entitlement to reimbursement. Consequently, GST payable post 01.07.2017 is admissible to the respondent upon proof of deposit, with the rate changes (e.g. 18% initially and the lower rate from April 2018) affecting the applicable quantum. [Paras 34, 36, 42, 43, 44]

The award holding that GST on production charges is payable to the respondent upon proof of deposit (with effect from 01.07.2017 and subject to the applicable rates thereafter) is upheld.

Partial/interim arbitral award - arbitral fact finding and scope of judicial review - Whether the partial/interim award dated 15.12.2020 is patently illegal or perverse so as to warrant interference under Section 34 of the 1996 Act - HELD THAT: - The Court reiterated that interpretation of contract and assessment of evidence fall within the arbitrator's domain and that interference is limited. Having examined the reasoning and factual findings recorded by the arbitrator on the decided issues, the Court found no patent illegality or perversity in the partial/interim award. The Court therefore declined to supplant the arbitrator's view with its own and dismissed the challenge under Section 34. [Paras 46, 47, 48]

No interference with the partial/interim award; the award is neither patently illegal nor perverse and is sustained.

Final Conclusion: The appeal is dismissed; the partial/interim arbitral award dated 15.12.2020 is upheld (including the findings that the respondent was not obliged to provide welcome drink during the initial contract period and that GST on production charges is reimbursable upon proof of deposit), pending matters remitted to arbitration for quantification are unaffected, and parties shall bear their own costs.

Advance ruling - applicant as supplier requirement - Interpretation of "in relation to the supply of goods or services or both" in Section 95(a) - Applicability of AAR to recipient's inward supply - Binding nature of advance ruling

Advance ruling - applicant as supplier requirement - Interpretation of "in relation to the supply of goods or services or both" in Section 95(a) - Whether a recipient of goods or services can be an applicant for pronouncement of an advance ruling under Section 95(a). - HELD THAT: - The Authority examined the language of Section 95(a) and concluded that the expression requires the supplier (and not the recipient) to seek an advance ruling in respect of matters relating to supply. The Authority relied on the plain and unambiguous wording of the provision to hold that the applicant must be the person undertaking or proposing to undertake the supply. The applicant's contention that the phrase "in relation to the supply of goods or services or both" could be read to include inward supplies by a recipient was rejected as contrary to the statutory text. The Authority observed that allowing a recipient to obtain a ruling on his inward supply would render the binding effect of the ruling ineffective as it would not bind the supplier, thereby defeating the object of the scheme. The Authority accordingly held that the subject application, filed by a recipient seeking rulings about supplies received, was not maintainable. [Paras 5]

A recipient cannot be an applicant for an advance ruling under Section 95(a); only the supplier proposing or undertaking the supply can seek such a ruling.

Applicability of AAR to recipient's inward supply - Binding nature of advance ruling - Whether the Authority could answer the applicant's questions on applicability of concessional rate to works contract services and to construction of common amenities when the applicant is the recipient. - HELD THAT: - Having found that the applicant is the recipient and not the supplier, the Authority held that it could not pronounce a binding advance ruling on the tax rate applicability for the works contract services or on the benefit for construction of common amenities as sought by the applicant. The Authority noted Section 103(1) which limits the binding effect of an advance ruling to the applicant and the concerned officer in respect of that applicant; consequently, a ruling obtained by a recipient would not bind the supplier, undermining the utility of the exercise. For these reasons the Authority declined to give any ruling on the substantive rate questions. [Paras 5, 6]

No ruling can be given on the applicability of Entry No. 3(v)(da) of Notification 11/2017 or on concessional rate for construction of common amenities because the applicant is only the recipient of the services.

Final Conclusion: The Authority declined to pronounce an advance ruling on the substantive questions concerning concessional GST rate on works contract services and construction of common amenities because the applicant is a recipient and Section 95(a) permits only a supplier undertaking or proposing to undertake the supply to seek an advance ruling; accordingly no ruling was given.

Exclusion of reimbursement received as a pure agent from the taxable value of supply - Application of Rule 33 regarding pure agent exclusion from taxable value - Distinction between consideration retained by supplier and amounts collected as conduit/intermediary - Determination of taxable value for supplies where supplier acts as intermediary - Advance ruling jurisdiction under Section 97(2) - scope and limitations

Exclusion of reimbursement received as a pure agent from the taxable value of supply - Application of Rule 33 regarding pure agent exclusion from taxable value - Distinction between consideration retained by supplier and amounts collected as conduit/intermediary - Whether stipend amounts collected by the applicant from Trainer Institutes and paid in full to trainees form part of the taxable value of the applicant's supplies - HELD THAT: - The Authority examined the agreements and factual matrix and found that Trainer Institutes are contractually obliged to pay stipends to trainees, and that the stipends are routed through the applicant who collects and disburses the full amount without retention. The applicant separately charges and retains a fixed service fee on which GST is discharged. The Authority treated the applicant's role in respect of stipend collection and disbursement as that of a conduit/intermediary and observed that such amounts are not attributable to services supplied by the applicant. Applying the legal principle embodied in Rule 33 concerning a supplier acting as a pure agent, and relying on the Authority's earlier, factually similar ruling in the Yashaswi Academy matter, the Authority held that the stipend amounts received from the Trainer Institutes and paid in full to trainees do not form part of the taxable value of the applicant's supplies and therefore do not attract GST at the hands of the applicant. [Paras 5]

Stipend amounts collected from Trainer Institutes and remitted in full to trainees are not includible in the taxable value of the applicant's supplies and do not attract GST.

Final Conclusion: The Authority declined to answer the preliminary question on whether the applicant 'acts as a pure agent' under Section 97(2) (as outside the specified scope) but conclusively held that the stipend amounts received from Trainer Institutes and paid in full to trainees are excluded from the applicant's taxable value and thus do not attract GST.

Classification of goods - Tariff heading 8544 - renewable energy devices - parts of solar power generating system - specific entry v. general entry - Schedule III Entry 395 - exclusion of parts of heading 8544

Classification of goods - Tariff heading 8544 - parts of solar power generating system - specific entry v. general entry - Schedule I Entry 234 - Schedule III Entry 395 - Whether the PV DC cables are parts of Solar Power Generating System and thereby classifiable under Entry No. 234 of Schedule I or else classifiable under Entry No. 395 of Schedule III - HELD THAT: - The Authority accepts that the PV DC cables fall under Tariff Heading 8544. The determinative question was whether the cables constitute 'parts' of a Solar Power Generating System (SPGS) so as to attract the more specific Entry No. 234. The Authority found that the impugned cables do not participate in generation of electricity; they merely transfer the electrical energy generated by the SPGS to inverters. By analogy (ceiling fan and its supply wiring), mere conduits for transfer of electricity are not parts of the generating apparatus. The applicant failed to demonstrate that the cables are integral to the generation function of the SPGS. Further, Notes to Section XVI and the exclusionary treatment of parts of articles of heading 8544 reinforce that such cables are not to be classed as parts of machines under the specific entry. Having concluded that the cables are not parts of SPGS, the Authority examined Schedule III and observed that the description in Entry No. 395 corresponds to CTH 8544 and that, following amendments, Entry No. 395 covers the impugned insulated cables. Accordingly, the Authority held that the impugned PV DC cables are classifiable under Entry No. 395 of Schedule III (as amended) and not under Entry No. 234 of Schedule I. [Paras 5]

PV DC cables are not parts of the Solar Power Generating System and are classifiable under Entry No. 395 of Schedule III to Notification No. 01/2017-CTR (as amended).

Final Conclusion: The Advance Ruling answers that the PV DC cables manufactured and supplied by the applicant are classifiable under Entry No. 395 of Schedule III to Notification No. 1/2017-Central Tax (Rate) (as amended) and are taxable accordingly under that entry.

Anti-profiteering - benefit of input tax credit - commensurate reduction in price - Section 171(1) of the CGST Act, 2017 - pre-GST and post-GST comparison - investigation under CGST Rules

Benefit of input tax credit - pre-GST and post-GST comparison - There was no additional benefit of input tax credit available to the Respondent which required passing on to the Applicant by way of reduced price. - HELD THAT: - The Authority accepted the DGAP's finding that the project was launched and all material events - licences, RERA registration, booking, allotment, first tax invoice, execution of Builder-Buyer Agreements and commencement of construction - occurred in the post-GST period. Consequently there was no basis to compute or compare any pre-GST input tax credit or tax-rate structure with post-GST availability of ITC. In absence of any pre-GST supply or bookings for the project, no additional ITC accrued to the Respondent that could have been passed on to the buyers; therefore the factual predicate for claiming any unpassed benefit of ITC did not exist. [Paras 8, 9, 14, 15]

No additional ITC benefit was established and no obligation to pass on such benefit arose.

Anti-profiteering - Section 171(1) of the CGST Act, 2017 - commensurate reduction in price - There was no contravention of Section 171(1) of the CGST Act, 2017 by the Respondent. - HELD THAT: - Section 171(1) applies where there is either a reduction in rate of tax or an increase in the benefit of input tax credit that must be passed on by way of commensurate price reduction. The Authority held that, since the project and all transactions were post-GST, neither a pre-GST tax-rate nor a pre-GST ITC position existed against which to measure any additional benefit. On the facts as verified, the Respondent did not realise any additional ITC benefit vis-a -vis a pre-GST period; accordingly the statutory trigger for invoking anti-profiteering did not arise. The DGAP's investigative conclusion that anti-profiteering provisions were not applicable to the impugned project was accepted. [Paras 9, 10, 15]

The Respondent has not contravened Section 171(1); the application is dismissed.

Final Conclusion: On the DGAP's report and undisputed chronology showing the project and all related acts to be post-GST, the Authority found no additional ITC to be passed on and no breach of Section 171(1) of the CGST Act, 2017; the application is dismissed and the matter is disposed.

Benefit of input tax credit (ITC) - passing on benefit of ITC - anti-profiteering under Section 171(1) of the CGST Act, 2017 - validity of completion certificate as determinative of tax liability - competent authority to issue completion certificate

Benefit of input tax credit (ITC) - passing on benefit of ITC - Whether additional ITC was available to the respondent in respect of the project and, if so, whether it was not passed on to the applicant. - HELD THAT: - The Authority accepted the Completion Certificate dated 31.03.2016 issued by an empanelled architect registered with the Council of Architecture and Rourkela Development Authority, and verified the registration. The DGAP's reinvestigation found that any ITC earned by the respondent in the period from July 2017 was attributable to repair and maintenance activities and not to construction of the impugned project. The respondent produced sale deeds and project-wise details showing that units sold after completion were not subject to Service Tax/GST and that the project had been completed prior to introduction of GST. Accordingly, there was no additional accrual or utilisation of ITC in respect of construction of the subject project in the post-GST period that would require passing on to buyers. [Paras 13]

No additional ITC in respect of construction of the project accrued to the respondent in the post-GST period and there was no benefit available which required passing on to the applicant.

Anti-profiteering under Section 171(1) of the CGST Act, 2017 - validity of completion certificate as determinative of tax liability - competent authority to issue completion certificate - Whether the respondent violated Section 171(1) of the CGST Act, 2017 by resorting to profiteering in respect of the applicant's purchase. - HELD THAT: - Section 171(1) requires passing on benefit of a reduction in tax rate or of ITC. The Authority found that the project's Completion Certificate was issued on 31.03.2016 by a competent authority (a registered architect as recognised under relevant provisions and state law) prior to the introduction of GST w.e.f. 01.07.2017. Because construction was completed pre-GST, there was no post-GST change in tax rate or fresh ITC benefit relating to the construction of the subject units to be compared or passed on. The DGAP's report, which the Authority accepted, concluded that Section 171(1) was not attracted. On that basis the allegation of profiteering was unsustainable and the complaint was dismissed. [Paras 12, 14, 15, 17]

Section 171(1) was not contravened; there was no profiteering and the complaint is dismissed.

Final Conclusion: The Authority accepted the DGAP's findings that the project was completed before GST came into effect, no additional ITC relating to construction accrued in the post-GST period, and therefore Section 171(1) is not attracted; the application alleging profiteering is dismissed as not maintainable.

Exception to speculative transaction under proviso (d) to Section 43(5) - eligible transaction as per Explanation-1 to Section 43(5) - derivatives under clause (ac) of Section 2 of the Securities Contracts (Regulation) Act, 1956 - trading on a recognized stock exchange through screen-based system via SEBI-registered broker - speculative transaction and treatment of set off and carry forward of losses

Eligible transaction as per Explanation-1 to Section 43(5) - derivatives under clause (ac) of Section 2 of the Securities Contracts (Regulation) Act, 1956 - trading on a recognized stock exchange through screen-based system via SEBI-registered broker - exception to speculative transaction under proviso (d) to Section 43(5) - speculative transaction and treatment of set off and carry forward of losses - Losses from currency derivative transactions executed on a recognised stock exchange through a SEBI-registered broker are not speculative transactions and are eligible for set off against non-speculative business income. - HELD THAT: - The Tribunal examined whether currency derivative transactions entered into on the BSE through a SEBI-registered broker qualify as 'eligible transactions' under Explanation-1 to Section 43(5) and thereby fall outside the definition of 'speculative transaction' by virtue of proviso (d). The definition of 'derivative' in clause (ac) of Section 2 of the Securities Contracts (Regulation) Act is wide enough to include currency derivatives. Explanation-1 requires that the transaction be carried out electronically on a screen-based system through a stock broker registered under the SEBI Act, which was satisfied on the material on record and sample contract notes. The CBDT instruction recognizing that eligible forex-derivative transactions executed on recognised exchanges are not speculative was noted as supportive. Reliance was also placed on coordinate-bench decisions holding that currency derivatives traded on recognized exchanges are derivatives covered by clause (ac) and excluded from speculative transactions by proviso (d). Applying these principles cumulatively, the Tribunal concluded that the assessee complied with the conditions of proviso (d) and Explanation-1 and therefore the loss arising from the currency derivative transactions could not be treated as speculative; the Assessing Officer and the CIT(A) were in error in treating the losses as speculative and denying set off. [Paras 9, 11, 12, 13, 14]

The orders of the Assessing Officer and the CIT(A) treating the currency-derivative loss as speculative are set aside; the claim that such loss is non-speculative is restored and the loss is eligible for set off against non-speculative business income.

Final Conclusion: Appeal allowed: losses from currency derivatives executed on a recognised stock exchange through a SEBI-registered broker are not speculative under the proviso to Section 43(5) and the Assessing Officer is directed to treat the loss as non-speculative for set off purposes.

Exemption from income tax on compensation under the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013 - acquisition by agreement/direct purchase treated as acquisition under the Act, 2013 - TDS obligation of deductor where the payment is exempt - correction statement under Section 200(3) of the Income tax Act, 1961 - processing of correction statement and determination of refund under Section 200A of the Income tax Act, 1961 - CBDT Circular No.36 of 2016 clarifying tax treatment of compensation under award or agreement

Exemption from income tax on compensation under the Right to Fair Compensation and Transparency in Land Acquisition, Rehabilitation and Resettlement Act, 2013 - acquisition by agreement/direct purchase treated as acquisition under the Act, 2013 - CBDT Circular No.36 of 2016 clarifying tax treatment of compensation under award or agreement - Whether compensation paid to the petitioner on acquisition of land by respondent No.1 pursuant to private negotiations and sale deed falls within the exemption from income tax under Section 96 of the Act, 2013. - HELD THAT: - The Court held that acquisition effected by private negotiation and sale deed for a public project, where the State policy fixes compensation computed under the provisions of the Act, 2013 and the Act itself recognises acquisition through agreement, retains the character of acquisition under the Act. Relying on the Apex Court's reasoning in Balkrishnan that an agreed enhanced compensation in negotiated settlement does not change the character of compulsory acquisition, and having regard to CBDT Circular No.36 of 2016 which clarifies that compensation received pursuant to award or agreement exempted by Section 96 of the Act, 2013 is not taxable under the Income tax Act, the Court concluded that the compensation in the present case is exempt from income tax. Section 46 (which limits the exemption in certain cases) does not apply because the purchaser/respondent is not a "specified person" within its scope. Therefore the amount paid to the petitioner could not be subjected to income tax. [Paras 11, 12]

Compensation paid pursuant to the negotiated acquisition/sale deed is exempt from income tax under Section 96 of the Act, 2013; the deducted TDS ought not to have been applied to the petitioner.

TDS obligation of deductor where the payment is exempt - correction statement under Section 200(3) of the Income tax Act, 1961 - processing of correction statement and determination of refund under Section 200A of the Income tax Act, 1961 - credit for tax deducted at source under Rule 37BA of the Income tax Rules, 1962 - The procedure by which the TDS wrongfully deducted by respondent No.1 is to be rectified and the manner of securing refund to the petitioner. - HELD THAT: - Having held the compensation to be exempt, the Court addressed remediation. Rule 37BA recognises credit for TDS to the deductee on the basis of information furnished by the deductor. The proviso to Section 200(3) permits the deductor to deliver a correction statement to rectify mistakes in the statement of tax deducted. Clause (d) of Section 200A(1) provides for determination of amounts payable or refundable to the deductor and for processing of statements. In the factual matrix the Court found it was incumbent on respondent No.1 to file the correction statement under the proviso to Section 200(3) to record that TDS was not liable to be deducted, and for the Income tax Department to process that statement (including any correction statement) under Section 200A so that steps may be taken for refund in accordance with the Income tax Act and Rules. The Court declined to decide whether the petitioner independently is required to file a return under Section 139, observing that the circumstances requiring filing under Section 139 were not before the Court. [Paras 13, 14, 16]

Respondent No.1 must file the correction statement under the proviso to Section 200(3) within the time directed; the Income tax Department shall process the statement under Section 200A; thereafter the parties shall take steps for refund in accordance with statutory provisions and rules.

Final Conclusion: The Court held that the compensation paid pursuant to the negotiated acquisition/sale deed, computed under the Act, 2013, is exempt from income tax under Section 96; respondent No.1 wrongly deducted TDS and is directed to file a correction statement under the proviso to Section 200(3) within one month, the Income tax Department shall process the statement under Section 200A, and the parties shall pursue refund in accordance with the Income tax Act and Rules.

Disallowance under section 40(a)(ia) for failure to deduct TDS - application of section 194J to arbitrator's fees - allowability of professional/consultancy expenditure under section 37(1) - requirement of documentary evidence/vouchers to substantiate expenditure - partial deletion of disallowance where supporting professional bills are produced

Disallowance under section 40(a)(ia) for failure to deduct TDS - application of section 194J to arbitrator's fees - Disallowance of Rs. 5,15,000 claimed as arbitration fee/clerical expenses for failure to deduct TDS - HELD THAT: - The Tribunal upheld the revenue's finding that payments to arbitrators were subject to deduction of tax at source under the provisions applicable to professional fees and that the assessee failed to offer a reasonable explanation for non-deduction. The assessee's own ledger described the payments as net of TDS and it had itself treated similar payments as "legal, professional and consultancy" with TDS reconciliation, showing awareness that TDS was required. The assessee's contention that section 194J was not attracted was rejected on these facts. Consequently, the disallowance under the provision for failure to deduct TDS was sustained. [Paras 10]

Addition of Rs. 5,15,000 upheld for failure to deduct TDS on arbitrator fees.

Allowability of professional/consultancy expenditure under section 37(1) - requirement of documentary evidence/vouchers to substantiate expenditure - partial deletion of disallowance where supporting professional bills are produced - Allowability of Rs. 35,05,892 paid to Pramodh Engineers as professional fees and the effect of production (or non-production) of supporting bills - HELD THAT: - The Tribunal found that the payments to Pramodh Engineers were incurred for pursuing arbitration proceedings connected with the assessee's business, which was substantiated by the project's account notes and awards in the assessee's favour. Accordingly, the Tribunal held that the Assessing Officer and CIT(A) erred in rejecting such payments on the ground that they were not for business. However, the assessee produced only three bills before the CIT(A) totaling Rs. 25,78,263; those three bills were accepted by the Tribunal as valid professional fee bills and the corresponding amount was deleted. The remaining portion of the disallowance was sustained because the assessee failed to furnish supporting bills or vouchers for that balance, and an assessee cannot claim expenditure without necessary documentary support. There was no issue of TDS deficiency on these payments. [Paras 11, 13, 14, 15]

Deletion of Rs. 25,78,263 of the disallowance; balance of the Rs. 35,05,892 disallowance upheld for lack of supporting bills.

Final Conclusion: The appeal is partly allowed: the addition of Rs. 5,15,000 for failure to deduct TDS on arbitrator fees is upheld; the disallowance of Rs. 35,05,892 paid to Pramodh Engineers is partly deleted to the extent of Rs. 25,78,263 for which bills were produced, and the remaining disallowance is sustained for want of documentary support.

Assumption of jurisdiction under section 263 - Erroneous and prejudicial to the interest of the Revenue - Application of mind by the Assessing Officer - Scope of suo motu revisional power - Assessment framed under section 143(3) - Enquiry under section 142(1) - Reconciliation of cash deposits during demonetisation

Assumption of jurisdiction under section 263 - Erroneous and prejudicial to the interest of the Revenue - Application of mind by the Assessing Officer - Enquiry under section 142(1) - Reconciliation of cash deposits during demonetisation - Whether the PCIT/CIT rightly invoked jurisdiction under section 263 to revise the assessment dated 14.12.2019 for A.Y. 2017-18 - HELD THAT: - The Tribunal found on the record that the Assessing Officer had issued specific queries under section 142(1) regarding cash deposits segregated between pre-demonetisation and demonetisation periods and had received detailed replies with bank statements, cash-book summary and an explanation for the discrepancy in figures in the return. The Assessing Officer examined those submissions and took a plausible view in the assessment framed under section 143(3). Applying the settled legal tests from precedents cited by the Tribunal, the requisites for exercise of suo motu revisional power under section 263 were absent because the order of the AO was not shown to be erroneous in law nor prima facie prejudicial to the Revenue. The Tribunal held that mere difference of opinion by the PCIT/CIT, or the existence of queries and answers on record that were not fully reproduced in the assessment order, does not establish that no application of mind was made or that the AO's order was erroneous; consequently the exercise of revisional jurisdiction to substitute the AO's judgment was impermissible. [Paras 8, 9, 11, 12, 17]

The assumption of jurisdiction by the PCIT/CIT under section 263 was held to be unjustified and the assessment dated 14.12.2019 was restored.

Final Conclusion: The Tribunal allowed the appeal, holding that the AO had carried out specific enquiries under section 142(1), applied his mind to the cash-deposit reconciliation for A.Y. 2017-18 and arrived at a plausible view; therefore the PCIT/CIT's exercise of revision under section 263 was unwarranted and the AO's assessment dated 14.12.2019 was restored.

Assessment as trust versus association of persons (AOP) - exemption under Section 11 - cancellation of registration under Section 12AA

Assessment as trust versus association of persons (AOP) - cancellation of registration under Section 12AA - exemption under Section 11 - The Tribunal correctly directed that the assessee be assessed as a trust and not as an AOP, and allowed exemption under Section 11, in view of the setting aside of the cancellation of registration. - HELD THAT: - The Tribunal found that the assessing officer had assessed the assessee as an AOP solely because the registration granted under Section 12AA had been cancelled by the Commissioner. The cancellation order dated 31.12.2008 had been set aside by the Tribunal by order dated 20.03.2009. On that basis the Tribunal directed the assessing officer to assess the assessee as a trust and to grant exemption under Section 11. This Court notes that the revenue's separate appeal against the Tribunal's order setting aside the cancellation (ITA/270/2009) was dismissed by this Court by judgment dated 17.01.2022, and therefore there is no error in the Tribunal's conclusion that the assessee's registration stood restored and that assessment should be as a trust, not as an AOP.

Appeal dismissed; Tribunal correctly directed assessment as a trust and allowance of exemption under Section 11.

Final Conclusion: The revenue's appeal is dismissed and the substantial question of law is answered against the revenue; the Tribunal's order directing assessment of the assessee as a trust and allowing exemption stands affirmed, and the stay application is closed.

Reopening of assessment under Section 148 - Statutory inquiry and pre-issue show-cause procedure under Section 148A - Obligation to provide opportunity of hearing and to consider assessee's reply under Section 148A(b) and (c) - Requirement of reasoned order under Section 148A(d)

Statutory inquiry and pre-issue show-cause procedure under Section 148A - Obligation to provide opportunity of hearing and to consider assessee's reply under Section 148A(b) and (c) - The mandatory pre-notice procedure under Section 148A requires the Assessing Officer to conduct any necessary inquiry, serve a show-cause notice, consider the assessee's reply and then decide whether to issue a notice under Section 148 by passing a reasoned order under Section 148A(d). - HELD THAT: - The Court examined the scheme of Section 148A as inserted by the Finance Act, 2021 and observed that before issuing a notice under Section 148 the Assessing Officer must (a) conduct any inquiry if required, (b) serve a show-cause notice giving the assessee an opportunity of being heard within the time specified, (c) consider the reply furnished by the assessee, and (d) decide on the basis of material on record including the reply whether it is a fit case to issue a notice under Section 148, by passing an order under Section 148A(d). The Court treated these steps as mandatory pre-conditions to the exercise of power to issue a notice under Section 148 and as requiring a decision supported by reasons after considering material produced by the assessee. [Paras 9, 10]

Section 148A imposes mandatory procedural obligations on the Assessing Officer to inquire, serve a show-cause notice, consider the reply and then pass a reasoned order before issuing a notice under Section 148.

Requirement of reasoned order under Section 148A(d) - Quashing and remand for fresh consideration - The impugned order dated 31.03.2022 under Section 148A(d) was quashed and the matter remitted because the order did not adequately consider the materials and reply furnished by the petitioner and lacked satisfactory reasoning. - HELD THAT: - The Court found that the petitioner had responded to the show-cause notice and supplied documentary evidence regarding dissolution of the partnership and bank account details. Paragraph 5 of the impugned order merely recorded that the reply was considered but 'not found acceptable' without any explanation; the Court held this to be unsatisfactory. In view of the statutory requirement to consider the assessee's reply and give a reasoned decision before issuing a notice under Section 148, the Court was not satisfied with the reasoning in the impugned order. Consequently the impugned order was quashed and the matter was remitted to the Assessing Officer to proceed afresh in accordance with Sub-sections (b) and (c) of Section 148A and thereafter pass a detailed reasoned order under Section 148A(d). The Court clarified that it has not examined the merits of the case. [Paras 11, 12, 13]

Impugned order quashed for inadequate reasoning and failure to properly consider the reply and documents; matter remitted for fresh consideration and passage of a detailed order in accordance with Section 148A(b), (c) and (d).

Final Conclusion: The writ petition is allowed to the extent that the order dated 31.03.2022 under Section 148A(d) is quashed and set aside; the matter is remitted to the Assessing Officer to comply with the mandatory pre-notice procedure under Section 148A, afford the petitioner an opportunity of hearing, consider the material on record and pass a detailed reasoned order in accordance with law for A.Y.2018-19.

Reopening of assessment and writ court non-interference at premature stage - Challenge to order under Section 148A(d) and consequential notice under Section 148 before framing of reassessment - Availability of statutory remedies under the Income Tax Act and inadmissibility of premature invocation of Article 226/227 - Distinction between jurisdictional error and error of law/fact within jurisdiction

Reopening of assessment and writ court non-interference at premature stage - Challenge to order under Section 148A(d) and consequential notice under Section 148 before framing of reassessment - Writ Court should not ordinarily interfere with an order under Section 148A(d) or the consequential notice under Section 148 at the stage when the assessing officer has yet to frame assessment/reassessment. - HELD THAT: - The Court held that when proceedings under the Income Tax Act are pending and the statutory machinery for assessment/reassessment is yet to be operated by the assessing authority, the High Court should not adjudicate the merits of the reassessment at that premature stage. Reliance was placed on earlier decisions which recognise that the Act provides a complete machinery for assessment, reassessment and for challenging assessment orders, and that interlocutory questioning of the departmental decision to issue a notice would circumvent that statutory scheme. The court observed that the challenge in the present petition was essentially factual and related to exercise of jurisdiction which the Act confers on the assessing officer; accordingly, interference under Article 226/227 was not warranted at this intermediate stage and the writ petition was dismissed without pronouncement on merits. [Paras 10, 11]

Writ petition dismissed; no interference with the order under Section 148A(d) or the notice under Section 148 at this stage.

Distinction between jurisdictional error and error of law/fact within jurisdiction - Availability of statutory remedies under the Income Tax Act and inadmissibility of premature invocation of Article 226/227 - The alleged error in exercise of jurisdiction was characterised as an error of fact or law within jurisdiction for which statutory remedies exist, not as a jurisdictional defect warranting immediate judicial interference. - HELD THAT: - The Court noted the well-settled distinction between a true jurisdictional error (which may justify direct judicial intervention) and an error of law or fact made within jurisdiction, which is to be corrected through the remedies provided in the Income Tax Act. The petition challenged the correctness of the assessing authority's exercise of jurisdiction on factual grounds; the Court held that such contentions are to be addressed through the statutory processes and that premature adjudication could prejudice the statutory fact-finding and appellate mechanism. Consequently, no substantive pronouncement was made on merits and the remedy under the Act remains the appropriate forum. [Paras 10]

The complaint was treated as an intra-jurisdictional error amenable to statutory remedy; not a jurisdictional defect justifying writ relief at this stage.

Final Conclusion: The review application was allowed to recall the earlier short order and the writ petition was restored; on merits the High Court dismissed the writ petition challenging the order under Section 148A(d) and the consequential notice under Section 148 for Assessment Year 2015-16, holding that judicial interference at this premature stage is not warranted and that statutory remedies under the Income Tax Act should be availed, without expressing any opinion on the merits.

Writ of mandamus - Vivad Se Vishwas Scheme - time and manner of payment - Designated authority's certificate determining amount payable - Deemed withdrawal of appeals upon filing declaration - No vested right to extension of statutory payment date - Requirement of judicially enforceable right for mandamus

Vivad Se Vishwas Scheme - time and manner of payment - Designated authority's certificate determining amount payable - No vested right to extension of statutory payment date - Petitioner's entitlement to pay under the Vivad Se Vishwas Act after the notified last dates and to have respondents accept payment with additional fee and interest. - HELD THAT: - The Court examined the scheme's mechanism whereby a declaration is filed in prescribed form and the designated authority issues a certificate determining the amount payable, and the time limits for payment set out under the Act. The Form-3 issued to the petitioner fixed the amounts payable and the statutory timeline applicable to payment; the Court held that the settlement under the scheme is not open-ended and has a terminal point. The notified timelines (including extensions and press-release clarifications) prescribe the last dates for payment without and with additional amount; no provision in the Act gives the petitioner a vested, enforceable right to further extend those dates. Consequently the contention that Form-3 created an unlimited or indefinite offer which could be accepted after the notified deadlines was rejected and the request to permit payment after the last dates was not maintainable. [Paras 9, 10, 11, 12]

The petitioner's request to pay and have respondents accept amounts under the Act after the prescribed last dates was declined; the Form-3 did not render the offer open-ended and no extension right was found.

Writ of mandamus - Requirement of judicially enforceable right for mandamus - Whether a writ in the nature of mandamus could be issued to compel respondents to accept late payment under the scheme. - HELD THAT: - The Court reiterated the principle that a writ of mandamus lies only where a legal or judicially enforceable right exists. Absent any statutory provision creating a vested right to an extension of the payment deadline under the Vivad Se Vishwas Act, the petitioner could not claim a legally protected right enforceable by mandamus. Reliance on settled authority establishing that mandamus requires a legal right and corresponding duty was applied to reject the petitioner's plea for issuance of mandamus compelling acceptance of late payment. [Paras 13]

In the absence of any vested legal right to extension, issuance of a writ of mandamus to compel acceptance of late payment was not warranted and the petition failed on this ground.

Final Conclusion: Writ petition dismissed; no entitlement to direct respondents to accept payment under the Vivad Se Vishwas Scheme after the prescribed last dates and no basis for mandamus in absence of a vested, judicially enforceable right.

Registration under section 12AA of the Income-tax Act - charitable purpose and genuineness of activities - absence of dissolution clause in trust deed - Maharashtra Public Trust Act contingencies - scheme under section 50A of the Maharashtra Public Trust Act - precedential application of jurisdictional High Court decision

Registration under section 12AA of the Income-tax Act - charitable purpose and genuineness of activities - absence of dissolution clause in trust deed - Maharashtra Public Trust Act contingencies - scheme under section 50A of the Maharashtra Public Trust Act - Application for registration under section 12AA was to be granted despite absence of a dissolution clause in the trust deed. - HELD THAT: - The Appellate Tribunal found no adverse finding by the Commissioner (Exemptions) regarding the charitable nature of the society's objects or the genuineness of its activities; the Commissioner had rejected the registration solely on the technical ground that the trust deed lacked a dissolution clause. The Tribunal held that absence of such a clause does not justify rejection where the trust has submitted to the jurisdiction of the Charity Commissioner, a scheme under section 50A of the Maharashtra Public Trust Act has been applied and approved, and the Maharashtra/Bombay Public Trust Act contains provisions to meet contingencies on dissolution. Reliance on the jurisdictional High Court's decision in CIT(E) v. Tara Educational & Charitable Trust (as cited in the order) supported the view that Section 12AA does not mandate refusal of registration for want of a dissolution clause when statutory safeguards and Charity Commissioner oversight exist. Applying these principles on the facts, and noting that the assessee had filed for amendment of its bye-laws and obtained approval under section 50A, the Tribunal concluded there was no justifiable reason to deny registration and directed the Commissioner to grant registration under section 12AA. [Paras 11]

The appeal is allowed and the Commissioner (Exemptions) is directed to grant registration to the assessee society under section 12AA.

Final Conclusion: The Tribunal allowed the assessee's appeal, directing grant of registration under section 12AA because the objects and activities were found charitable and the absence of a dissolution clause in the trust deed, in the presence of Charity Commissioner oversight and applicable provisions of the Maharashtra Public Trust Act (and an approved scheme under section 50A), did not warrant rejection.

Penalty for concealment under section 271(1)(c) where income is added by the Assessing Officer - Application of Explanation 1 to section 271(1) relating to amounts added or disallowed in computing total income - Distinction between survey under section 133A and search under section 132 for imposition of penalty - Effect of voluntary declaration in return of income on penalty liability

Penalty for concealment under section 271(1)(c) where income is added by the Assessing Officer - Application of Explanation 1 to section 271(1) relating to amounts added or disallowed in computing total income - Distinction between survey under section 133A and search under section 132 for imposition of penalty - Effect of voluntary declaration in return of income on penalty liability - Whether penalty under section 271(1)(c) can be imposed when the assessee voluntarily declared income during a survey, included that amount in a belated but timely return, and the Assessing Officer made no addition in the assessment. - HELD THAT: - The Tribunal held that Explanation 1 to section 271(1) deems concealed the amount that is "added or disallowed in computing total income"; therefore liability under clause (c) presupposes an addition or disallowance by the AO. Explanations 5 and 5A, which extend penalty even where income is declared in a return, apply only to search cases under section 132 and are not applicable to survey proceedings under section 133A. In the present case the assessee surrendered income during survey, included the same amount in the return filed under section 139(4), and the AO accepted the returned income without making any addition. Since the income was not added by the AO in assessment, the statutory condition for invoking penalty under section 271(1)(c) (as clarified by Explanation 1) was not satisfied. The Supreme Court decision in MAK Data Pvt. Ltd. was distinguished on facts because there the assessed income exceeded the returned income and the addition by the AO was the basis for penalty. Consequently, a voluntary declaration of income in the return following survey, with no subsequent addition by the AO, cannot form the foundation for imposing penalty under section 271(1)(c). [Paras 3, 4, 6]

Penalty under section 271(1)(c) cannot be imposed on income voluntarily declared in a survey and accepted in the return where the AO makes no addition; the CIT(A) order deleting the penalty is affirmed.

Final Conclusion: The Revenue's appeal is dismissed; the penalty imposed under section 271(1)(c) was rightly deleted because the income surrendered during the survey was voluntarily offered in the return and no addition was made by the Assessing Officer.

Approval under section 80G - registration under section 12AA - genuineness of activities - rejection of 80G after 12AA registration granted - reliance on inspection reports and surplus for denial of exemption

Approval under section 80G - registration under section 12AA - rejection of 80G after 12AA registration granted - reliance on inspection reports and surplus for denial of exemption - Validity of denial of approval under section 80G to the society which holds continuing registration under section 12AA - HELD THAT: - The Tribunal examined whether the Commissioner of Income Tax (Exemption) was justified in rejecting the assessee's application for approval under section 80G despite the assessee having been granted registration under section 12AA which continued and had not been cancelled. The Tribunal followed the reasoning of a co-ordinate Bench which held that when registration under section 12AA has been granted after examination of genuineness of activities and remains in force, it is not proper for the Commissioner to refuse approval under section 80G by re-assessing genuineness. The Tribunal found that the adverse observations relied upon by the ld. CIT(E) - absence of a signboard, non-production of audited account for one year at the time of inspection, and existence of surplus from fees - were not sufficient legal grounds to deny 80G approval where 12AA registration exists and there were no adverse findings in assessment proceedings. Applying that principle, the Tribunal set aside the order of the ld. CIT(E) and directed grant of approval under section 80G to the assessee. [Paras 13, 14]

Order of ld. CIT(E) denying approval under section 80G is set aside and ld. CIT(E) is directed to grant approval; appeal allowed.

Final Conclusion: The Tribunal allowed the appeal, set aside the CIT(E)'s order denying section 80G approval, and directed the Commissioner to grant approval to the assessee in view of its continuing section 12AA registration and absence of adverse findings warranting denial.

Deductibility of expenditure under Section 37(1) where business is unlawful or prohibited - Extrapolation of income from seized material to other assessment years - Requirement that incriminating material must pertain to the specific assessment year to reopen a concluded assessment after search

Deductibility of expenditure under Section 37(1) where business is unlawful or prohibited - Explanation 1 to Section 37(1) - exclusion of expenditure prohibited by law - Deduction of 10% of income as business expenditure was not allowable to an assessee carrying on hawala business. - HELD THAT: - The Tribunal found on the material, including the assessee's own statements and incriminating documents seized from the assessee's locker, that the assessee was engaged in hawala operations. Section 37(1) permits deduction of expenditure wholly and exclusively for the purpose of business, but Explanation 1 excludes from deduction any expenditure which is prohibited by law. Hawala business is contrary to public policy and prohibited; the assessee produced no proof of incurring any deductible expenditure and the AO had assessed income on a gross basis. For these reasons the CIT(A)'s allowance of 10% as business expenditure was held not to conform with Section 37(1) and was reversed. [Paras 13]

Allowance of 10% deduction by the CIT(A) is reversed and such deduction is disallowed.

Extrapolation of income from seized material to other assessment years - Requirement that incriminating material must pertain to the specific assessment year to reopen a concluded assessment after search - Additions based on extrapolation from documents seized for AY 2013-14 to AY 2010-11 and AY 2011-12 were not sustainable and were correctly deleted by the CIT(A). - HELD THAT: - The Tribunal noted that the incriminating material seized in the search related exclusively to assessment year 2013-14, whereas assessments for 2010-11 and 2011-12 were concluded as on the date of search. To make additions in a concluded assessment on the basis of search/seized material, the incriminating material must relate to the assessment year sought to be reopened; absent such year-specific material there was no basis to extrapolate income from AY 2013-14 to earlier concluded years. The CIT(A) therefore correctly deleted the extrapolated additions for both years. [Paras 14]

Deletion of additions based on extrapolation from seized documents for AY 2013-14 is upheld for AY 2010-11 and AY 2011-12.

Final Conclusion: The appeals are partly allowed: the CIT(A)'s deletion of extrapolated additions for AY 2010-11 and AY 2011-12 is affirmed, but the CIT(A)'s allowance of a 10% business expenditure deduction is reversed and disallowed.

Disallowance under Section 40(a)(ia) of the Income-tax Act - tax deduction at source - reimbursement of expenses - tax withholding obligation under Section 192 - remand for verification

Disallowance under Section 40(a)(ia) of the Income-tax Act - reimbursement of expenses - tax withholding obligation under Section 192 - Validity of deletion by CIT(A) of the disallowance of payments made to Goldman Sachs Group Inc. (GSGI) treated as reimbursements and not liable to withholding under Section 40(a)(ia) - HELD THAT: - The Tribunal upheld the CIT(A)'s finding that the payments (treated in the assessment as Rs.3.06 crores) to GSGI represented reimbursement of employee-related stock-award costs incurred by the parent group and did not carry any element of profit. The Tribunal noted that the assessee debited the cost to its books and was subject to tax deduction obligations under Section 192 in relation to employees, and that forms (Form No.16) and the nature of the transactions supported the reimbursement character. No infirmity was shown in the CIT(A)'s conclusion that the payments were mere recharges and not amounts on which tax was required to be withheld under Section 40(a)(ia). Accordingly, the Assessing Officer's solitary ground in his appeal was dismissed. [Paras 11]

Deletion of the disallowance of Rs.3.06 crores was confirmed and the Assessing Officer's appeal on this ground is dismissed.

Disallowance under Section 40(a)(ia) of the Income-tax Act - tax deduction at source - reimbursement of expenses - remand for verification - Treatment of the balance disputed payments aggregating approximately Rs.17 lacs - whether tax was already deducted on part and whether remaining payments are reimbursements not requiring TDS - HELD THAT: - The Tribunal found that the assessee had produced evidence before the CIT(A) that tax had already been deducted on part of the payments (Rs.9,25,546) and that another part (Rs.8,71,077) represented reimbursement such as relocation expenses. The Tribunal observed that the CIT(A) rejected these contentions without adequately examining the evidence on the sole ground that the material was not produced before the Assessing Officer, and that no justification was given for such rejection. In view of the deficiency in appellate consideration, the Tribunal directed that the matter be remitted to the Assessing Officer for fresh examination: the assessee is to produce the relevant details and the Assessing Officer is to decide in accordance with law whether TDS was already deducted and whether the payments are genuine reimbursements. [Paras 13]

Disallowance in respect of the Rs.17 lacs is set aside and the matter is remitted to the Assessing Officer for verification and fresh decision; the assessee's appeal is allowed for statistical purposes.

Final Conclusion: The Tribunal dismissed the Assessing Officer's appeal upholding the CIT(A)'s deletion of the disallowance in respect of the payments to GSGI as mere reimbursements, and remitted the issue relating to the contested Rs.17 lacs to the Assessing Officer for verification of pre-existing TDS and the reimbursement character of payments; the assessee's appeal is allowed for statistical purposes.

Allowability of deduction for employees' contribution to provident fund and ESIC - disallowance under Section 36(1)(va) for delayed deposit of employees' contributions - processing of return and adjustments under section 143(1) - retrospective application versus prospective operation of legislative amendment - relevance of tax audit reporting in assessment under section 143(1) - Explanation to Section 36(1)(va) introduced by Finance Act, 2021

Explanation to Section 36(1)(va) introduced by Finance Act, 2021 - retrospective application versus prospective operation of legislative amendment - Applicability of the amendment (Explanation) introduced by Finance Act, 2021 to assessment year 2018-19 - HELD THAT: - The Tribunal found that the Explanation to Section 36(1)(va) was introduced by the Finance Act, 2021 with effect from 1-4-2021 and that the amendment does not impose additional obligations retrospectively on earlier assessment years. Having considered the statutory amendment's effective date and the settled principle that a provision which casts an additional burden on the taxpayer will not be applied retrospectively unless clearly intended, the Tribunal held that the amendment is not applicable to AY 2018-19. The Tribunal relied on a coordinate Bench decision which addressed the same question and concluded that the legislative change could not be used to sustain a disallowance for the earlier year. [Paras 6, 7]

Amendment introduced by Finance Act, 2021 (Explanation to Section 36(1)(va)) is not applicable to AY 2018-19.

Allowability of deduction for employees' contribution to provident fund and ESIC - disallowance under Section 36(1)(va) for delayed deposit of employees' contributions - processing of return and adjustments under section 143(1) - relevance of tax audit reporting in assessment under section 143(1) - Validity of disallowance made in intimation under section 143(1) for employee contributions deposited after statutory due date but before filing return under section 139(1) - HELD THAT: - The Tribunal examined whether the processing adjustment under section 143(1) to disallow employees' contributions to PF and ESIC-on the ground of late deposit as reflected in the tax audit report-was legally sustainable where the employer had deposited the contributions before filing the return under section 139(1). Relying on the reasoning in a coordinate Bench decision, the Tribunal observed that reporting of a payment date in the tax audit report is a factual statement and cannot, by itself, constitute a disallowance in the processing of the return when, as here, payments were made prior to the due date for filing the return. The Tribunal concluded that such an adjustment in the course of processing under section 143(1) was vitiated in law and therefore deleted the disallowance. [Paras 6, 7]

Disallowance of the employees' contribution made in the section 143(1) intimation is deleted where contributions were deposited before the due date for filing the return under section 139(1).

Final Conclusion: The Tribunal allowed the appeal for AY 2018-19, set aside the CIT(A)'s order, and directed deletion of the disallowance of employees' PF and ESIC contributions, holding that the Finance Act, 2021 amendment does not apply to AY 2018-19 and that the processing adjustment under section 143(1) was not sustainable where contributions were deposited before filing the return under section 139(1).

Revision under section 263 of the Income-tax Act - Duty of Assessing Officer to follow directions of revisional authority - Re-do assessment after affording opportunity of hearing - Enhancement of disallowance in consequence of revisional order - Reasonable opportunity and principles of natural justice in revision proceedings - Consequences of non-appearance before the Tribunal

Revision under section 263 of the Income-tax Act - Duty of Assessing Officer to follow directions of revisional authority - Enhancement of disallowance in consequence of revisional order - Re-do assessment after affording opportunity of hearing - Validity of CIT(A)'s enhancement of disallowance to accord with the CIT's order under section 263 where the AO had passed a consequential assessment not fully following the revisional directions. - HELD THAT: - The Tribunal examined the record of the revisional proceedings and the consequential assessment. The Commissioner in his revision order had set aside the original assessment and directed the Assessing Officer to re-do the assessment on the issues identified, specifically directing disallowance of the registration expenditure. The Assessing Officer, however, made a lesser disallowance in the consequential order. The Tribunal found that the revisional direction was specific and binding on the AO and that the CIT had afforded a reasonable opportunity of hearing during the revision. In view of the AO's failure to follow the revisional directions, the CIT(A)'s enhancement of the disallowance to conform with the section 263 order was upheld. The Tribunal also noted a clerical error in the AO's order regarding the exact quantum disallowed but treated the substantive failure to implement the revisional direction as determinative. The Tribunal therefore found no infirmity in the CIT(A)'s order and dismissed the assessee's challenge to that enhancement. [Paras 4, 7]

Order of the CIT(A) upholding enhancement of disallowance in accordance with the CIT's section 263 direction is affirmed and the ground raised by the assessee is dismissed.

Consequences of non-appearance before the Tribunal - Reasonable opportunity and principles of natural justice in revision proceedings - Effect of the assessee's non-appearance before the Tribunal on additional grounds raised in the appeal. - HELD THAT: - The Tribunal recorded that the assessee and its representatives did not appear despite opportunities. In the absence of any representation, the Tribunal proceeded to adjudicate on the merits from the material on record and noted that the revision proceedings had afforded reasonable opportunity. Consequently, the Tribunal declined to entertain additional grounds raised by the assessee at the hearing stage and adjudicated the appeal on the available record. [Paras 5, 8]

Additional grounds raised by the assessee are not allowed for want of representation; the appeal is disposed of on the material on record.

Final Conclusion: The Tribunal dismisses the appeal, upholds the CIT(A)'s enhancement of the disallowance to conform with the revisional order under section 263, and declines to entertain additional grounds due to the assessee's non-appearance.

Principles of natural justice - right to cross-examine witnesses - order rendered a nullity for violation of natural justice - reliance on statements recorded under Section 108 of the Customs Act, 1962 - availability of alternative remedy by appeal not a bar where natural justice is violated - remand for fresh adjudication with opportunity to cross-examine

Principles of natural justice - right to cross-examine witnesses - order rendered a nullity for violation of natural justice - reliance on statements recorded under Section 108 of the Customs Act, 1962 - Denial of permission to cross-examine a witness relied upon by the adjudicating authority rendered the impugned order legally infirm. - HELD THAT: - The Court found that the Settlement Commission and Respondent No.2 placed reliance on the statement of Shri Naishad B. Kapadia when adjudicating against the petitioner. Permission to cross-examine was denied on the sole premise that cross-examination would not shed further light. The Court held that it is impermissible for the authority to pre-judge the usefulness of cross-examination and to refuse it where the statement of a witness is expressly relied upon. Following the settled principle that an order passed without observing the principles of natural justice is a nullity, the Court concluded that the impugned order could not stand when the petitioner was denied the opportunity to test the veracity of the material relied upon against him. [Paras 7, 10, 11]

Impugned order set aside on ground of violation of natural justice for denial of cross-examination.

Remand for fresh adjudication with opportunity to cross-examine - availability of alternative remedy by appeal not a bar where natural justice is violated - Whether the matter should be remanded for fresh consideration and whether the availability of appeal precluded writ relief in view of the breach of natural justice. - HELD THAT: - Although an appeal under the statutory scheme is available, the Court held that where principles of natural justice have been violated, relief under writ jurisdiction cannot be foreclosed merely because an alternate remedy exists. In consequence, the Court directed that the impugned order be set aside and the matter remitted to Respondent No.2 to decide afresh after permitting the petitioner to cross-examine Shri Naishad B. Kapadia. The scope of the rehearing was left open so that the authority may reconsider all points after affording the required opportunity. [Paras 12]

Matter remanded to Respondent No.2 for fresh decision after permitting cross-examination; availability of appeal did not preclude writ relief in these circumstances.

Final Conclusion: Writ petition allowed; impugned order dated 08.05.2020 set aside; matter remitted to Respondent No.2 for fresh adjudication after permitting the petitioner to cross-examine Shri Naishad B. Kapadia; all points left open.

Jurisdiction of DRI officers to issue show cause notice under Section 28 of the Customs Act - power of an appellate tribunal to remand matters pending authoritative determination - maintenance of status quo pending decision of a superior forum - retrospective deeming of officers as 'proper officer' under Section 28(11) of the Customs Act

Jurisdiction of DRI officers to issue show cause notice under Section 28 of the Customs Act - retrospective deeming of officers as 'proper officer' under Section 28(11) of the Customs Act - Whether the Tribunal was correct in remitting appeals to the adjudicating authority because the jurisdiction of DRI officers to issue show cause notices was then under dispute. - HELD THAT: - The Court observed that the question whether DRI officers were competent to issue notices under Section 28 had produced conflicting High Court decisions and was pending before the Supreme Court in appeals arising from Mangali Impex. Earlier orders of co-ordinate Benches had taken differing approaches; while one bench declined interference with the Tribunal's remand where status quo had been directed, a later Division Bench in Sanket Praful Tolia held that the Tribunal ought not to have allowed the appeals and remanded the matters but should have kept the appeals pending to await the Supreme Court's decision. Applying the later authoritative view, the Court set aside the CESTAT order of remand and restored the matters to the Tribunal with a direction to keep the appeals pending and await the Supreme Court's determination, thereby declining to finally adjudicate the jurisdictional question in the present proceedings.

Order of the Tribunal remanding the matters for decision on jurisdiction set aside; appeals restored to the Tribunal to be kept pending awaiting the Supreme Court's decision.

Power of an appellate tribunal to remand matters pending authoritative determination - maintenance of status quo pending decision of a superior forum - Whether the Tribunal was empowered to remand the cases without deciding the issues on merits on the ground that the jurisdictional question was sub judice. - HELD THAT: - The Court held that, in light of the Division Bench decision in Sanket Praful Tolia, the appropriate course where an authoritative pronouncement by the Supreme Court is awaited is for the Tribunal to keep the appeals pending rather than allow the appeals and remand them to the adjudicating authority. The Court therefore concluded that the Tribunal's remand was not appropriate and directed that the appeals be restored to the Tribunal to await the Supreme Court's determination. The Court also protected the interests of parties by prohibiting coercive action by the Department until final adjudication.

Tribunal's power to remand was not exercised appropriately; remand set aside and appeals to be kept pending with a direction that no coercive action be taken meanwhile.

Final Conclusion: The CESTAT orders remanding the appeals for decision on the jurisdictional competence of DRI officers are set aside; the matters are restored to the Tribunal to be kept pending awaiting the Supreme Court's decision in the appeals arising from Mangali Impex, and the Department is directed not to initiate coercive action in the interim. The substantial questions of law are left open.

Rule against bias (nemo debet esse judex in propria causa) - reasonable apprehension of bias - impartiality of tribunal members - principles of natural justice - recusal and disqualification - remand for fresh consideration

Rule against bias (nemo debet esse judex in propria causa) - reasonable apprehension of bias - impartiality of tribunal members - recusal and disqualification - Whether the participation of a CESTAT member who earlier accorded sanction for prosecution rendered the CESTAT orders vitiated by apprehension of bias. - HELD THAT: - The Court applied the settled common-law principle that no person should be a judge in his own cause and that the relevant test is whether circumstances give rise to a reasonable apprehension or real likelihood of bias. Citing established authorities, the Court held that a member who had earlier accorded sanction for prosecution based on the adjudication order ought not to have subsequently heard and decided the appeal against that adjudication. The fact that the same officer sanctioned prosecution and later sat as a member of the CESTAT to decide the appeal created a reasonable apprehension of bias; demonstration of actual bias is not necessary. The Court therefore concluded that the participation of that member vitiated the impugned orders. [Paras 6, 11, 12]

Participation of the CESTAT member who had accorded sanction for prosecution created a reasonable apprehension of bias and vitiated the impugned orders.

Remand for fresh consideration - principles of natural justice - Remedial consequence to be adopted in view of the apprehension of bias. - HELD THAT: - In light of the finding that the member's participation gave rise to a reasonable apprehension of bias, the respondent conceded before the Court that the matter should be remanded. The Court set aside the CESTAT final order and miscellaneous order and remanded the appeal to the CESTAT for fresh disposal in accordance with law, expressly refraining from expressing any opinion on the merits and leaving other substantial questions open for fresh adjudication. [Paras 13, 14]

Impugned CESTAT orders set aside and the matter remanded to the CESTAT for fresh consideration; no opinion expressed on merits and other questions left open.

Final Conclusion: Finding reasonable apprehension of bias in the participation of the CESTAT member who had earlier accorded prosecution sanction, the High Court set aside the CESTAT final and miscellaneous orders and remanded the matter for fresh disposal in accordance with law, leaving the merits and other questions undecided.

Fictitious shareholding - juridical personality of a deity - insufficiency of prosecution evidence arising from defective inspection - penalty for failure to make declaration under Section 187C (civil/monetary consequence, not criminal liability) - exclusive prosecutorial competence in respect of securities offences under Section 55A - competence of Registrar/Assistant Registrar to institute complaint

Juridical personality of a deity - fictitious shareholding - Whether shares held jointly in the name of a deity and a person constitute holding in a fictitious name attracting criminal liability under the Companies Act - HELD THAT: - The Court found on the evidence that the shares stood jointly in the name of Shri Venkatachalapathy and the petitioner, that payments were made by the petitioner, and that DW1's unchallenged evidence described the shares as held jointly in reverence to the deity. The Inspecting Officer (PW2) admitted that accounts and shareholding in the name of a god are permissible and that he had not verified physical share certificates or supplied the inspection report to the petitioner. The trial and appellate Courts failed to appreciate that there was no intention to impersonate or to acquire shares in a fictitious name and that the facts disclosed no evasion or enrichment. On these findings the Court concluded that the holding in the name of the deity did not amount to criminally punishable fictitious shareholding and warranted acquittal. [Paras 14, 15]

The petitioner was acquitted of the offence alleged under Section 68A as the shares held in the name of the deity did not constitute fictitious shareholding on the material before the Court.

Insufficiency of prosecution evidence arising from defective inspection - Whether defects in the inspection and in the prosecution's foundational material rendered the prosecution unsustainable - HELD THAT: - The Court recorded that PW2 did not call for or verify the physical share certificates, did not serve the inspection report on the petitioner, and accepted that his role was limited to forwarding documents to PW1. The complaint did not set out the show cause notice and the reasons for rejecting the petitioner's replies. These deficiencies undermined the prosecution's case and the reliability of the inspection-based foundation for criminal proceedings. [Paras 14, 15]

The prosecution's case was held to be unsustainable in view of the inspection and evidentiary defects, contributing to the order of acquittal.

Penalty for failure to make declaration under Section 187C (civil/monetary consequence, not criminal liability) - Whether non-filing of the declaration required under Section 187C attracts criminal prosecution or only penalty - HELD THAT: - The Court observed that the petitioner ought to have filed the requisite declaration under Section 187C within the prescribed period, but that failure to do so, absent other culpable elements, gives rise to a monetary penalty and not necessarily criminal prosecution under Section 68A. Having found absence of mens rea or impersonation, the Court held that only the civil/penal consequences under Section 187C were appropriate. [Paras 16]

Non-filing of the declaration under Section 187C may attract penalty but did not justify the criminal conviction under the facts of this case.

Exclusive prosecutorial competence in respect of securities offences under Section 55A - competence of Registrar/Assistant Registrar to institute complaint - Whether the Assistant Registrar was competent to institute the criminal complaint and whether SEBI's role under Section 55A ousts other prosecutorial action - HELD THAT: - The Court noted submissions about Section 55A and the contention that SEBI is the proper authority to initiate prosecutions relating to issuance and transfer of securities. The lower appellate Court had earlier held that 'Registrar' includes Assistant Registrar and that the respondent had authority to file the complaint in respect of alleged holding in a fictitious name. This Court, while observing the statutory scheme and that SEBI has specific powers under Section 55A, resolved the case on factual and evidentiary grounds and on the appropriate consequence for non-filing under Section 187C, without sustaining the criminal prosecution. The decision therefore does not rest on an express broad statutory ruling that Assistant Registrars may or may not in all circumstances institute complaints, but it records that prosecutorial competence questions were considered and that the prosecution was not sustainable on merits. [Paras 12, 16, 17]

Although competence and SEBI's statutory role were canvassed, the Court allowed the revision on factual and evidentiary grounds and on the limited legal proposition that non-filing under Section 187C attracts penalty rather than criminal sanction in the circumstances; the conviction was set aside.

Final Conclusion: Criminal Revision allowed; the judgments of the trial Court and the lower appellate Court are set aside and the petitioner is acquitted of the charges.

Dissolution of company in liquidation - discharge of Official Liquidator - deposit of surplus in public account of India under Section 555(1) and (2) of the Companies Act, 1956 - permissible deductions and expenditure under the Companies Act and Rules - destruction of physical records under Rules traceable to Section 550(1) and (2) of the Companies Act, 1956 - digitization of court records and consequent destruction

Dissolution of company in liquidation - discharge of Official Liquidator - The company in liquidation is to be dissolved and the Official Liquidator discharged. - HELD THAT: - The Court found that the main company petition had long outlived its utility and that just and reasonable circumstances existed to accede to the dissolution application. The Official Liquidator's report showed negligible funds available for distribution and no worthwhile assets to disburse. In light of the antiquity of proceedings and the fund position, the Court concluded that continuing the main petition would be futile and ordered dissolution of the company and discharge of the Official Liquidator. [Paras 5, 6, 9]

Company stands dissolved and the Official Liquidator is discharged; the dissolution application and main company petition are disposed of as ordered, with no order as to costs.

Deposit of surplus in public account of India under Section 555(1) and (2) of the Companies Act, 1956 - permissible deductions and expenditure under the Companies Act and Rules - Balance funds in the liquidation account are to be deposited in the public account of India in the Reserve Bank of India subject to permissible deductions. - HELD THAT: - The Court acceded to the prayer to deposit the remaining balance with the Reserve Bank of India in the public account of India under the scheme of Section 555(1) and (2) of the Companies Act, 1956. The deposit is to be made after the Official Liquidator makes only those deductions and expenditures which are permissible under the Companies Act and the Rules thereunder and after incurring any permissible expenditure and standard deductions, if applicable. [Paras 7]

OL shall deposit the balance in the public account of India in the Reserve Bank of India after making permissible deductions and expenditures under the Act and Rules.

Destruction of physical records under Rules traceable to Section 550(1) and (2) of the Companies Act, 1956 - digitization of court records and consequent destruction - Destruction of physical records in the Official Liquidator's office and the treatment of physical court records are governed by the Central Government Rules and the High Court's digitization process respectively. - HELD THAT: - The Court noted that the Central Government has prescribed Rules traceable to Section 550(1) and (2) of the Companies Act for destruction of physical records in the Office of the Official Liquidator and directed that destruction proceed in accordance with those Rules. Physical records pertaining to the main company petition and related applications held by the Company Court are to be governed by the Madras High Court's ongoing digitization process, which also provides for destruction of records. [Paras 8]

Destruction of OL's physical records to proceed as per Central Government Rules traceable to Section 550(1) and (2); physical court records governed by the High Court's digitization process.

Final Conclusion: The High Court allowed the dissolution application, ordered dissolution of the company and discharge of the Official Liquidator, directed deposit of the remaining balance in the public account of India after permissible deductions, and permitted destruction of records in accordance with the applicable Rules and the Court's digitization process; no order as to costs.

Reduction of share capital under Section 66 of the Companies Act, 2013 - Special resolution for reduction of capital - Company's capital lost or unrepresented by available assets - Approval of form of minutes under Section 66(5) - Accounting treatment conformity with Accounting Standards prescribed under Section 133 - Regional Director's report - no objection - Sanction not to preclude action for statutory violations - No exemption from stamp duty, taxes or other statutory compliances

Reduction of share capital under Section 66 of the Companies Act, 2013 - Special resolution for reduction of capital - Accounting treatment conformity with Accounting Standards prescribed under Section 133 - Regional Director's report - no objection - Approval of form of minutes under Section 66(5) - Confirmation of the company's scheme for reduction of paid-up equity share capital and approval of the proposed minutes to be registered under Section 66(5). - HELD THAT: - The shareholders approved the reduction by a special resolution in the extraordinary general meeting. The application included certificates from the company's chartered accountants certifying that there are nil unsecured creditors and one secured creditor, and that the proposed accounting treatment conforms with the Accounting Standards prescribed under Section 133. The Tribunal's directions for service and publication were complied with and the Regional Director reported that it had no objection to the proposed scheme. In view of these materials and compliance with the procedural requirements, the Tribunal held it was just and proper to confirm the reduction of paid-up capital (cancellation of capital lost or unrepresented by available assets to reduce the nominal value per share) and approved the form of minutes proposed to be registered under Section 66(5). [Paras 12, 13]

The reduction of share capital as proposed is confirmed and the form of minutes for registration under Section 66(5) is approved.

Sanction not to preclude action for statutory violations - No exemption from stamp duty, taxes or other statutory compliances - Extent and effect of the Tribunal's sanction vis-a -vis statutory liabilities and future actions. - HELD THAT: - The Tribunal made clear that its sanction does not bar initiation of proceedings or actions, in accordance with law, against any persons, directors or officials if any deficiency, violation or non-compliance with any enactment, rule or regulation is found. The order expressly does not grant exemption from payment of stamp duty, taxes or other charges and requires the company to comply with obligations under other laws including SEBI, FEMA and Income Tax as applicable. [Paras 14, 15]

The sanction is subject to normal legal consequences; it does not confer exemptions and compliance with other statutory requirements remains obligatory.

Final Conclusion: Application under Section 66 is allowed: the Tribunal confirms the proposed reduction of paid-up equity share capital and approves the minutes for registration; the sanction is subject to continued statutory compliance and does not prevent lawful action for any violations nor grant exemptions from stamp duty, taxes or other obligations.

Interference with show cause notice at interlocutory stage - Availability of alternative efficacious remedy before Securities Appellate Tribunal - Vicarious liability of non-executive directors - Inordinate delay and requirement of reasonable explanation for initiation of proceedings - Judicial restraint where disputed questions of fact require forum-specific adjudication

Interference with show cause notice at interlocutory stage - Availability of alternative efficacious remedy before Securities Appellate Tribunal - Judicial restraint where disputed questions of fact require forum-specific adjudication - Maintainability of writ petition challenging SEBI show cause notice and extent of court's power to quash such notice at threshold - HELD THAT: - The High Court held that ordinarily it will not interfere with a show cause notice unless it is issued without authority or is patently illegal. Where the show cause notice is issued within the statutory scheme and an alternative efficacious remedy exists (before SAT), the writ court should normally refrain from exercising its extraordinary jurisdiction. The petitioners did not contend that the notice was issued without jurisdiction or that it was patently illegal. Given the availability of the statutory appellate forum and the factual questions involved, the court declined to assume the role of the adjudicating authority at the threshold and directed the petitioners to avail the remedy before SAT. To protect the parties' interests pending invocation of that remedy, the court kept the notice in abeyance for a limited period and granted specific procedural directions (stay of coercive action, computation of limitation, and expedited consideration by SAT). [Paras 21, 23, 34, 35]

Writ not entertained to quash the show cause notice; petitioners directed to approach SAT and the notice was kept in abeyance for a limited period with directions to SAT to consider the matter on merits.

Vicarious liability of non-executive directors - Judicial restraint where disputed questions of fact require forum-specific adjudication - Whether vicarious liability can be fastened on the petitioners as non-executive directors - HELD THAT: - The court reiterated the settled principle that non-executive directors are not ordinarily vicariously liable for acts of the company unless they were in charge of and responsible for the conduct of the business or were involved in day-to-day affairs. While the respondents relied on material suggesting the petitioners held roles in the audit committee (which could have wider ramifications), that factual contention was disputed. Because the question of the petitioners' status and involvement is a disputed question of fact, the High Court declined to adjudicate it under Article 226 and left the factual appreciation to the appropriate forum (SAT) where evidence can be placed and evaluated. [Paras 24, 25, 26]

Issue not decided on merits by this Court; factual dispute as to involvement of petitioners is left to be adjudicated before SAT.

Inordinate delay and requirement of reasonable explanation for initiation of proceedings - Judicial restraint where disputed questions of fact require forum-specific adjudication - Legitimacy of issuance of show cause notice after long delay and adequacy of explanation for delay - HELD THAT: - The court acknowledged the settled law that powers should be exercised within a reasonable period and that undue delay may render actions unsustainable. Noting the substantial delay (matters dated 2002 and notice in 2018), the court observed that respondents had furnished an explanation - that relevant information only came to light during investigations of other companies - and that such explanation could not be summarily rejected at the threshold. Given the enormity of the delay and the need for proper appreciation of the explanation against evidentiary material, the court refrained from resolving the issue itself and directed that the petitioners be permitted to raise and have the delay issue considered by SAT. [Paras 26, 28, 29, 36]

Delay not held sufficient to quash the notice at this stage; adequacy of explanation and impact of delay to be examined by SAT.

Final Conclusion: Writ petitions seeking quashing of the SEBI show cause notice were not allowed to succeed on merits; the High Court declined to quash the notice at the threshold, kept the notice in abeyance for a limited period, and directed the petitioners to file proceedings before the Securities Appellate Tribunal which shall consider the matters (including disputed factual issues and delay) expeditiously, with no coercive action meanwhile.

Existence of pre-existing dispute - Operational debt and documentary evidence of unpaid operational debt - Demand notice and notice of dispute under the Code - Test for plausibility of defence requiring further investigation (Mobilox test) - Admission of petition under Section 9 of the Insolvency and Bankruptcy Code, 2016

Existence of pre-existing dispute - Demand notice and notice of dispute under the Code - Test for plausibility of defence requiring further investigation (Mobilox test) - Whether the Company Petition filed under Section 9 of the Code must be rejected on account of a pre-existing dispute between the parties. - HELD THAT: - The Tribunal examined the documentary record and found that the Corporate Debtor had, by email dated 16.01.2018 and other communications prior to receipt of the Demand Notice, raised complaints about quality and rate differences and claimed amounts and damages. Applying the test articulated by the Supreme Court in Mobilox Innovations, the adjudicating authority is required at the admission stage to determine only whether a plausible contention exists which requires further investigation and is not a patently feeble or spurious defence. The Bench found the Corporate Debtor's defence was not mere bluster or an illusory contention but raised substantive complaints that predated the Demand Notice and warranted investigation. Consequently, the existence of a pre-existing dispute disentitled the Operational Creditor to initiation of CIRP under Section 9. [Paras 5, 6, 7, 8]

The Company Petition is dismissed on the ground of a pre-existing dispute between the parties.

Final Conclusion: The petition under Section 9 of the Insolvency and Bankruptcy Code, 2016 filed by the Operational Creditor is dismissed for want of merit on the ground that a pre-existing dispute regarding quality and rate difference existed prior to the Demand Notice.

Fraudulent trading or wrongful trading - Liability to make contribution to assets of the corporate debtor - Void ab initio - Forensic audit as basis for Section 66 proceedings - Joint and several liability of directors - Maintainability of Section 66 application filed by Resolution Professional

Maintainability of Section 66 application - Regulation 35A and time-bar under CIRP Regulations - Interlocutory application under Section 66 filed by the Resolution Professional is maintainable - HELD THAT: - The Tribunal examined Section 66 and the authorities on temporal and procedural objections, noting that technical objections to jurisdiction or time-limits raised for objection's sake are not decisive. Having considered the factual pleadings and the principles in the cited NCLAT decision, the Tribunal rejected the maintainability objection and held that the application by the Resolution Professional seeking relief under Section 66 is maintainable and not to be dismissed on mere technical grounds. [Paras 23]

Maintainability objection rejected; the Section 66 application is maintainable.

Fraudulent trading or wrongful trading - Forensic audit as basis for Section 66 proceedings - Void ab initio - Joint and several liability of directors - Liability to make contribution to assets of the corporate debtor - Respondents are jointly and severally liable to make contribution to the assets of the corporate debtor for fraudulent transactions identified by the forensic audit - HELD THAT: - The Tribunal accepted the forensic auditor's findings that certain transactions (including sale of mortgaged land, suspected diversion of funds accounted as land advance, and share purchase agreements) were fraudulent or void ab initio and were entered into with intent to keep assets beyond the reach of the secured creditor and to deceive the corporate debtor and third parties. On that basis the Tribunal concluded the case warranted relief under Section 66 and held the respondents personally liable for deliberate and wilful defaults. Consequently the Tribunal directed the respondents 1 to 6 to jointly and severally contribute the specified amount to the corporate debtor's account with interest at the rate directed, to be paid within the time ordered. [Paras 24, 25]

Respondents 1 to 6 held jointly and severally liable to make contribution to the assets; directed to pay the amount with interest as ordered.

Final Conclusion: The Tribunal dismissed the maintainability objection and, relying on the forensic audit, held the directors/respondents personally liable for fraudulent transactions under Section 66, directing them to contribute to the corporate debtor's assets and disposing of the interlocutory application accordingly.

Related party - Form No. G and separation of third party property under Regulation 20 of IBBI (Liquidation Process) Regulations, 2016 - assets as part of the liquidation estate and control of the Liquidator - effect of prior declaration under Section 66 - estoppel from seeking reliefs inconsistent with earlier adjudication

Related party - Form No. G and separation of third party property under Regulation 20 of IBBI (Liquidation Process) Regulations, 2016 - assets as part of the liquidation estate and control of the Liquidator - effect of prior declaration under Section 66 - estoppel from seeking reliefs inconsistent with earlier adjudication - Whether the applicants are entitled to release of moveable goods, books and documents lying in the factory premises or whether such relief must be refused on account of their status and the liquidation proceedings - HELD THAT: - The Tribunal found on the material before it that the three applicant companies are related parties of the corporate debtor by virtue of shareholding and common directorship, and therefore cannot be treated as independent third parties for the purpose of claiming separation of assets. The earlier order in IA/38/KOB/2021 declared the transactions fraudulent and directed the respondents (including persons connected with the applicants) to make good losses; that earlier adjudication operates against the present claim and estops the applicants from obtaining reliefs inconsistent with that order. Regulation 20 of the IBBI (Liquidation Process) Regulations, 2016 requires third parties to submit Form No. G for release and separation of assets; no such claim in Form G was filed and the Liquidator has custody and control of the liquidation estate. Given these factors - related party status, absence of Form No. G, the assets being held as part of the liquidation estate and the binding effect of the prior Section 66 determination - the Tribunal concluded there was no basis to direct release of the goods, books or other items claimed by the applicants. The Tribunal also observed that the order allowing release in IA(IBC)/73/KOB/2022 involved true third parties and is therefore distinguishable. [Paras 26, 27, 28]

Application dismissed; no relief granted for release of the goods, books or documents.

Final Conclusion: The application seeking release of movable assets, books and documents is dismissed on the ground that the applicants are related parties, no Form No. G was filed by any third party, the items are part of the liquidation estate under the control of the Liquidator, and the relief sought is inconsistent with the Tribunal's earlier Section 66 adjudication.

Admission of application for insolvency resolution process against personal guarantors - Moratorium upon admission of insolvency resolution process for personal guarantors - Appointment and duties of Resolution Professional in personal guarantor insolvency - Obligation to publish public notice and invite claims - Preparation and submission of repayment plan and conduct of creditors' meeting

Admission of application for insolvency resolution process against personal guarantors - Applications filed by the creditor under Section 95 of the IBC, 2016 for initiation of insolvency resolution process against the personal guarantors were admitted. - HELD THAT: - The petitions filed by the creditor under Section 95(1) read with the Personal Guarantors Insolvency Rules were examined along with the Resolution Professional's reports. The Resolution Professional verified that requisite documents evidencing debt, demand notice, non-payment after demand and service of the application had been furnished and that the petitions were in the prescribed form and accompanied by the prescribed fee. Respondents contested enforceability of guarantees and contended that corporate insolvency resolution would satisfy claims, but the Tribunal found on the record and the Resolution Professional's verification that the debt remained unpaid and that the criteria for admission under Section 95 were satisfied. Accordingly, the Tribunal held that the cases were fit for admission and directed initiation of the insolvency resolution process against the personal guarantors. [Paras 9, 10, 11, 12, 13]

CP(IB)/7/KOB/2022 to CP(IB)/14/KOB/2022 were admitted and insolvency resolution process against the respondents/personal guarantors was initiated.

Moratorium upon admission of insolvency resolution process for personal guarantors - A moratorium in relation to all debts of the personal guarantors was declared from the date of admission for the statutory period. - HELD THAT: - Upon admission under Section 95, the Tribunal invoked Section 100 and declared a moratorium as provided under Section 101. The order stayed pending legal actions in respect of any debt, prohibited creditors from initiating legal proceedings, and restrained the debtor from transferring or encumbering assets, subject to exceptions notified by the Central Government. The moratorium was ordered to be effective from the date of admission and to cease at the end of 180 days or on earlier passing of an order on the repayment plan under Section 114, in accordance with statutory provisions. [Paras 13]

Moratorium declared from date of admission and to operate for the period and on the terms specified under the Code.

Appointment and duties of Resolution Professional in personal guarantor insolvency - The Resolution Professional previously appointed under Section 97 was confirmed to perform the functions of Resolution Professional for the insolvency process against the personal guarantors and was directed to carry out statutory duties. - HELD THAT: - The Tribunal noted the Resolution Professional's registration and prior appointment when the Section 97 application was allowed. The RP was directed to perform duties under the Code, including preparing the list of creditors based on the application and claims received, preparing the repayment plan in consultation with the debtor, submitting reports and the repayment plan within statutory timelines, and to comply with the Code of Conduct in Section 208. The Tribunal also required the RP to submit periodic reports to the Tribunal as per the Rules. [Paras 14, 16, 17, 19]

The named Resolution Professional was directed to perform statutory functions and duties in the insolvency resolution process for the personal guarantors.

Obligation to publish public notice and invite claims - The Resolution Professional was directed to publish public notices and invite claims from all creditors within specified timelines and in specified media. - HELD THAT: - Pursuant to admission, the RP was ordered to cause a public notice on the NCLT Kochi Bench website within seven days and to invite claims from all creditors to be submitted within 21 days of such notice. The notice must include details of the order admitting the application, particulars of the RP for claim registration, and last date for submission of claims. The RP was further directed to publish the notice in two newspapers (one English and one vernacular) having wide circulation in the State where the corporate debtor and personal guarantor reside and to furnish spare copies to the Registry. [Paras 14, 15]

RP directed to publish statutory notices and invite claims within the timelines and modes prescribed.

Preparation and submission of repayment plan and conduct of creditors' meeting - The RP was directed to prepare a repayment plan, convene and report the creditors' meeting if required, and submit the repayment plan and related reports to the Tribunal within statutory timeframes. - HELD THAT: - The Tribunal set out the procedural steps: the RP shall prepare a list of creditors within 30 days of the notice, the debtor shall prepare a repayment plan under Section 105 in consultation with the RP, and the RP shall submit the repayment plan and his report within 21 days from the last date for submission of claims as per Section 106. If the RP decides a creditors' meeting is required he shall summon it within the statutory window and, in any case, shall prepare and submit the report of the meeting under Section 112. The meeting and further actions are to be conducted in accordance with the specified provisions of the Code, and the RP must record reasons if a meeting is not called. [Paras 16, 17, 18, 19]

RP directed to prepare and submit the repayment plan and to follow statutory procedure for convening and reporting the creditors' meeting within prescribed periods.

Final Conclusion: The Tribunal admitted the creditor's applications under Section 95 against the personal guarantors, appointed and directed the Resolution Professional to take statutory steps (including publication of notice, invitation of claims, preparation and submission of repayment plan and convening of creditors' meeting) and declared a moratorium from the date of admission for the period and on the terms prescribed by the Code.

Auction transparency - liquidator's duty to maximize value - mala fide conduct by liquidator - forfeiture of EMD and consequences - acceptance of second highest bid / resale discretion of liquidator - regulatory oversight by IBBI and inspection of liquidator - attachments prior to CIRP - non-maintainability of challenge

Auction transparency - liquidator's duty to maximize value - mala fide conduct by liquidator - acceptance of second highest bid / resale discretion of liquidator - forfeiture of EMD and consequences - The e-auction conducted on 25.09.2020 for the immovable property is set aside. - HELD THAT: - The Tribunal found that the auction process on 25.09.2020 lacked transparency and resulted in diminution of value to the financial creditor. The record of the auction on 23.09.2020 showed a keenly contested sale with a last valid bid of Rs. 1,55,55,550/- by Mr. G. Subramanian. Instead of declaring the second highest bidder successful or otherwise following transparent procedures, the Liquidator re-fixed the upset price at the earlier starting level and conducted an auction on 25.09.2020 without publishing a fresh sale notice or keeping the sole financial creditor informed. The Liquidator also allowed participation of a bidder whose EMD had been forfeited for the earlier mistaken bid. These facts led the Tribunal to conclude that the conduct of the Liquidator resulted in loss to the financial creditor and smacked of wrongdoings and mala fide, warranting annulment of the 25.09.2020 sale. [Paras 30, 31]

Auction of 25.09.2020 set aside.

Regulatory oversight by IBBI and inspection of liquidator - inspection of liquidator - Registry directed to send a copy of the order to IBBI for detailed inspection of the Liquidator and records pertaining to the Corporate Debtor. - HELD THAT: - Having found irregularities in the conduct of the auctions and potential mala fide actions by the Liquidator, the Tribunal directed that the IBBI be informed so that it may conduct a detailed inspection of the Liquidator and the relevant records to ascertain any irregularities. The direction is administrative and supervisory, aimed at regulatory scrutiny of the Liquidator's conduct. [Paras 32]

Registry to mark copy of the order to IBBI for detailed inspection of the Liquidator and records.

Registration of sale certificate - consequence of set aside of sale - Applications seeking issuance/registration of sale certificate and related reliefs consequent to the 25.09.2020 sale are dismissed. - HELD THAT: - In view of the Tribunal's setting aside of the 25.09.2020 auction, the IAs filed by the purported successful bidder for registration of the sale certificate, handing over possession, cancellation of encumbrances and related reliefs were rendered untenable and therefore dismissed. [Paras 36, 37]

IA/206/CHE/2021 and IA/22(CHE)/2021 dismissed.

Attachments prior to CIRP - non-maintainability of challenge - Application by the Liquidator to remove pre-CIRP attachment of the property is dismissed as not maintainable. - HELD THAT: - The Liquidator sought directions to remove an attachment effected by a revenue authority on 03.02.2016 in respect of sales tax dues for Financial Years 2007-08 to 2014-15. The Tribunal observed that the attachment preceded the initiation of the CIRP (03.12.2018) and, relying on the principle in the cited NCLAT authority, held that the Liquidator's prayer to remove a pre CIRP attachment was not maintainable and therefore dismissed the IA. [Paras 39]

IA/932/2020 dismissed as not maintainable.

Final Conclusion: The Tribunal set aside the e-auction of 25.09.2020 for lack of transparency and mala fide conduct by the Liquidator, directed that IBBI be informed for detailed inspection of the Liquidator and records, dismissed applications seeking registration/implementation of the impugned sale, and dismissed the Liquidator's challenge to a pre CIRP attachment as not maintainable.

Priority of provident fund dues over other creditors - status of provident fund dues vis-a -vis liquidation estate - penal damages and interest under Section 14B and Section 7Q of the EPF Act form part of "any amount due" - liquidator's power to reject claims under Section 40(1) of IBC - non-obstante and overriding effect of IBC in relation to labour/statutory dues

Status of provident fund dues vis-a -vis liquidation estate - liquidator's power to reject claims under Section 40(1) of IBC - Whether the Liquidator was entitled to reject the PF authority's revised claim on the ground that PF dues form part of the liquidation estate and are subject to the waterfall mechanism under IBC. - HELD THAT: - The Tribunal held that provident fund dues do not form part of the Liquidation Estate and that the Liquidator's jurisdiction extends only over assets forming part of the estate. Consequently the Liquidator cannot reject a claim of the Provident Fund authorities on the basis that those dues are part of the liquidation estate or subject to the waterfall distribution. The Liquidator's email rejection on such grounds was therefore not sustainable and the PF authorities' claim could not be dismissed for that reason. (paras 5, 9) [Paras 5, 9]

Liquidator's rejection on the ground that PF dues formed part of the liquidation estate was set aside and the PF claim could not be rejected for that reason.

Penal damages and interest under Section 14B and Section 7Q of the EPF Act form part of "any amount due" - priority of provident fund dues over other creditors - non-obstante and overriding effect of IBC in relation to labour/statutory dues - Whether penal damages and interest levied under Sections 14B and 7Q of the EPF Act are includible in the priority claim of the PF authorities and whether such amounts are liable to be brought within the IBC waterfall. - HELD THAT: - Relying on NCLAT and Supreme Court authority, the Tribunal held that penal damages and interest levied by PF authorities under Sections 14B and 7Q fall within the expression "any amount due from an employer" and attract statutory priority. The Tribunal rejected the respondent's contention that such amounts should be treated as part of the IBC waterfall, observing that the provisions of the EPF legislation operate to secure PF dues (including interest and damages) as charged amounts and are not displaced merely because insolvency/liquidation proceedings are ongoing. Thus penal damages and interest are payable to the PF authorities and are not to be subsumed into the waterfall distribution. (paras 6-8) [Paras 6, 7, 8]

Penal damages and interest under Sections 14B and 7Q are part of the PF authorities' priority claim and are not to be treated as part of the IBC waterfall; PF authorities are entitled to satisfaction of their full claim including interest.

Final Conclusion: IA/818/IB/2020 disposed of: the Liquidator's rejection of the EPF authority's revised claim is not sustainable; the PF authorities are entitled to satisfaction of their full claim (including penal damages and interest under Sections 14B and 7Q) and those amounts do not form part of the liquidation estate to be distributed under the IBC waterfall.

Infructuous applications - approval of resolution plan - effect of approval of a resolution plan on pending CIRP applications - injunction against alleged intellectual property infringement during CIRP - directions regarding handover of leased properties during CIRP - power of the Adjudicating Authority to dismiss applications rendered academic by subsequent events

Infructuous applications - approval of resolution plan - effect of approval of a resolution plan on pending CIRP applications - Whether the interlocutory applications filed in IBA/1099/2019 survive after approval of the resolution plan in respect of the corporate debtor and require adjudication on merits. - HELD THAT: - The Tribunal recorded that corporate insolvency resolution proceedings were initiated against the corporate debtor and a Resolution Professional was appointed. The Resolution Plan in respect of the corporate debtor was approved by the Adjudicating Authority by order dated 01.02.2022 and the approved plan is in the implementation stage. The applications before the Tribunal sought, inter alia, injunction against alleged infringement of intellectual property and directions to the Resolution Professional regarding leased properties. The Tribunal held that upon approval of the Resolution Plan and its being in implementation, the prayers made in the pending applications became academic. Consequently, no substantive adjudication of those interlocutory claims was necessary and the applications had been rendered infructuous by the subsequent event of plan approval. [Paras 5, 6, 7]

Applications IA/1275/IB/2020, IA/702(CHE)/2021, IA/738(CHE)/2021 and IA/1082(CHE)/2021 are dismissed as infructuous.

Final Conclusion: All four interlocutory applications were dismissed as having been rendered infructuous by the approval and implementation of the Resolution Plan in respect of the corporate debtor.

Section 9 application under IBC, 2016 - Operational debt - Pre-existing dispute - Notice of dispute under Section 8 - Rejection of Section 9 application where dispute exists - Mobilox principle

Pre-existing dispute - Notice of dispute under Section 8 - Rejection of Section 9 application where dispute exists - Mobilox principle - Whether the application under Section 9 of the IBC, 2016 is liable to be rejected on the ground of a pre-existing dispute between the parties announced prior to the statutory demand notice - HELD THAT: - The Tribunal found on the material on record that the corporate debtor had raised a bona fide dispute prior to the issuance of the statutory demand. The corporate debtor produced particulars of debit notes reflecting adjustment for alleged inferior quality of supplies, these debit notes being accounted in its books and reflected in the audit report and ledger; the applicant's representative (Mr. Chandan Dave) visited the factory and affixed the applicant's rubber stamp on the work sheet of the debit notes; the corporate debtor relied on emails showing that incorrect accounts were sent by the applicant and that the corporate debtor had replied on 14.12.2018 denying balance confirmation, which pre-dated the Section 8 notice. The Tribunal applied the principle in Mobilox that, if a plausible dispute exists and is supported by evidence (and is not spurious or illusory), the Adjudicating Authority must reject an otherwise complete Section 9 application. On these findings the Tribunal concluded that a genuine dispute existed and therefore the Section 9 application could not be admitted. [Paras 12, 13, 14, 15]

Section 9 application rejected and disposed of on the ground of a pre-existing dispute between the parties, application not admitted.

Final Conclusion: The Tribunal rejected and disposed of the Section 9 petition, holding that a plausible pre-existing dispute existed (established by debit notes, audit entries and pre-notice communications) and hence the application could not be admitted under the Mobilox principle.

Duties of resolution professional under Section 25(2) of the Insolvency and Bankruptcy Code - avoidance of preferential, undervalued and fraudulent transactions under Chapter III of the Insolvency and Bankruptcy Code - requirement of specific material facts and requisite enquiries before filing applications under Sections 43/45/46/47/66 of the Insolvency and Bankruptcy Code (Anuj Jain principle) - maintainability of applications under Section 60(5) read with Section 25(2)(j) of the Insolvency and Bankruptcy Code - forensic audit and engagement of professional/accounting/legal experts prior to seeking avoidance or fraud reliefs - status of shares held by a third party/major shareholder as distinct from assets of the corporate debtor

Duties of resolution professional under Section 25(2) of the Insolvency and Bankruptcy Code - forensic audit and engagement of professional/accounting/legal experts prior to seeking avoidance or fraud reliefs - maintainability of applications under Section 60(5) read with Section 25(2)(j) of the Insolvency and Bankruptcy Code - Whether the Resolution Professional's interlocutory application under Section 60(5) read with Section 25(2)(j) seeking avoidance, piercing of corporate veil, forensic audit and other reliefs was maintainable and liable to be entertained by the Adjudicating Authority. - HELD THAT: - The Tribunal held that a Resolution Professional must be satisfied about avoidability of particular transactions after conducting requisite enquiries and, where necessary, engaging forensic auditors or other expert professionals before approaching the Adjudicating Authority for reliefs under Chapter III or for allegations of fraudulent/wrongful trading. The Tribunal applied the principle in Anuj Jain that different heads of challenge (preference, undervaluation, fraud) require distinct enquiries and specific material facts; a composite or generalized pleading without those enquiries or engagement of experts is impermissible. In the present case the RP had not availed expert assistance, had not carried out the detailed enquiries indicated by the Supreme Court, and had itself earlier stated that the corporate debtor had no assets; the RP therefore could not directly seek the broad reliefs claimed. The Tribunal also noted that the RP had not effectively utilised police assistance directions earlier given nor taken steps to seize records or assets as mandated by his duties. For these reasons the application was found to be without the necessary factual foundation and procedural precursors and was dismissed. [Paras 43, 44, 45, 46, 55]

I.A. (IB) No. 841/KB/2020 filed by the Resolution Professional under Section 60(5) read with Section 25(2)(j) is dismissed for want of requisite enquiries, specific material facts and expert involvement; consequential I.A.1288/KB/2020 held infructuous and dismissed.

Avoidance of preferential, undervalued and fraudulent transactions under Chapter III of the Insolvency and Bankruptcy Code - requirement of specific material facts and requisite enquiries before filing applications under Sections 43/45/46/47/66 of the Insolvency and Bankruptcy Code (Anuj Jain principle) - status of shares held by a third party/major shareholder as distinct from assets of the corporate debtor - Whether the alleged inter se sale/transfer of shares by the alleged holding shareholder could be treated as a transaction of the corporate debtor subject to avoidance proceedings under the Code. - HELD THAT: - The Tribunal observed that shares held by a third party or shareholder are not per se assets of the corporate debtor, and that transfer of such shares by the shareholder does not automatically amount to transfer of corporate debtor's property. The respondents contended and placed documents showing their share subscription and subsequent dealings; they denied being promoters and asserted the transactions were transfers of their own holding, not of corporate debtor assets. The Tribunal found that the RP had not established specific material facts to demonstrate that the share transfer constituted an avoidable, undervalued or fraudulent transaction affecting the corporate debtor under the Code. Given the absence of necessary enquiries and pleading of specific facts as required by the applicable jurisprudence, the challenge to the share transfer was not sustained. [Paras 15, 16, 17, 48, 55]

The allegations that the sale/transfer of shares by Respondent No.1 amounted to an avoidable or fraudulent transaction affecting the corporate debtor were not established; such transfer was not treated as property of the corporate debtor for the purposes of avoidance under the Code.

Maintainability of applications under Section 60(5) read with Section 25(2)(j) of the Insolvency and Bankruptcy Code - requirement of specific material facts and requisite enquiries before filing applications under Sections 43/45/46/47/66 of the Insolvency and Bankruptcy Code (Anuj Jain principle) - Whether contempt or non-compliance of earlier orders by the respondents was established so as to warrant action pursuant to the RP's application. - HELD THAT: - The Tribunal reviewed the orders previously passed (including directions to cooperate and to assist the RP) and the conduct that followed. It found no convincing material showing that the respondents wilfully disobeyed any order of the Adjudicating Authority: several respondents alleged resignation prior to the relevant orders or stated they had no possession of assets; the RP had not proved any specific breach of directions. The Tribunal therefore concluded that no violation or contempt of its orders was made out on the available record. [Paras 24, 31, 52, 55, 56]

No contempt or disobedience of this Adjudicating Authority's orders by the respondents was found; consequential contempt-related reliefs were refused.

Final Conclusion: The Tribunal dismissed I.A. (IB) No. 841/KB/2020 by the Resolution Professional for lack of requisite enquiries, absence of pleaded specific material facts and failure to engage requisite professional assistance as mandated when seeking avoidance, fraud or veil piercing reliefs; consequentially I.A.1288/KB/2020 was held infructuous and dismissed. No contempt or violation of the Tribunal's orders by the respondents was established.

Initiation of corporate insolvency resolution process - operational creditor's claim under Section 9 of the Insolvency and Bankruptcy Code, 2016 - pre-existing dispute / "moonshine dispute" principle - Section 55(3) of the Indian Contract Act - acceptance of delayed performance bars compensation - appointment of Interim Resolution Professional - moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016

Operational creditor's claim under Section 9 of the Insolvency and Bankruptcy Code, 2016 - pre-existing dispute / "moonshine dispute" principle - Section 55(3) of the Indian Contract Act - acceptance of delayed performance bars compensation - The operational creditor's claim for the unpaid amount was due and payable and the application under Section 9 was maintainable; the corporate debtor failed to establish a pre-existing dispute. - HELD THAT: - The Tribunal found that the corporate debtor did not place any document on record showing that the imposition of penalty was communicated to the operational creditor prior to issuance of the demand notice, nor was any debit note issued. The agreements and POs did not contain a clause empowering the corporate debtor to levy penalty; SECI had also clarified that no penalty clause existed between the parties and advised against double penalisation. The corporate debtor had reconciled accounts and made payments, which showed completion of work albeit with delay. Applying Section 55(3) of the Indian Contract Act, where the promisee accepts delayed performance, the promisee cannot claim compensation for loss; the respondent did not plead non-completion of the work. The Tribunal held that the alleged dispute was a belated, after thought contention and amounted to a mere moonshine dispute, insufficient to defeat a Section 9 petition. On these grounds the operational creditor's claim was held to be due and payable and the petition admitted. [Paras 5, 6, 7, 8]

Application under Section 9 admitted; corporate debtor failed to prove any pre-existing dispute and the debt is established as due and payable.

Appointment of Interim Resolution Professional - moratorium under Section 14 of the Insolvency and Bankruptcy Code, 2016 - Appointment of an Interim Resolution Professional and directions consequent to admission, including deposit for IRP expenses and invocation of moratorium. - HELD THAT: - Having admitted the Section 9 application, the Tribunal appointed an Interim Resolution Professional subject to his consent and disclosure obligations under the IBBI regulations. The applicant had not proposed an IRP, and the Tribunal nominated a named IRP on conditions specified (consent, disclosures and absence of disciplinary proceedings). The Tribunal directed the operational creditor to deposit an amount with the IRP to meet initial expenses, to be adjusted as accounted for by the IRP and refundable subject to Committee of Creditors' accounting. Consequent to admission, the moratorium under Section 14(1) of the Code was declared applicable, with the provisions of Sections 14(2) to 14(4) to operate during the moratorium. Registry and statutory compliances (communication to parties, IBBI, supply of papers to IRP, and ROC update) were directed. [Paras 9, 10, 11, 12]

Mr. Amit Talwar appointed as Interim Resolution Professional subject to conditions; operational creditor directed to deposit initial amount; moratorium under Section 14 to apply and consequential directions issued.

Final Conclusion: The Tribunal admitted the Section 9 petition, holding the operational debt to be due and payable and the corporate debtor's contention of dispute to be a sham; an Interim Resolution Professional was appointed and the moratorium under the Code was directed to operate with ancillary procedural directions.

Existence of an operational debt and default under Section 9 of the Insolvency and Bankruptcy Code, 2016 - documentary proof of debt and invoice-based payment terms - threshold/maintainability of Section 9 petition in summary proceedings - pre-existing dispute and deemed admission for failure to reply to demand notice

Existence of an operational debt and default under Section 9 of the Insolvency and Bankruptcy Code, 2016 - documentary proof of debt and invoice-based payment terms - threshold/maintainability of Section 9 petition in summary proceedings - Whether the Operational Creditor proved an unpaid operational debt and default such that the Section 9 petition was maintainable. - HELD THAT: - The Tribunal accepted that the Quotation and Purchase Order contained payment provisions, including 'sixty days from the date of Invoice' and specific references to NRE costs. It found that no invoice was issued because the products were not supplied, so the 'sixty days from the date of Invoice' term was inapplicable. The Operational Creditor asserted an advance liability of a larger sum, but failed to produce any document showing the Corporate Debtor's agreement to pay the claimed advance of Rs. 2,28,62,374.63. The Tribunal held that assertions about extensive procurement by the Operational Creditor and resultant material liability could not be adjudicated in a summary proceeding under Section 9 without documentary proof of the Corporate Debtor's agreement to the claimed advance. As the Petitioner did not establish the debt and default required for admitting a Section 9 application, the petition was not maintainable. The Tribunal also noted that the claimed NRE amount, if treated alone, fell below the statutory threshold for a Section 9 application, reinforcing non-maintainability on the record before it. [Paras 11, 12]

Petition under Section 9 dismissed for failure to prove debt and default; petitioner free to pursue other remedies.

Final Conclusion: The Company Petition under Section 9 was dismissed because the Operational Creditor failed to establish, by documentary evidence, the existence of the claimed advance debt and consequent default necessary for admission of a Section 9 application; the order leaves open other legal remedies available to the Operational Creditor.

Imposition of penalty under Rule 26 of the Central Excise Rules, 2002 - fraudulent availment of refund/credit based on falsified documents - proof of supply and transport documents as defence to penalty - binding effect of earlier appellate Tribunal finding in related proceedings

Imposition of penalty under Rule 26 of the Central Excise Rules, 2002 - proof of supply and transport documents as defence to penalty - binding effect of earlier appellate Tribunal finding in related proceedings - Whether the penalty imposed under Rule 26 could be sustained against the appellants when transportation and supply of the goods were established and a related Tribunal order had set aside demands against the supplier. - HELD THAT: - The Tribunal examined the records of related proceedings concerning the buyer M/s Omega Rolling Mills Pvt. Ltd. and noted that transport documents, including consignment notes referencing invoices, quantities and descriptions, evidenced movement of goods from the appellant's factory to the buyer. The Tribunal had earlier set aside adjudged demands against the supplier on the ground that the goods were manufactured in its factory and actual supply had taken place. That appellate finding in favour of the buyer and supplier, which the Revenue had not challenged before higher forums, establishes that the goods were in fact supplied and transported. In view of those determinations, the imposition of penalty under Rule 26 on both the manufacturer (V.K. Metal Works) and the transporter (Kanpur Kashmir Roadways) could not be sustained. The High Court judgment relied on by Revenue was held to be inapplicable as the buyer in the present case was not a party to that decision and the Tribunal's favourable order for the buyer/supplier remains effective. [Paras 5, 6, 7]

Imposition of penalty under Rule 26 quashed in respect of both appellants; impugned order set aside.

Final Conclusion: Appeals allowed to the extent of penalty; the impugned order imposing penalty under Rule 26 on the appellants is set aside as the Tribunal's earlier finding that goods were supplied and transported, which the Revenue has not successfully challenged, precludes sustaining the penalty.

Service of demand notice under Section 138(b) of the Negotiable Instruments Act - Presumption of service under Section 27 of the General Clauses Act - Notice to director/alter ego and attribution to the company - Maintainability of complaint and proviso (c) to Section 138 regarding the 15-day period - Cognizance under Section 142 of the Negotiable Instruments Act

Service of demand notice under Section 138(b) of the Negotiable Instruments Act - Presumption of service under Section 27 of the General Clauses Act - Demand notice addressed to the respondent company was duly served and the trial court erred in holding otherwise. - HELD THAT: - The High Court examined the copy of the demand notice, the postal receipt and the postal track report produced in evidence. The copy of the notice (Exhibit-5) contained the correct name and address of the respondent company, and the postal track report indicated delivery on 12th April, 2013. The postal receipt issued by the post office only confirms dispatch; it is the addressed registered envelope and the postal track report that determine whether the notice was sent to and delivered at the correct address. The respondents did not lead evidence to rebut the statutory presumption of service under Section 27 of the General Clauses Act or otherwise demonstrate non-receipt. In these circumstances the Court held that the trial court was wrong to conclude that no notice was served and was entitled to presume due service of the demand notice on the company. [Paras 20, 28, 30, 31]

The demand notice was duly served on the respondent company on 12th April, 2013 and the trial court's finding of non-service is set aside.

Notice to director/alter ego and attribution to the company - Maintainability of complaint and proviso (c) to Section 138 regarding the 15-day period - Cognizance under Section 142 of the Negotiable Instruments Act - It was unnecessary to remand the case to prove service on the director; service on the company sufficed for proceeding to conviction, and the complaint was not premature under proviso (c). - HELD THAT: - The Court noted that notices had been sent to both the company and the director, but during trial the complainant failed to prove service on the director. The Court nevertheless held that once service on the company is established, it is not necessary to establish separate service on the director for the purpose of maintaining the complaint, since a person in charge of the company's affairs would be expected to be aware of a demand notice addressed to the company; principles of attribution and prior authorities showing that notice to an authorised signatory/director may bind the company were considered. The Court also observed that the complaint was filed after the expiry of the 15-day period following the date of receipt of the demand notice and therefore was not premature. Consequently the Court refused the appellant's request for remand to prove service on the director and directed the trial court to record conviction and sentence. [Paras 21, 32, 33, 36, 38]

No remand to prove service on the director is necessary; having found service on the company and that the complaint was not premature, the lower court's order of acquittal is set aside and conviction and sentence are to be recorded.

Final Conclusion: The High Court allowed the appeal, set aside the Magistrate's order of acquittal, held that the demand notice was duly served on the respondent company (thereby meeting the requirement for cognizance and avoiding prematurity), refused remand to prove service on the director as unnecessary, and directed the trial court to record conviction and sentence against the respondents.

Maintainability of public interest litigation - verification of petitioner credentials in PIL - jurisdiction under Article 226 to entertain PILs despite procedural non compliance - rule of procedure as handmaid of justice (directory v. mandatory) - misuse of PIL / mala fide litigation - exhaustion of alternative criminal remedies and limits of Section 156(3) CrPC - sealed cover material and court's power to peruse for satisfying its conscience

Maintainability of public interest litigation - verification of petitioner credentials in PIL - rule of procedure as handmaid of justice (directory v. mandatory) - Whether W.P. (PIL) No. 4290 of 2021 and W.P. (PIL) No. 727 of 2022 are maintainable despite alleged non compliance with the Jharkhand High Court (Public Interest Litigation) Rules, 2010 (Rules 4, 4 A, 4 B and 5) and asserted deficiencies in the petitioner's credentials. - HELD THAT: - The Court examined the Jharkhand High Court (Public Interest Litigation) Rules, 2010 and relevant Supreme Court authorities, and held that procedural rules for verification of credentials serve to encourage genuine PILs and discourage vexatious ones but must be construable as devices to promote, not defeat, substantive justice. Applying the principle that procedural prescriptions are the handmaid and not the mistress of justice, the Bench found that the petitioner had made the requisite disclosures in the principal and supplementary affidavits and that substantial prima facie material (including sealed cover material placed by Enforcement Directorate) indicated public harm. In those circumstances, mere non strict compliance with Rules 4/4 A/4 B/5 would not oust the High Court's jurisdiction under Article 226; to dismiss the petitions on that ground would frustrate public interest. The Court therefore answered objections based on procedural non compliance and alleged lack of credentials against the respondents and held the writ petitions maintainable for consideration on merits. [Paras 28, 29, 31, 36, 51]

Objections based on non compliance with the Jharkhand High Court (PIL) Rules and on alleged lack of petitioner credentials are rejected; both writ petitions are held maintainable.

Misuse of PIL / mala fide litigation - maintainability of public interest litigation - Whether the writ petitions are barred by mala fides arising from the petitioner's familial connection to earlier litigation (father acting as a witness in a prior criminal matter) or otherwise motivated by private vendetta. - HELD THAT: - Relying on settled principles that PILs must be entertained with caution to avoid abuse, the Court considered the respondents' contention that the petitioner acted from malice because his father had been a witness in a case involving the respondent's family. The Court observed that the seriousness of the allegations (alleged large scale siphoning of public money, involvement of shell companies and recovery from a senior IAS officer) and the contemporaneous investigative developments weigh against treating the petitions as mala fide. The fact that a prior petition by another person on similar allegations was dismissed does not automatically render the present petitions mala fide, particularly where the petitioner has filed affidavits and supplementary material and where incriminating material has surfaced during investigation. The objection of mala fide was therefore negatived. [Paras 32, 33, 34, 42, 43]

The complaint of mala fide and private vendetta is repelled; the petitions are not rejected on that ground.

Exhaustion of alternative criminal remedies and limits of Section 156(3) CrPC - jurisdiction under Article 226 to entertain PILs despite procedural non compliance - Whether the petitioner's failure to exhaust statutory criminal remedies (e.g., lodging complaints under Section 154/156(3) CrPC) bars the High Court from entertaining a PIL seeking investigation by central agencies such as CBI/ED/Income tax. - HELD THAT: - The Court reviewed authorities on availability of magistral powers under Section 156(3) CrPC and the limits on a magistrate's power to direct CBI investigation. It concluded that an application seeking direction for investigation by a central agency in cases of alleged large scale money laundering and inter state shell company transactions cannot be adequately remedied by the ordinary CrPC route; Section 156(3) cannot be used to compel a CBI probe. Given the nature of the allegations and the material before the Court (including sealed cover disclosures and ED's affidavit), the absence of prior FIR based remedies was not a bar to maintainability. The objection that the petitioner should have first pursued CrPC remedies was therefore rejected. [Paras 45, 46, 47, 48, 49]

Objection premised on non exhaustion of CrPC remedies is rejected; failure to pursue Section 154/156(3) remedies does not render these PILs non maintainable in the present factual matrix.

Final Conclusion: For the reasons stated, the High Court held W.P. (PIL) No. 4290 of 2021 and W.P. (PIL) No. 727 of 2022 to be maintainable and refused to dismiss them on grounds of procedural non compliance, alleged mala fides or non exhaustion of CrPC remedies; the matters were directed to be placed for hearing on merits (listed for 10th June, 2022).

Presumption under Section 139 of the Negotiable Instruments Act - rebuttable presumption of legally recoverable debt - onus on the accused to probabilize the defence - standard of proof: prosecution beyond reasonable doubt and accused on preponderance of probabilities - requirement to reply to statutory notice under the Negotiable Instruments regime - revisional jurisdiction - interference only for perverse findings

Presumption under Section 139 of the Negotiable Instruments Act - onus on the accused to probabilize the defence - rebuttable presumption of legally recoverable debt - requirement to reply to statutory notice under the Negotiable Instruments regime - Whether the conviction and sentence under Section 138 of the Negotiable Instruments Act and its confirmation on appeal suffer from such error or perversity as to warrant interference by this Court in revision - HELD THAT: - The Court examined the record and found that the complaint and evidence sufficiently established advances made in the months of June, July and August 2008 and the issuance and dishonour of the cheque. Though exact dates were not pleaded, P.W.1 in cross-examination gave particulars of payments and prior transactions; the accused (D.W.1) gave inconsistent defences - at one point alleging loss/theft and elsewhere blaming a third person, while admitting receipt of the notice (through his office-incharge) and failing to reply to it. Documentary exhibits relied on by the accused (Exs. D.1 to D.3) and the evidence of D.W.2 did not establish the asserted loss or misuse of cheques or otherwise probabilize the defence. Applying the settled principle that once issuance and signature are admitted or established the statutory presumption under Section 139 arises and that the accused must probabilize a contrary case on the preponderance of probabilities, the Court held that the accused had not discharged that onus. The courts below considered the contradictions, lack of contemporaneous complaint regarding loss, failure to produce supporting witnesses (notably the accused's wife) and absence of a reply to the statutory notice, and reached conclusions open on the record. The petitioner's reliance on authorities concerning burden and presumption was noted, but those principles were applied and found not to assist the accused on these facts. Consequently there was no perverse conclusion calling for exercise of revisional jurisdiction. [Paras 15, 16, 21, 22, 23]

The conviction and sentence under Section 138 of the Negotiable Instruments Act, as confirmed by the Appellate Court, do not suffer from error or perversity and do not warrant interference in revision.

Final Conclusion: Revision petition dismissed; the findings of the Trial Court and the Appellate Court upholding conviction and sentence under Section 138 of the Negotiable Instruments Act are maintained.

Regular bail - discretionary relief of bail - prima facie case - organized smuggling of narcotic drugs - ongoing investigation and absconding accused - minimum punishment as a factor in bail

Regular bail - discretionary relief of bail - prima facie case - Whether the petitioner is entitled to grant of regular bail - HELD THAT: - The Court examined the material on record and concluded that there is sufficient material to refuse the discretionary relief of bail. The factors relied upon include the petitioner's radio communication response at the relevant location, his presence in the immediate vicinity where the Pakistani vessel was intercepted, circumstantial indicators noted by investigating agencies (including the condition of the boat and crew and the limited catch), the filing of a chargesheet by the investigating agency, the pendency of investigation with several accused still absconding, and the seriousness of the offences alleged. The Court observed that explanations offered by the petitioner concerning his presence and the radio response are matters available for trial, but at the threshold these do not outweigh the material pointing to a prima facie case. Given that the offences carry a substantial minimum sentence, the Court declined to exercise its discretion in favour of bail while investigation and trial preparations remain pending. [Paras 9, 10, 11]

Bail refused; petition for special leave to appeal dismissed.

Final Conclusion: Special leave to appeal dismissed; the Court refused to interfere with the impugned order denying regular bail, observing that the questions raised are for trial and that the refusal is based on the prima facie material, the pendency of investigation and the seriousness of the charges.