TaxTMI Updates e-Newsletter
Sep 30,2020

Restoration of registration certificate - retrospective restoration - common portal functionality for restoration - implementation of appellate authority order - effect of cancellation on input tax credit

Restoration of registration certificate - retrospective restoration - implementation of appellate authority order - common portal functionality for restoration - Whether the petitioner's registration would be restored in accordance with the Appellate Authority's order and whether such restoration could operate retrospectively on the common portal - HELD THAT: - The petitioner avers inadvertent filing of a cancellation application and the Appellate Authority set aside the cancellation and directed restoration. Respondents did not challenge that order and undertook to develop and incorporate the functionality on the common portal to enable retrospective restoration. The respondents' counsel represented that the petitioner's registration has now been restored retrospectively w.e.f. 06th November, 2018 in accordance with the Appellate Authority's order. Given this representation and the implementation of the portal functionality, the court found the grievance redressed and no longer requiring further adjudication. [Paras 5, 6]

Petitioner's registration restored retrospectively w.e.f. 06th November, 2018 in accordance with the Appellate Authority's order; writ petition disposed of as satisfied

Final Conclusion: The Court disposed of the writ petition as satisfied after being informed that the petitioner's registration had been restored retrospectively in accordance with the Appellate Authority's order and the requisite functionality was implemented on the common portal.

Summary order. Interim application allowed; petition challenging rejection of refund for Financial Year 2017-2018 (refund for February 2018) listed; notice issued to respondents; respondents permitted three weeks to file counter affidavit; matter posted for further hearing on 09.12.2020.

Release of seized goods on deposit of tax and penalty - penalty under Section 129(1)(a) of the Act - security by way other than cash or bank guarantee - payment subject to final determination - constitution of GST Tribunal

Release of seized goods on deposit of tax and penalty - penalty under Section 129(1)(a) of the Act - payment subject to final determination - Seized goods to be released on specified payment and penalty, subject to final determination. - HELD THAT: - Having considered the facts and submissions, the Court directed that the seized goods shall be released to the petitioner upon payment of the specified tax together with 100% penalty under Section 129(1)(a) of the Act. The Court recorded that this payment and release are provisional and shall remain subject to the final adjudication in the matter. The direction implements a provisional relief balancing the petitioner's entitlement to custody of goods against the revenue interest, while preserving the adjudicatory rights of the Authority to make the ultimate determination.

Seized goods released on payment of the specified tax and 100% penalty under Section 129(1)(a), payment to remain subject to final determination.

Security by way other than cash or bank guarantee - constitution of GST Tribunal - Provision for security for the remaining amount and administrative direction regarding GST Tribunal. - HELD THAT: - The Court ordered that for the remaining amount the petitioner shall furnish security other than cash and bank guarantee. This requirement is part of the interim mechanism for release and is without prejudice to final adjudication. Separately, the Court directed the State counsel to apprise the Court of the date by which the GST Tribunal will be constituted, recognising the prospect of further statutory forum adjudication once the Tribunal is in place.

Petitioner to furnish non-cash, non-bank-guarantee security for remaining amount; State to inform the Court of the date for constitution of the GST Tribunal.

Final Conclusion: Interim relief granted: seized goods released on payment of specified tax and 100% penalty under Section 129(1)(a), with petitioner to furnish alternative security for the balance; payments and release subject to the final determination in the proceedings; State directed to inform the Court about constitution of the GST Tribunal.

Classification as Goods Transport Agency (GTA) - consignment note as essential condition for GTA - hiring/rental of transport vehicles versus GTA services - entitlement to opt for forward charge under Notification No.20/2017 - proper person to seek advance ruling - jurisdiction of Advance Ruling Authority under section 97(2)

Classification as Goods Transport Agency (GTA) - consignment note as essential condition for GTA - hiring/rental of transport vehicles versus GTA services - Appellant's services in the proposed arrangement are not GTA services but rental/hire of transport vehicles. - HELD THAT: - The explanation to Heading 9967 requires issuance of a consignment note by a person providing services in relation to transport of goods by road, and a consignment note denotes receipt of goods from consignor/consignee and privity of contract with the goods owner. In the proposed arrangement the Appellant receives goods from M/s. Posco ISDC Pvt. Ltd., which itself receives goods from consignor/consignee and issues the consignment note and the e-way bill; the Appellant supplies only the vehicle and issues a lorry receipt which does not satisfy the consignment note description. The arrangement and the draft agreement (including insurance and claims being with Posco) establish Posco as the actual transporter/GTA and the Appellant as a vehicle hirer, hence the services fall under rental of transport vehicles and not SAC 996791 GTA services. [Paras 8, 9, 10, 11]

Appellant is not acting as a Goods Transport Agency in the proposed transactions; their services are correctly classified as hire/rental of transport vehicles.

Entitlement to opt for forward charge under Notification No.20/2017 - classification as Goods Transport Agency (GTA) - Appellant is not entitled to charge GST at 12% on forward charge basis in the proposed arrangement. - HELD THAT: - The entitlement to adopt forward charge under Notification No.20/2017 depends on the supplier being a GTA as defined. Since the Appellant was held not to be the GTA in the proposed arrangement (being only a vehicle hirer), they cannot validly opt to charge 12% GST on a forward charge basis under that notification for these transactions. The ruling does not preclude the Appellant from opting for forward charge in other transactions where they directly contract with consignor/consignee and satisfy GTA requirements. [Paras 9, 12]

Appellant cannot charge 12% GST on forward charge basis for the proposed transactions because they are not acting as a GTA in those transactions.

Proper person to seek advance ruling - eligibility of recipient to claim input tax credit - Question on whether M/s. Posco ISDC Pvt. Ltd. can claim ITC of GST charged by the Appellant was not to be answered in the Appellant's application and MAAR correctly refrained from answering it. - HELD THAT: - The question concerning Posco's entitlement to claim input tax credit pertains to Posco and does not pertain to the Appellant. Under the advance ruling scheme the authority may decline to answer questions not raised by or not pertaining to the applicant. The Appellate Authority concurs with MAAR that the Appellant was not the proper person to seek a ruling on Posco's ITC eligibility; therefore that question was rightly left unanswered by MAAR. [Paras 13]

MAAR correctly refrained from answering the question on Posco's ITC entitlement as it did not pertain to the Appellant.

Jurisdiction of Advance Ruling Authority under section 97(2) - MAAR lacked jurisdiction to rule on whether it is procedurally correct to have two GTAs issuing two consignment notes for the same movement of goods, and correctly declined to rule. - HELD THAT: - The procedural question about permissibility of two GTAs issuing consignment notes in a single transportation falls outside the scope of matters covered under section 97(2) for which advance rulings may be sought. MAAR held, and the Appellate Authority concurs, that MAAR does not have jurisdiction to pass a ruling on that procedural issue and therefore properly declined to answer it. [Paras 14]

MAAR correctly held it had no jurisdiction under section 97(2) to rule on the procedural question regarding two consignment notes.

Final Conclusion: The Appellate Authority upholds the Maharashtra Authority for Advance Ruling's decision: the Appellant is not the GTA in the proposed subcontracting arrangement and their services are rental of transport vehicles; consequently they cannot charge 12% under forward charge for those transactions; MAAR rightly refrained from answering the ITC question as not pertaining to the applicant and correctly declined jurisdiction to rule on the procedural question of two consignment notes. The appeal is dismissed.

Deduction under section 80IA(4)(iii) - allowability of deduction on identical facts - follow-on relief in assessee's own case - onus on Revenue to distinguish assessment years

Deduction under section 80IA(4)(iii) - allowability of deduction on identical facts - follow-on relief in assessee's own case - onus on Revenue to distinguish assessment years - Claim for deduction under section 80IA(4)(iii) for A.Y. 2012-13 sustained. - HELD THAT: - The Tribunal examined whether the assessee was entitled to deduction under section 80IA(4)(iii) for A.Y. 2012-13. The Bench noted that in the immediately preceding year (A.Y. 2011-12) the Commissioner (Appeals) had allowed the deduction and the Tribunal in ITA No.1345/PUN/2016 had dismissed the Revenue's appeal, recording that the assessee had maintained separate books for the eligible undertaking, had filed Form No.10CCB and other supporting material, and had satisfied the conditions for the deduction in later years though earlier years had been disallowed. The Revenue in the present appeal did not place any material to show that the facts or circumstances for A.Y. 2012-13 were different from those in A.Y. 2011-12. In absence of any contrary findings or distinguishing evidence brought on record by the Revenue, the Tribunal held that there was no reason to depart from the view already taken in the assessee's own case for the preceding year and consequently the relief granted by the CIT(A) for A.Y. 2012-13 was correctly allowed and is to be sustained. [Paras 8, 9]

The deduction under section 80IA(4)(iii) claimed for A.Y. 2012-13 is allowed; the Revenue's appeal is dismissed.

Final Conclusion: Following the Tribunal's earlier decision in the assessee's own case for A.Y. 2011-12 and in absence of any distinguishing material by the Revenue for A.Y. 2012-13, the Tribunal sustains the CIT(A)'s allowance of deduction under section 80IA(4)(iii) and dismisses the Revenue's appeal.

Computation of deduction under section 10A/10AA - Exclusion of expenses from export turnover and total turnover - Set-off of brought forward losses before computation of deduction under section 10A/10AA - Exclusion of 10A income at source for computation of gross total income - Allowability of expenses on buy-back of shares as revenue expenditure - Binding effect of higher court precedent

Computation of deduction under section 10A/10AA - Exclusion of expenses from export turnover and total turnover - Binding effect of higher court precedent - Whether expenses reduced from export turnover must also be reduced from total turnover while computing deduction under section 10A of the Act. - HELD THAT: - The Tribunal held that the DRP was justified in directing the Assessing Officer to reduce the impugned expenses not only from export turnover but also from total turnover for computing deduction under section 10A. The Tribunal applied the ratio of the Hon'ble Apex Court in CIT v. HCL Technologies Ltd., which held that allowing exclusion of expenses only from export turnover but not from total turnover would produce an irrational and unworkable result and that expenses excluded from export turnover must be excluded from total turnover in the same proportion. On that authoritative precedent, the Tribunal directed computation in accordance with that principle. [Paras 2]

Revenue's appeal dismissed; AO directed to reduce the impugned expenses from total turnover as well while computing deduction under section 10A.

Set-off of brought forward losses before computation of deduction under section 10A/10AA - Exclusion of 10A income at source for computation of gross total income - Binding effect of higher court precedent - Whether brought forward business losses should be set off against profits of 10A/10AA units before computing deduction under section 10A/10AA. - HELD THAT: - The Tribunal held in favour of the assessee. It examined the position that the income of a section 10A unit is to be excluded at source before arriving at gross total income, following the judgment of the jurisdictional High Court in Yokogawa India Ltd. and the subsequent confirmation by the Hon'ble Supreme Court. Applying that principle, the Tribunal directed the AO to compute deduction under sections 10A/10AA without setting off the brought forward losses against the profits of the eligible units. [Paras 4]

Grounds on set-off allowed; AO directed to calculate deduction under section 10A/10AA without reducing brought forward losses.

Allowability of expenses on buy-back of shares as revenue expenditure - Binding effect of higher court precedent - Whether expenses incurred on buy-back of shares are allowable as revenue expenditure. - HELD THAT: - The Tribunal allowed the claim following the decision of the Hon'ble High Court of Karnataka in CIT v. Motor Industries Co. Ltd., which held that expenses on buy-back of shares may retain the character of revenue expenditure where there is no inflow of fresh funds or increase in capital employed and the buy-back leads to reduction of the capital base. Applying that authority, the Tribunal held the expenditure on buy-back incurred by the assessee to be allowable as revenue expenditure. [Paras 4]

Grounds relating to buy-back expenses allowed; expenditure treated as revenue expenditure and allowed.

Final Conclusion: The revenue appeal is dismissed. The assessee's appeal is partly allowed: brought forward losses shall not be set off before computing deduction under sections 10A/10AA, and the expenditure on buy-back of shares is allowed as revenue expenditure; consequential recomputations to be made by the Assessing Officer in accordance with these directions.

Transfer Pricing adjustment - Arm's Length Price - Associated Enterprises / international transaction - Internal Comparable Uncontrolled Price (internal CUP) - Joint Venture - capital contribution versus loan - Benchmarking of guarantee transactions (performance and corporate guarantees) - Mark-to-market losses on foreign exchange hedges as accrued loss - Remand for factual verification

Transfer Pricing adjustment - Joint Venture - capital contribution versus loan - Arm's Length Price - Whether advances made to the 50% joint-venture entity were loans subject to TP interest adjustment or business/capital advances not requiring interest-based TP adjustment - HELD THAT: - The Tribunal recorded that the assessee made advances to a 50% JV partner which were reflected in the JV partners' account and were driven by substantial operational losses and a pre-existing obligation to fund the JV to protect the assessee's business interest. The advances were held to be more in the nature of capital contribution/business advances made to sustain the project and protect the assessee's own commercial interest rather than conventional loans. Given this characterisation, treating the advances as interest-bearing loans for Transfer Pricing purposes was not appropriate and the upward TP adjustment computed by the lower authorities was deleted. The Tribunal therefore directed the AO to delete the TP adjustment. [Paras 4, 5]

TP adjustment on advances deleted; advances held to be business/capital contribution and not loans subject to interest-based ALP adjustment.

Benchmarking of guarantee transactions (performance guarantees) - Internal Comparable Uncontrolled Price (internal CUP) - Arm's Length Price - Whether fees/commission recovered by the assessee for performance and advance-payment guarantees provided for AEs were at arm's length and required upward TP adjustment - HELD THAT: - Relying on the Tribunal's earlier reasoning in the assessee's own preceding years, the Tribunal held that the most direct internal CUP for bank guarantees is the commission charged by the bank as reflected in the sanction/charge letter. Where the assessee recovered the bank's commission from the AE (0.60%), there was no loss to the assessee and no further adjustment was warranted. For guarantees where the assessee charged no fee but the arrangements and commercial consequences meant the assessee would derive the contractual benefit (assignment/execution of contract), no arm's length fee was required. Applying these principles to the performance and advance-payment guarantees in issue, the Tribunal found the fees charged were at ALP and dismissed the revenue's grounds seeking adjustments. [Paras 7]

No TP adjustment in respect of the performance and advance-payment guarantees; fees charged by assessee held to be at arm's length.

Benchmarking of guarantee transactions (corporate guarantees) - Associated Enterprises / international transaction - Arm's Length Price - Whether unconditional corporate guarantees provided to banks on behalf of subsidiary AEs constitute international transactions subject to benchmarking, and if so, the appropriate ALP for such guarantees - HELD THAT: - The Tribunal held that corporate guarantees of the kind executed by the assessee were covered by the definition of international transaction (including after the Finance Act, 2012 amendment) because the assessee had an independent contractual obligation to pay in case of default and the guarantees could affect the assessee's assets/liabilities. However, taking into account the commercial context - the AEs were wholly-owned special purpose vehicles formed to enable downstream acquisition and the assessee was the ultimate beneficiary, so the actual risk borne by the assessee was low - the Tribunal rejected the TPO's 2% benchmarking. Applying precedent and the factual matrix, the Tribunal directed recomputation of TP adjustment at a reduced rate of 0.20% for the corporate guarantees. [Paras 7]

Corporate guarantees treated as international transactions and to be benchmarked; TP adjustment to be recomputed at 0.20%.

Mark-to-market losses on foreign exchange hedges as accrued loss - Arm's Length Price - Whether mark-to-market (MTM) losses on outstanding foreign-exchange contracts at year-end were unrealized/notional and therefore not deductible, or were accrued losses deductible for tax and for book profit computation under section 115JB - HELD THAT: - The Tribunal followed its earlier decisions in the assessee's own cases and the Supreme Court authority cited in the first appellate order to hold that MTM losses on hedging contracts outstanding at year-end constituted accrued losses and were allowable. The Tribunal noted consistent precedent in the assessee's prior years and found the facts pari materia; accordingly, the CIT(A)'s deletion of the addition was sustained and the MTM losses were treated as allowable expenditure for normal income-tax and book-profit computations. [Paras 7]

MTM forex losses held to be accrued and allowable; addition deleted.

Remand for factual verification - Admission and remand of additional ground seeking deduction of education cess and higher education cess while computing business income - HELD THAT: - The Tribunal admitted the additional ground proposed by the assessee in view of favourable precedent at the jurisdictional High Court and directed the AO to bring relevant facts on record and to re-adjudicate the issue after affording the assessee a reasonable opportunity of hearing. The ground was admitted and remanded for fresh factual verification and decision. [Paras 8]

Additional ground admitted; matter remanded to AO for factual verification and fresh adjudication.

Final Conclusion: For AY 2012-13 the Tribunal deleted the TP adjustment on advances to the JV (assessee's appeal allowed); sustained that the performance/advance-payment guarantee fees charged were at arm's length (no adjustment); held corporate guarantees to be international transactions but reduced TP benchmarking to 0.20% (revenue partly successful); affirmed that MTM forex losses were accrued and allowable; and admitted an additional ground on education cess, remanding it to the AO for factual verification.

Disallowance under section 40(a)(ia) for non-deduction of tax at source - Liability to deduct tax under section 194H - commission versus discount - TDS on year-end provisions/credit - timing of deduction (payment or credit) - Capitalisation of interest under section 36(1)(iii) - borrowed funds v. own funds - Disallowance under section 14A for expenditure attributable to exempt income - Principal-to-principal sale versus commission payment

Disallowance under section 40(a)(ia) for non-deduction of tax at source - Liability to deduct tax under section 194H - commission versus discount - Principal-to-principal sale versus commission payment - Deletion of disallowance under section 40(a)(ia) in respect of discounts (on sale of set-top boxes and recharge coupons), bonus/credits to subscribers, sales promotion and distribution channel support expenses for failure to deduct TDS. - HELD THAT: - The Tribunal followed its earlier decision in the assessee's own case under proceedings under sections 201(1) and 201(1A), which held that the discounts and credits in question were not in the nature of commission liable to deduction under section 194H. The transactions between the assessee and distributors were found to be on a principal-to-principal basis with transfer of risk and freedom for distributors to sell below MRP; sample invoices evidenced sale (not a service/commission). Applying that reasoning to both AY 2009-10 and AY 2010-11, the Tribunal concluded that no TDS obligation under section 194H arose and therefore the disallowances under section 40(a)(ia) for non-deduction of tax were deleted. [Paras 8, 9]

Disallowances under section 40(a)(ia) relating to discounts, subscriber credits, sales promotion and distribution channel support expenses deleted for both years.

TDS on year-end provisions/credit - timing of deduction (payment or credit) - Disallowance under section 40(a)(ia) for non-deduction of tax at source - Validity of disallowance under section 40(a)(ia) of year end provisions made without invoices (ad hoc provisions) for AY 2009-10 and AY 2010-11. - HELD THAT: - The Tribunal upheld the AO and CIT(A) findings that year end provisions debited to profit and loss account are creditable events for the purpose of Chapter XVII B and therefore attract TDS either at payment or at credit; credit into suspense account is also caught. The assessee had not deducted TDS in the year of provisioning and hence the expenses were liable to be disallowed under section 40(a)(ia). Subsequent deduction of TDS in the next year or reversal did not alter the legal position that TDS was required when the credit arose. The Tribunal rejected the line of authorities relied upon by the assessee as inconsistent with the statutory scheme of Chapter XVII B r.w.s. 40(a)(ia). [Paras 15, 16]

Ground challenging disallowance of year end provisions under section 40(a)(ia) rejected for both years.

Capitalisation of interest under section 36(1)(iii) - borrowed funds v. own funds - Deletion of disallowance under proviso to section 36(1)(iii) in respect of interest pro rata attributable to capital work in progress where assessee demonstrated use of own (equity) funds for WIP. - HELD THAT: - While the legal position requires capitalization of interest on borrowed funds used for acquisition/construction of capital assets until put to use, the AO disallowed interest without demonstrating that borrowed funds were specifically applied to WIP. The assessee produced evidence of substantial share capital receipts in the years concerned sufficient to finance the capital WIP. In such circumstances, and following the principle that where interest free funds are sufficient, investments are presumed to be from such funds, the Tribunal held that the AO erred in disallowing proportionate interest under section 36(1)(iii) and directed deletion of the addition for both assessment years. [Paras 20]

Proportionate disallowance of interest under section 36(1)(iii) deleted for AY 2009-10 and AY 2010-11.

Disallowance under section 14A for expenditure attributable to exempt income - Deletion of disallowance under section 14A where no exempt income was earned in the year. - HELD THAT: - The Tribunal applied precedents of the jurisdiction holding that if no exempt income is earned in the relevant year, no disallowance under section 14A can be made. The Revenue did not dispute that no exempt income arose. On that basis, the CIT(A)'s deletion of the AO's section 14A disallowance was held to be correct and the Revenue's appeals were dismissed. [Paras 23]

Disallowance under section 14A deleted; Revenue appeals dismissed for both years.

Final Conclusion: Assessee's appeals are partly allowed: disallowances under section 40(a)(ia) (discounts and related items) and under section 36(1)(iii) (interest allocable to WIP) deleted; disallowance of year end provisions under section 40(a)(ia) rejected. Revenue's appeals on section 14A disallowance are dismissed.

Comparability - functional comparability - Transactional Net Margin Method (TNMM) - arm's length price (ALP) - recomputation - inclusion and exclusion of comparables - precedent and consistency in transfer pricing comparability

Comparability - functional comparability - precedent and consistency in transfer pricing comparability - Inclusion of ICRA Management Consulting Services Ltd. as a comparable for benchmarking the assessee's non binding investment advisory services. - HELD THAT: - The Tribunal found that IMCSL provides management consulting and business advisory services that earn fee based income and carry limited risk, and that the search criteria could properly be widened to include entities offering management consultancy and advisory support as functionally similar to the assessee's investment advisory services. The Tribunal noted prior acceptances of IMCSL as a comparable in the assessee's own earlier years and in other orders for AY 2011 12 and concluded that, on the facts, IMCSL is functionally comparable and should be included. [Paras 6]

IMCSL directed to be included as a comparable.

Comparability - functional comparability - precedent and consistency in transfer pricing comparability - Inclusion of Informed Technologies India Ltd. as a comparable for benchmarking the assessee's non binding investment advisory services. - HELD THAT: - The Tribunal observed that ITIL provides financial sector data management, analysis and outsource services for research/advisory reports, focusing on financial content - activities comparable to the assessee's equity and business research and advisory support. The Tribunal relied on prior acceptances of ITIL as comparable in the assessee's own and other decisions for the relevant period, and concluded that ITIL is functionally comparable and should be included. [Paras 6]

ITIL directed to be included as a comparable.

Comparability - functional comparability - precedent and consistency in transfer pricing comparability - Inclusion of IDC (India) Ltd. as a comparable for benchmarking the assessee's non binding investment advisory services. - HELD THAT: - The Tribunal found that IDC (India) Ltd., as a global provider of market intelligence and advisory services engaged in research and survey functions, performs activities sufficiently similar to the assessee's advisory support services. The Tribunal noted prior acceptance of IDC as a comparable in the assessee's and other matters for the year under consideration and ordered its inclusion. [Paras 6]

IDC (India) Ltd. directed to be included as a comparable.

Comparability - functional comparability - inclusion and exclusion of comparables - Exclusion of Ladderup Corporate Advisory Pvt. Ltd. from the list of comparables for benchmarking the assessee's non binding investment advisory services. - HELD THAT: - The Tribunal examined the functional profile of Ladderup and applied earlier coordinate bench precedents which held that Ladderup, being registered and operating as a merchant/investment banker with merchant banking/investment banking activities, is not functionally comparable to entities providing non binding investment advisory services. Having found the facts identical to those in prior decisions (Kitara, Wells Fargo and other coordinate bench orders), the Tribunal directed exclusion of Ladderup from the comparable set. [Paras 6]

Ladderup Corporate Advisory Pvt. Ltd. directed to be excluded as a comparable.

Comparability - functional comparability - Exclusion of Motilal Oswal Investment Advisors Pvt. Ltd. as a comparable for the year under consideration. - HELD THAT: - The Tribunal reviewed MOAIPL's business profile and found it engaged primarily in merchant/investment banking activities - including cross border M&A and financing solutions - with income largely from such activities. The Tribunal noted prior rejections of MOAIPL as a comparable in the assessee's own and other orders and concluded that MOAIPL is not functionally comparable to the assessee's advisory services, warranting exclusion. [Paras 9]

MOAIPL correctly excluded as a comparable.

Comparability - functional comparability - Exclusion of New Berry Advisors Ltd. as a comparable for the year under consideration. - HELD THAT: - On examination of New Berry's annual report and financials, the Tribunal found that the company's activities (including marketing/distribution of financial products and inventory classification) are functionally different from the assessee's non binding investment advisory services. The Tribunal also noted prior rejections of New Berry as a comparable and held that DRP/TPO correctly excluded it. [Paras 10]

New Berry Advisors Ltd. correctly excluded as a comparable.

Transactional Net Margin Method (TNMM) - arm's length price (ALP) - recomputation - inclusion and exclusion of comparables - Direction to recompute the arm's length price after revising the comparable set. - HELD THAT: - Having resolved which entities are to be included and excluded as comparables for benchmarking the assessee's non binding investment advisory services under TNMM, the Tribunal directed the Transfer Pricing Officer/Assessing Officer to recompute the ALP applying the TNMM to the revised set of comparables, thereby effecting any necessary upward or downward adjustments in accordance with that recalculation. [Paras 7]

TPO/AO directed to recompute the arm's length price using the revised set of comparables.

Final Conclusion: The assessee's appeal is allowed in part: IMCSL, ITIL and IDC (India) Ltd. are to be included as comparables and Ladderup, Motilal Oswal Investment Advisors Pvt. Ltd. and New Berry Advisors Ltd. are to be excluded; the TPO/AO is directed to recompute the arm's length price for AY 2011 12 using TNMM on the revised comparable set. The revenue's appeal is dismissed.

Comparability adjustments under TNMM - tested party cannot deviate from book profit without corresponding adjustments to comparables - adjustments to comparables required to eliminate material differences - identification of extraordinary items in financial statements - obligation to determine arm's length price under most appropriate method - prohibition of ad hoc or arbitrary determination of ALP - entity level adjustments versus transaction level (AE only) adjustments - Rule 10B(3) comparability adjustment principle - Rule 10AB limitation on "other method" for ALP - book profit adjustments under Explanation 1 to Section 115JB(2)

Comparability adjustments under TNMM - tested party cannot deviate from book profit without corresponding adjustments to comparables - identification of extraordinary items in financial statements - entity level adjustments versus transaction level (AE only) adjustments - Disallowance of adjustments claimed by the assessee for unabsorbed production overheads, under recovered selling & administrative overheads and one time technological fee for Chennai Metro in the Transport segment. - HELD THAT: - The Tribunal held that the claimed items are regular business expenditures incurred year after year and were not identified as extraordinary items in the assessee's financial statements; hence they cannot be excluded as non recurring/extraordinary for benchmarking under TNMM. The assessee, being the tested party, cannot unilaterally adjust its book profits on account of capacity/utilisation without ensuring corresponding, reasonable adjustments in the results of comparables; reasonable accurate adjustments to comparables require supporting data which the assessee failed to furnish. The initial burden to demonstrate the need for and method of any comparability adjustment lies on the assessee. However, following precedent of the jurisdictional High Court and earlier DRP/ITAT rulings in the assessee's own cases, the Tribunal affirmed the principle that, if any adjustment is to be made, it should be restricted to the international (AE) transactions and not at the entity/segment level. The Tribunal therefore sustained the disallowance of the entity level adjustments but directed that, if adjustments are to be computed, they be carried out only in relation to AE transactions of the Transport segment by the TPO in accordance with law.

Assessee's claimed exclusions were disallowed; TPO directed to compute any permissible adjustments only in respect of AE transactions of the Transport segment.

Obligation to determine arm's length price under most appropriate method - prohibition of ad hoc or arbitrary determination of ALP - Rule 10AB limitation on "other method" for ALP - Validity of TPO/DRP determination of arm's length price for royalty payments (technology licence and trademark) in the Power segment, including TPO's fixation of ALP at nil and DRP's fixation of a rate. - HELD THAT: - The Tribunal found that the TPO's determination of ALP at nil was unsustainable because, when comparables submitted by the assessee are rejected, the statutory duty shifts to the TPO to determine ALP by applying one of the prescribed methods (Section 92C) or, if necessary, by fairly applying the less inappropriate method; the TPO cannot desist from this duty. The DRP was correct in principle to reject an ad hoc nil result, and the Tribunal agreed with the DRP's acceptance of 1% trademark royalty for AY 2013 14 on the facts. However, the DRP's adoption of a 1% rate for technology licence by reference to the trademark rate was held to be arbitrary and not based on any prescribed method or on Rule 10AB's requirement that an "other method" take into account prices in similar uncontrolled transactions under similar circumstances. The Tribunal emphasised the settled proposition that ad hoc or estimation based fixation of royalty rates is impermissible and that any determination must conform to the statutory methods and be supported by cogent analysis; accordingly the TPO/DRP's arbitrary fixation for technology royalty could not stand.

TPO's nil ALP determination set aside; DRP's acceptance of 1% trademark royalty for AY 2013 14 upheld; DRP/TPO determination of technology royalty rate set aside as arbitrary and to be determined in accordance with law and prescribed methods.

Identification of extraordinary items in financial statements - Deductibility/timing of unpaid service tax on receivables not collected as on 31 March (relating to AY 2010 11 and 2011 12) and claim for service tax deduction on payment basis where previously disallowed under section 43B. - HELD THAT: - Relying on the Tribunal's earlier decision in the assessee's own case and the jurisdictional High Court precedents, the Tribunal held that service tax liability crystallises on receipt and that where no deduction was claimed earlier, section 43B cannot be invoked to disallow amounts. The Tribunal directed the AO to re examine the factual circumstances and allow deduction if, on examination, the service tax was payable only on actual receipt or had been paid within the relevant time where applicable. Where a prior year's disallowance was recorded, AO to reassess the matter in light of this direction.

Grounds in favour of the assessee; AO directed to re examine service tax disallowances in light of precedent and facts.

Book profit adjustments under Explanation 1 to Section 115JB(2) - Whether transfer pricing adjustments and certain merger related disallowances could be added to book profits for computation under section 115JB. - HELD THAT: - The Tribunal admitted the legal question and, following Supreme Court and Bombay High Court precedent, held that book profits under section 115JB cannot be adjusted except by items expressly provided in Explanation 1 to Section 115JB(2). Transfer pricing adjustments do not figure in that Explanation; therefore such adjustments cannot be added to book profits. One merger related expenditure issue was not pressed by the assessee and was dismissed as not pressed.

Assessee's challenge sustained: transfer pricing adjustment cannot be added to book profits for section 115JB computation; merger expenditure ground dismissed as not pressed.

Final Conclusion: The Tribunal partly allowed the assessee's appeals and dismissed the Revenue's appeals: claimed ''extraordinary'' overhead adjustments at entity level were disallowed but any adjustment, if to be made, must be limited to AE transactions of the Transport segment and computed by the TPO; TPO's nil ALP fixation for royalty was set aside, DRP's acceptance of 1% trademark royalty for AY 2013 14 upheld while DRP/TPO fixation of a technology royalty rate by arbitrary reference was held unsustainable and must be determined in accordance with the statutory methods; service tax disallowances to be re examined in favour of the assessee as per precedent; and transfer pricing adjustments cannot be added to book profits for MAT computation unless expressly permitted by Explanation 1 to Section 115JB(2).

Levy of fee under section 234E - Processing and intimation under section 200A(1)(c) - Prospective operation of statutory amendment - Rectification under section 154 - Invalidity of intimation/Deletion of demand

Levy of fee under section 234E - Processing and intimation under section 200A(1)(c) - Prospective operation of statutory amendment - Whether intimation issued under section 200A can lawfully charge late filing fee under section 234E in respect of TDS returns relating to periods prior to 01.06.2015. - HELD THAT: - The Tribunal held that clause (c) to section 200A(1) was inserted w.e.f. 01.06.2015 to enable computation of fees under section 234E at the time of processing TDS statements. Prior to that insertion the Assessing Officer had no statutory power, while processing under section 200A, to compute and levy fee under section 234E. The amendment was held to be prospective and not clarificatory or retrospective; the legislative memorandum itself contemplated prospective operation. Reliance was placed on the Karnataka High Court decision in Fatheraj Singhvi and consistent Tribunal precedents (including Udit Jain and Maharashtra Cricket Association) applying the rule that where a subsequent amendment creates an enabling machinery, it cannot be read back to confer power before its effective date. Accordingly intimations issued under section 200A seeking to charge section 234E fees for periods prior to 01.06.2015 were held invalid and the demands deleted. [Paras 16, 17, 18]

Intimations under section 200A cannot validly charge fee under section 234E for periods prior to 01.06.2015; such demands are deleted.

Rectification under section 154 - Levy of fee under section 234E - Whether the Assessing Officer could, by passing rectification orders under section 154 after 01.06.2015, levy section 234E fees in respect of periods prior to 01.06.2015 where original intimations/orders were issued before 01.06.2015. - HELD THAT: - The Tribunal accepted the assessee's submission that if the Assessing Officer lacked power to levy section 234E fees by intimation under section 200A for periods prior to 01.06.2015, that absence of power could not be cured by subsequently passing rectification orders under section 154 after the amendment date. The Tribunal noted that the Revenue did not challenge the preliminary finding that AO could not levy fees while processing returns prior to 01.06.2015; consequently the subsequent rectification dated after 01.06.2015 could not validly impose those fees for prior periods. The appellate findings and Tribunal precedents were applied to hold such rectification-based demands invalid. [Paras 19, 20]

Rectification orders under section 154 issued after 01.06.2015 cannot be used to impose section 234E fees for periods prior to 01.06.2015 where the AO had no power to levy such fees in the original intimation.

Final Conclusion: All appeals are allowed: intimations and rectification orders imposing late filing fee under section 234E for TDS/TCS periods prior to 01.06.2015 are held invalid and the demands deleted, the amendment to section 200A(1)(c) being prospective and not operative for periods before 01.06.2015.

Exclusion of comparable - transfer pricing comparability - functional analysis (FAR) - risk profile in comparability analysis - intangibles and brand value as comparability factors - lack of segmental information - cost plus method (TNNM) and PLI benchmarking - arm's length price - CBDT circular on tax effect threshold for administrative dismissal

CBDT circular on tax effect threshold for administrative dismissal - Whether the Department's appeal should be admitted where the tax effect of the disputed addition is below the threshold specified by the CBDT circular. - HELD THAT: - Both parties accepted that the tax effect of the disputed amount in the Department's appeal is below the threshold laid down in the relevant CBDT circular. The Tribunal applied the CBDT Circular No.17/2019 dated 08.08.2019 and, on that basis, dismissed the Revenue's appeal in limine without admitting it for adjudication of merits. [Paras 2]

Department's appeal dismissed in limine pursuant to the CBDT circular as the tax effect was below the specified threshold.

Exclusion of comparable - transfer pricing comparability - functional analysis (FAR) - risk profile in comparability analysis - intangibles and brand value as comparability factors - lack of segmental information - cost plus method (TNNM) and PLI benchmarking - arm's length price - Whether TCS-e-Serve Ltd. is a valid comparable for determining the arm's length price of the assessee's provision of back office support services and whether the transfer pricing adjustment should be sustained. - HELD THAT: - The Tribunal examined the functional profile and risk exposure of the assessee and of TCS-e-Serve Ltd. The assessee is a low-risk, captive provider of back office/ITeS services remunerated on a cost-plus basis, whereas TCS-e-Serve, besides BPO/ITeS, also renders technical/software development services, bears significant macro, operational and financial risks, and benefits from substantial intangibles including brand equity. The absence of segmental information for TCS-e-Serve hindered reliable separation of software/technical activities from BPO services. The Tribunal noted that these differences in functions, assets (including brand/intangibles), and risks render TCS-e-Serve functionally and economically dissimilar to the assessee. The Tribunal relied on the reasoning in the judgment of the Delhi High Court in Avaya India Ltd. as affirming exclusion where comparables exhibit large scale operations, significant brand effect and lack of segmented disclosures; it further relied on this Tribunal's own prior finding for the assessee for Assessment Year 2012-13 that excluded TCS-e-Serve for the same reasons. In view of the foregoing FAR-based comparability analysis, TCS-e-Serve was directed to be excluded from the comparable set and the TPO was directed to redetermine the arm's length price without that comparable. [Paras 5, 6, 7, 8, 9]

TCS-e-Serve Ltd. excluded from the comparability list; assessee's appeal allowed and TPO directed to determine the arm's length price excluding that comparable.

Final Conclusion: Revenue's appeal dismissed in limine under the CBDT circular as the tax effect was below the threshold; assessee's transfer pricing appeal allowed by excluding TCS-e-Serve Ltd. as a comparable on grounds of functional dissimilarity, different risk profile, lack of segmental information and material intangibles/brand effect, and remanding computation of ALP to the TPO accordingly.

Charitable purpose under section 2(15) (proviso) - dominant and predominant object test - trade, commerce or business versus charitable activity - fee or consideration and profit motive - registration under section 12A

Charitable purpose under section 2(15) (proviso) - dominant and predominant object test - trade, commerce or business versus charitable activity - fee or consideration and profit motive - registration under section 12A - Whether the assessee's activities for Assessment Year 2012-13 are charitable and entitled to exemption, or amount to carrying on business/trade/commerce attracting the proviso to section 2(15). - HELD THAT: - The Tribunal applied the established dominant-object test and construed the proviso to section 2(15) in light of the assessee's memorandum of association, objects, nature of projects, subscriber profile and pricing. The assessee is an autonomous non-profit society registered under section 12A and engaged principally in establishing and operating a nationwide academic and research network, undertaking R&D projects, and providing network and related services mainly to educational, research and government institutions. The Tribunal observed that (i) charging of subscription/consultancy fees on actuals and presence of commercial-style clauses in service agreements do not, by themselves, convert activities into trade or commerce; (ii) mere generation of surplus in some years is not decisive if profit-making is not the dominant or driving objective; and (iii) the proviso excludes from charity only those institutions whose activities are carried on with a profit motive or on sound commercial/business principles pursued with reasonable continuity. The Tribunal relied on its earlier decisions for AY 2009-10 and 2010-11, which were affirmed by the High Court, and held that on facts the assessee's primary object is charitable (advancement of education and research/public utility) and not profit-making. Consequently, the activities did not fall within the mischief of the proviso to section 2(15) and the exemption under section 11 was correctly allowed by the CIT(A). [Paras 6, 7, 8]

Revenue's appeal is dismissed and the exemption claimed by the assessee for AY 2012-13 is sustained.

Final Conclusion: Following the Tribunal's earlier findings for preceding assessment years, affirmed by the High Court, and on application of the predominant-object test to the assessee's objects, activities and receipts, the appeal filed by the Revenue for AY 2012-13 is dismissed and the exemption in respect of the assessee's charitable activities is upheld.

Incriminating material - Section 153A-abated versus unabated assessments - Use of third party seized documents in unabated assessments - Unexplained cash credit and genuineness/creditworthiness under Section 68 - Disallowance of interest and payments under Section 69C - Extrapolation theory in on money additions - Principle of audi alteram partem for reliance on third party statements - Notice issued in the name of a non existent/amalgamated company-jurisdictional defect

Incriminating material - Section 153A-abated versus unabated assessments - Use of third party seized documents in unabated assessments - Whether additions/disallowances in assessments which had not abated on the date of search (unabated assessments) are sustainable in absence of incriminating material found in the course of the search. - HELD THAT: - The Tribunal held that Section 153A distinguishes between abated (pending) and unabated (completed) assessments and, for unabated years, the AO may reassess only to the extent of tangible, cogent and relevant incriminating material unearthed during the search in relation to that assessee and that year. Mere suspicion, information from unrelated files or documents seized from third parties, or post search public domain material without nexus to the assessee's premises is insufficient. The Tribunal applied and followed jurisdictional and higher court precedents (including Kabul Chawla and Calcutta High Court authorities) and explained that not every seized paper is 'incriminating' unless it prima facie shows that the books/entries do not reflect the true state of affairs and is corroborated by material found from the assessee's premises or otherwise directly linked. On the facts, the additions in respect of unabated years could not be sustained for want of incriminating material found from the assessee's search. [Paras 16, 18, 36]

Additions/disallowances in unabated assessments that are not supported by incriminating material found in the course of search are unsustainable; the assessee's related grounds therefore succeed.

Use of third party seized documents in unabated assessments - Extrapolation theory in on money additions - Whether documents seized from a third party (RB/12 and others) justified additions for alleged on money received by the assessee and whether a single instance could be extrapolated to make large project wide additions. - HELD THAT: - The Tribunal examined the seized papers (RB/12) and the third party statement of the purchaser (Satyam Bubna) and found the documents were loose notings from third party premises, dated earlier years, and that the purchaser had denied cash payments and described the papers as rough calculations. The AO had not obtained corroborative material from the assessee's premises. On those facts the Tribunal held the third party seized papers did not constitute incriminating material qua the assessee and could not form the basis for additions; extrapolation from a solitary, uncorroborated instance to all units was arbitrary and unsustainable. The Tribunal therefore deleted the on money additions that were extrapolated and also directed deletion of the confirmed singular addition where it found no reliable basis. [Paras 19, 20, 21, 23, 37]

Third party loose papers and an uncorroborated single instance cannot be treated as incriminating material for unabated years; extrapolation to other units is impermissible and the related additions were deleted.

Unexplained cash credit and genuineness/creditworthiness under Section 68 - Disallowance of interest and payments under Section 69C - Principle of audi alteram partem for reliance on third party statements - Whether additions under Section 68 and disallowances under Section 69C, based principally on statements of alleged 'entry operators' and departmental/public domain material without examination or opportunity for cross examination, were sustainable. - HELD THAT: - The Tribunal analysed the AO's reliance on assorted third party statements and departmental databases, noting that those statements were recorded in unrelated proceedings and were neither confronted on record nor tested by the AO in the assessee's inquiry. The assessee had produced identities, PANs, confirmations, bank evidences, audited financials of creditors, TDS compliance and earlier final orders (ITSC) accepting similar creditors. The Tribunal applied established principles: once the assessee discharges its initial onus under Section 68 by producing documents showing identity and genuineness, the burden shifts to the revenue to independently verify and, if relying on third party statements, to permit confrontation/cross examination. The AO's mechanical reliance on untested statements and perfunctory rejection of creditors' financials was held to violate natural justice and to be factually unsupportable. Consequently the additions and disallowances under Sections 68/69C were deleted, including corresponding additions in the merged entity's separate assessment (which was also set aside for jurisdictional reasons below). [Paras 32, 43, 54, 66, 76]

Additions under Section 68 and disallowances under Section 69C based on untested third party statements and summary departmental material are unsustainable where the assessee has produced documentary evidence of identity, genuineness and creditworthiness; such additions are deleted.

Principle of audi alteram partem for reliance on third party statements - Whether disallowance under Section 40A(3) for alleged cash payments to employees/persons without confronting the assessee was sustainable. - HELD THAT: - The AO treated aggregated cash payments as unaccounted and disallowed them; on appeal the CIT(A) found the payments were recorded in regular books and were transacted 'through' the assessee's staff (not 'to' them). The Tribunal observed that the AO did not rebut the documentary accounting evidence and that the CIT(A)'s factual finding on proper accounting and lack of adverse material was unchallenged by Revenue. Principles of natural justice and telescoping of confirmed unaccounted receipts were applied where relevant. [Paras 7, 35]

The disallowance under Section 40A(3) was not sustainable and was correctly deleted by the CIT(A).

Notice issued in the name of a non existent/amalgamated company-jurisdictional defect - Whether notices and assessments issued in the name of M/s IQ City Infrastructure Pvt. Ltd. (a company amalgamated into the assessee before the notices) were valid. - HELD THAT: - The Tribunal held that where a transferee company has been judicially amalgamated and the transferor/amalgamating company has ceased to exist from the appointed date, issuance of statutory notices (eg. under Section 143(2)) in the name of the non existent amalgamating company is a jurisdictional defect and renders consequent assessment orders null and void. The Tribunal followed binding precedents (Saraswati Industrial Syndicate, Spice Entertainment, Maruti Suzuki and authorities cited) and applied them on the facts: intimation of amalgamation had been given to the AO but notices were still issued in the non existent name, therefore the separate assessments in the name of the defunct entity were declared non est and deleted. [Paras 81, 82, 85]

Assessment notices and orders issued in the name of an entity that had ceased to exist on the appointed date of amalgamation are void; the separate assessment framed in the name of the non existent company is a nullity and is set aside.

Extrapolation theory in on money additions - Use of third party seized documents in unabated assessments - Whether on money receipts alleged in the 'Swarnamani' project (payments said to be made by S.S. Patodia) supported additions and extrapolation to the whole project. - HELD THAT: - The Tribunal scrutinised the cash book extracts and the purchaser's statement obtained during a survey. It found contemporaneous bank records, Form 26AS, bank confirmations and email communications establishing that the relevant payments were made through banking channels and TDS was deducted; the purchaser had retracted his survey statement and later confirmed payments were by bank transfer. The Tribunal reiterated that survey statements and third party loose papers are of limited evidentiary weight and cannot supplant primary bank documentary evidence; where the assessee produced bank reconciliations and corroborative documents, the AO's addition based on a third party survey statement and extrapolation was unsustainable. The extrapolation was therefore rejected. [Paras 95, 98, 100, 104]

The purported on money receipts in Swarnamani were not established as cash receipts; the extrapolated project wide additions were unjustified and deleted; the specific addition was also deleted.

Final Conclusion: The Tribunal allowed the assessee's appeals and dismissed the Revenue's cross appeals: additions/disallowances in unabated assessment years were set aside for want of incriminating material; project wide extrapolations from isolated or third party loose papers were rejected; additions under Sections 68/69C based on untested third party statements were deleted where the assessee produced documentary evidence of identity, genuineness and creditworthiness; cash payment disallowances recorded in the regular books were deleted; and separate assessments framed in the name of an entity that had ceased to exist after court approved amalgamation were held to be void ab initio.

Arm's Length Price - Transaction Net Margin Method (TNMM) - comparability / functionality filter for selection of comparables - onsite development revenue as a comparability filter - working capital adjustment (negative adjustment) in TNMM - treatment of foreign exchange gains as operating income - deduction under section 10A - exclusion from export and total turnover - remand to Transfer Pricing Officer for verification of comparables

Onsite development revenue as a comparability filter - comparability / functionality filter for selection of comparables - Inclusion of R S Software (India) Ltd. and Mindtree Ltd. in final list of comparables for SWD services segment - HELD THAT: - The DRP had suo moto excluded R S Software (India) Ltd. and Mindtree Ltd. on the ground that they were predominantly engaged in onsite software development though no onsite revenue filter had been applied by the TPO or previously by the parties. The Tribunal found that the two companies had been selected by the assessee in its TP study, were accepted by the TPO, passed the filters applied by the TPO and that the DRP's application of an onsite filter without defining a threshold and without opportunity to the parties was arbitrary. The Tribunal noted consistent precedents of the Bench directing inclusion of these companies under identical circumstances and therefore directed their inclusion in the final list of comparables. [Paras 19]

R S Software (India) Ltd. and Mindtree Ltd. are to be included in the final list of comparables.

Comparability / functionality filter for selection of comparables - Exclusion of Acropetal Technologies Ltd. from final list of comparables for SWD services segment - HELD THAT: - The DRP excluded Acropetal not only on alleged onsite activity but also because segmental break-ups for export earnings and employee costs were not available. The Tribunal examined the company's annual report and found Acropetal failed the TPO's quantitative filters: employee cost was only 11.51% of total operating revenue (below the 25% filter) and software development service revenue constituted Rs.81.40 Crores of total Rs.141 Crores (below the 75% service revenue filter). Reliance was placed on earlier Tribunal decisions reaching the same conclusion. For these reasons exclusion was upheld. [Paras 20]

Acropetal Technologies Ltd. remains excluded from the final list of comparables.

Comparability / functionality filter for selection of comparables - Exclusion of E-Infochips Ltd. from final list of comparables for SWD services segment - HELD THAT: - The DRP excluded E-Infochips on multiple grounds including lack of segmental information, presence of inventory and failure of the 75% software service revenue filter. The Tribunal found that software development service revenue for FY 2010-11 was less than 75% of total operating revenue and that diverse activities were reported together without segmental details; presence of inventory further made it functionally dissimilar to the captive SWD provider. The Tribunal upheld the DRP's exclusion, citing consistent precedents. [Paras 21]

E-Infochips Ltd. is excluded from the final list of comparables.

Comparability / functionality filter for selection of comparables - Exclusion of ICRA Techno Analytics Ltd. from final list of comparables for SWD services segment - HELD THAT: - The Tribunal agreed with the DRP that ICRA Techno Analytics reported diverse activities under a single segment without segmental breakup, rendering it impossible to determine whether it passed the TPO's filters. On that basis, and in line with earlier Tribunal decisions, the company was held to be functionally not comparable and excluded. [Paras 22]

ICRA Techno Analytics Ltd. is excluded from the final list of comparables.

Comparability / functionality filter for selection of comparables - Exclusion of Infosys Ltd. from final list of comparables for SWD services segment - HELD THAT: - The Tribunal found Infosys functionally dissimilar to the captive service provider on multiple counts - product development, inventories, ownership of marketing intangibles and IP, high brand value and R&D spend - differences that cannot be eliminated by adjustments. The Tribunal noted consistent prior holdings rejecting Infosys as comparable to pure captive SWD providers and upheld its exclusion. [Paras 24]

Infosys Ltd. is excluded from the final list of comparables.

Comparability / functionality filter for selection of comparables - Inclusion of Evoke Technologies Pvt. Ltd. in final list of comparables for SWD services segment - HELD THAT: - The DRP had excluded Evoke on account of an asserted peculiar economic circumstance (sharp increase in consultancy charges and low margin). The Tribunal observed Evoke was selected in the assessee's TP study and by the TPO, passed the filters applied by the TPO and had been consistently treated as comparable in analogous cases. The Tribunal found no basis to exclude Evoke for the reasons given and directed its inclusion. [Paras 26]

Evoke Technologies Pvt. Ltd. is to be included in the final list of comparables.

Comparability / functionality filter for selection of comparables - Exclusion of Sasken Communication Technologies Ltd. from final list of comparables for SWD services segment - HELD THAT: - Although Sasken had been selected by the assessee originally, the Tribunal accepted the assessee's challenge that Sasken derives revenue from software products, launched new products, has significant R&D and intangibles and inventories, and reports diverse activities without segmental breakup. The Tribunal noted precedents where Sasken was treated as functionally distinct and held that Sasken is not comparable to a captive routine SWD provider; accordingly it was excluded. [Paras 29]

Sasken Communication Technologies Ltd. is excluded from the final list of comparables.

Comparability / functionality filter for selection of comparables - Inclusion of CG-VAK Software & Exports Ltd. in final list of comparables for SWD services segment - HELD THAT: - The TPO had rejected CG-VAK on employee cost ground; the DRP upheld rejection citing absence of detailed breakup and possibility of sub-contracting. The Tribunal examined the company's accounts, found cost of services to total sales ratio at 77.65% and held the majority of 'cost of services' would relate to employee cost, concluding the company passes the employee-cost filter. The Tribunal found no basis to infer sub-contracting and directed inclusion, relying on prior Tribunal decisions. [Paras 31]

CG-VAK Software & Exports Ltd. is to be included in the final list of comparables.

Remand to Transfer Pricing Officer for verification of comparables - Remand to TPO/AO for verification of certain comparables raised by the assessee (e Zest Solutions Ltd., Larsen & Toubro Infotech Ltd., Persistent Systems & Solutions Ltd., Persistent Systems Ltd., Tata Elxsi Ltd.) in SWD services segment - HELD THAT: - The Tribunal admitted the assessee's grounds seeking exclusion of certain companies that were either chosen by the TPO or by the assessee but not objected to earlier, and observed that the TPO/AO did not have the opportunity to decide these specific contentions. For these comparables the Tribunal directed that the TPO/AO should be remitted the issue for fresh decision after affording the assessee an opportunity of being heard, rather than deciding them on the record before the Tribunal. [Paras 33, 34, 36]

Issues regarding the comparability of e Zest Solutions Ltd., Larsen & Toubro Infotech Ltd., Persistent Systems & Solutions Ltd., Persistent Systems Ltd., and Tata Elxsi Ltd. are remanded to the TPO/AO for fresh consideration after hearing the assessee.

Transaction Net Margin Method (TNMM) - working capital adjustment (negative adjustment) in TNMM - Validity of negative working capital adjustment for a captive service provider - HELD THAT: - The assessee challenged the TPO's negative working capital adjustment on the ground that a captive service provider, funded and compensated on total cost plus basis by its AEs, bears no working-capital risk. The Tribunal relied on its earlier decisions (cited) and held that negative working capital adjustment should not be made for a captive service provider. Consequently, the assessee's ground was allowed. [Paras 45]

Negative working capital adjustment shall not be made for the assessee (a captive service provider); the assessee's challenge is allowed.

Treatment of foreign exchange gains as operating income - Treatment of foreign exchange gains in computing operating margin under TNMM - HELD THAT: - The DRP had directed that foreign exchange fluctuations be treated as operating in nature for comparability. The Revenue challenged this and, with the assessee consenting to the Revenue's position, the Tribunal allowed the revenue's ground. The effect is that foreign exchange gains are to be treated as non operating for the purpose of computing margins in this case. [Paras 27]

Foreign exchange gains are to be treated as non operating in nature for margin computation in this assessment.

Deduction under section 10A - exclusion from export and total turnover - Whether telecommunication and foreign travel expenses reduced from export turnover must also be reduced from total turnover while computing deduction under section 10A - HELD THAT: - The DRP directed that amounts excluded from export turnover in computing deduction under section 10A (telecom and travel in foreign currency) should also be excluded from total turnover. The Revenue challenged this, but the Tribunal observed the DRP's direction followed the authoritative decision of the Karnataka High Court in CIT v. Tata Elxsi and subsequent Supreme Court authority in CIT v. HCL Technologies. In view of this binding precedent, the Tribunal rejected the revenue's challenge and upheld the DRP's direction, resulting in deletion of the disallowance under section 10A. [Paras 46, 47]

DRP's direction to reduce the specified expenses from both export and total turnover for section 10A computation is upheld; the Revenue's challenge is rejected.

Arm's Length Price - Transaction Net Margin Method (TNMM) - Direction to TPO to recompute ALP for SWD and ITeS segments consistent with Tribunal's directions - HELD THAT: - After deciding which comparables are to be included or excluded, addressing working capital adjustment and treatment of foreign exchange gains, and remanding specified comparability issues to the TPO, the Tribunal directed the TPO to compute the Arm's Length Price in the SWD and ITeS segments in accordance with the directions given in the order and after affording the assessee an opportunity of being heard. [Paras 17, 44]

TPO is directed to recompute ALP for the SWD and ITeS segments as per the Tribunal's directions and after hearing the assessee.

Final Conclusion: The cross appeals are partly allowed in the respects indicated: the Tribunal directed inclusion or exclusion of specified comparable companies for the SWD and ITeS segments as detailed above, disallowed a negative working capital adjustment for the captive assessee, held foreign exchange gains to be non operating for margin computation, upheld the DRP's treatment under section 10A in light of binding precedent, remanded certain comparability issues to the TPO for fresh consideration after hearing the assessee, and directed the TPO to recompute the Arm's Length Price consistent with these directions.

Penalty under section 272A(2)(k) - Failure to furnish TDS statements under section 200(3) - Reasonable cause - illness of managing director and non availability of accountant - Deductor's fiduciary duty in furnishing TDS statements - Remand for verification and computation of penalty

Penalty under section 272A(2)(k) - Failure to furnish TDS statements under section 200(3) - Deductor's fiduciary duty in furnishing TDS statements - Reasonable cause - illness of managing director and non availability of accountant - Liability for penalty for late filing of TDS returns for AY 2010-11 and AY 2011-12 and the applicability of the assessee's pleaded reasonable cause. - HELD THAT: - The Tribunal recorded that the assessee admittedly deposited the TDS amounts with interest on the dates shown in the record and subsequently filed the quarterly returns for the relevant quarters. The Tribunal rejected the contention that non-availability of an accountant justified the delay for all quarters, noting that a new accountant took charge on 15/08/2010 and therefore the non-availability plea could not be accepted at least for the period relating to AY 2011-12. However, having regard to the illness of the managing director, the Tribunal accepted the assessee's submission only to the limited extent of treating the date of deposit of TDS (with interest) as the relevant starting point for computation of penalty. The Tribunal emphasised the fiduciary character of the deductor's obligation to furnish statements under section 200(3) but limited the relief to recalculation of penalty from date of deposit rather than full exoneration.

Assessee liable to penalty under section 272A(2)(k) for late filing of TDS returns, but penalty reduced by computing it from the respective dates of deposit of TDS with interest; grounds allowed partly.

Remand for verification and computation of penalty - Whether the penalty amount should be recalculated and verified by the Assessing Officer based on dates of deposit of TDS. - HELD THAT: - The Tribunal directed the assessee to file a chart computing penalty from the dates of payment of TDS to the Government and reproduced the computation for the two assessment years. The Assessing Officer was directed to verify the computations and to restrict the penalty under section 272A(2)(k) to the amounts as computed from the dates of deposit. This direction is a remand limited to quantification and verification and does not reopen the question of liability on merits beyond the adjustment ordered.

Matter remanded to the Assessing Officer to verify the computation and to restrict the penalty to the amounts computed from the dates of deposit of TDS.

Final Conclusion: Appeals allowed in part: liability for penalty under section 272A(2)(k) sustained but penalty ordered to be computed from the dates of deposit of TDS with interest; Assessing Officer directed to verify and restrict penalty as computed.

Re-opening of assessment on discovery of fresh material - transfer by delivery of possession coupled with part performance (section 2(47)(v) read with section 53A of the Transfer of Property Act) - application of presumptive valuation when SRO value differs by more than 10% (operation of section 50C)

Re-opening of assessment on discovery of fresh material - Validity of reopening the assessment after four years from the end of the relevant assessment year. - HELD THAT: - The Tribunal upheld the reassessment proceedings. It found that fresh material surfaced during the relevant assessment year showing that the assessee had executed a sale deed of immovable property and had not declared the transaction in the original return, thereby justifying the reopening of assessment beyond four years. The appellate finding that the reassessment was invalid was rejected on this basis. [Paras 4]

Re-opening of assessment was valid and the ground challenging re-opening is devoid of merit.

Transfer by delivery of possession coupled with part performance (section 2(47)(v) read with section 53A of the Transfer of Property Act) - application of presumptive valuation when SRO value differs by more than 10% (operation of section 50C) - Whether the transfer of the property occurred in 2003/2004 (making capital gains taxable in AY 2004-05) or in 2006/2007 (bringing the transaction within section 50C for AY 2007-08), and whether the addition based on SRO value under section 50C in AY 2007-08 was sustainable. - HELD THAT: - The Tribunal accepted the assessee's contemporaneous bank statement and the notarised unregistered sale deed evidencing receipt of consideration and handing over of possession in December 2003/January 2004. Applying the principle in section 2(47)(v) - which treats transfer as taking place when possession is delivered coupled with part performance as in section 53A - the Tribunal held that the transfer occurred earlier (taxable in AY 2004-05). The Tribunal rejected the reasoning of the CIT(A) that the registered sale deed in 2006 controlled the date of transfer, noting that possession and consideration were earlier and that defects in the notarised document did not negate the part performance. Consequently, the presumptive SRO valuation relied upon under section 50C for AY 2007-08 could not be used to assess capital gains in that year, and the addition made for LTCG in AY 2007-08 was directed to be deleted. [Paras 9]

Capital gains are exigible in AY 2004-05 as transfer occurred on receipt of consideration and delivery of possession in December 2003/January 2004; the addition based on SRO value under section 50C in AY 2007-08 is deleted.

Final Conclusion: The appeal is partly allowed: the reassessment was held valid, but the addition of long-term capital gain in respect of AY 2007-08 was deleted because the Tribunal held that the transfer occurred earlier (taxable in AY 2004-05) by reason of receipt of consideration and delivery of possession constituting part performance.

Reopening of assessment under Section 147/148 - reason to believe - change of opinion - tangible material - reassessment null and void for lack of new material - pronouncement within 90 days under Rule 34(5) of ITAT Rules - exclusion of lockdown period for computation of time-limits

Reopening of assessment under Section 147/148 - reason to believe - change of opinion - tangible material - reassessment null and void for lack of new material - Validity of reopening the completed assessment for A.Y.2010-11 - HELD THAT: - The Tribunal found that the matters which the Assessing Officer relied upon for reopening had already been examined during the original assessment framed under section 143(3), and the assessee had furnished the reconciliation, financial statements and explanations, including response to audit objections, at that stage. There was no new material in the reasons recorded which was not previously available to the AO; thus the reassessment proceeded on a basis indistinguishable from mere change of opinion. Applying the principles in the authorities relied upon by the parties, the Tribunal held that reopening under section 147 requires "tangible material" having a live link with the formation of belief that income has escaped assessment and cannot be sustained on mere change of opinion. In absence of such new material the reassessment was void on legal grounds and the order of the AO was quashed; consequential merits were not adjudicated. [Paras 7, 9]

Reassessment under section 147/148 for A.Y.2010-11 quashed for lack of new material; appeal allowed on this legal ground and merits need not be decided.

Pronouncement within 90 days under Rule 34(5) of ITAT Rules - exclusion of lockdown period for computation of time-limits - Whether delay in pronouncing the order beyond 90 days invalidates the order - HELD THAT: - The Tribunal examined Rule 34(5) which ordinarily requires pronouncement within 90 days of conclusion of hearing but recognises exceptions for extraordinary circumstances. Having regard to the COVID-19 lockdown and consistent decisions treating the lockdown period as exceptional (and excluding it for computation of limitation), the Tribunal held that the period during which lockdown was in force should be excluded in computing the 90-day period. In those circumstances the delay in pronouncement was justified by extraordinary circumstances and did not invalidate the order. The Tribunal followed co-ordinate decisions treating the pandemic and lockdown as grounds for exclusion of the period for pronouncement. [Paras 10, 11, 12]

Delay in pronouncement beyond 90 days excused by exclusion of lockdown period; order validly pronounced in accordance with Rule 34(5) as interpreted in the pandemic context.

Final Conclusion: The reassessment for A.Y.2010-11 was quashed for want of any new material to justify reopening under section 147/148 and the appeal is allowed; the delay in pronouncement beyond 90 days is excused by excluding the COVID-19 lockdown period for computation of the time-limit under Rule 34(5).

One-time condonation of delay - applicability of settlement scheme to defaults due till 31.10.2019 - immunity from prosecution under settlement scheme - defaulting LLP - equitable relief where compliance done pursuant to court order - arbitrariness and reasonableness (denial of benefit)

Defaulting LLP - one-time condonation of delay - uploaded pursuant to court order without prejudice - arbitrariness and reasonableness (denial of benefit) - immunity from prosecution under settlement scheme - Petitioners are entitled to the benefit of the LLP Settlement Scheme, 2020 notwithstanding that they uploaded the statutory forms pursuant to this Court's order prior to 31.10.2019. - HELD THAT: - The Scheme grants one-time relaxation for 'defaulting LLPs' to file belated documents which were due till 31.10.2019 and provides immunity from prosecution for documents filed under the Scheme. The petitioners uploaded their documents pursuant to this Court's order and expressly without prejudice to rights and contentions pending in these petitions. Denying them the benefit of the Scheme solely because the uploading occurred pursuant to judicial directions would be arbitrary and would place them in a worse position than LLPs who did not seek relief before the Court. Given that the filings were subject to the further outcome of these proceedings, the petitioners cannot be treated as not being within the ambit of the Scheme or be excluded from its benefits on that ground. [Paras 14, 15, 16]

Petitioners shall not be denied the benefit of the LLP Settlement Scheme, 2020 merely because their documents were uploaded pursuant to this Court's order prior to 31.10.2019; petitions disposed accordingly.

Final Conclusion: The writ petitions and connected applications are disposed of with directions that the petitioners shall be entitled to the benefit of the LLP Settlement Scheme, 2020 and shall not be excluded from its relief for having uploaded documents pursuant to this Court's earlier order before 31.10.2019.

Disqualification of directors consequent to defaulting company filings (interaction of the proviso to Section 167(1)(a) with Section 164) - retrospective effect of statutory provisos - activation/reactivation of DIN and DSC to enable filings - Companies Fresh Start Scheme (CFSS), 2020 as an enabler for defaulting active companies to file belated documents - entitlement to act as director where disqualification arose prior to statutory amendment

Disqualification of directors consequent to defaulting company filings (interaction of the proviso to Section 167(1)(a) with Section 164) - entitlement to act as director where disqualification arose prior to statutory amendment - activation/reactivation of DIN and DSC to enable filings - DIN and DSC activation for the Petitioner qua the two non-defaulting companies ABMR and DCD Grand. - HELD THAT: - The court held that the proviso to Section 167(1)(a) (which causes a director disqualified in relation to a defaulting company to vacate office in all companies) came into effect on 07.05.2018 and cannot be applied retrospectively. Relying on paragraph 98 of Mukut Pathak, disqualifications which arose prior to that amendment do not result in demission from office in other companies. Since the Petitioner was disqualified w.e.f. 01.11.2017 (prior to the proviso), his DIN/DSC cannot be treated as suspended for the two companies which are not the defaulting company, and therefore the DIN/DSC would not be treated as suspended in respect of ABMR and DCD Grand. [Paras 7, 10, 15]

DIN and DSC of the Petitioner shall not be treated as suspended for ABMR and DCD Grand and the Petitioner remains entitled to act as director of those companies.

Entitlement to act as director where disqualification arose prior to statutory amendment - disqualification of directors consequent to defaulting company filings (interaction of the proviso to Section 167(1)(a) with Section 164) - Whether the Petitioner continues to hold office and may act as director of the defaulting company DCDPL. - HELD THAT: - Applying the ratio in paragraph 98 of Mukut Pathak, the court concluded that because the Petitioner's disqualification occurred before the proviso to Section 167(1)(a) took effect, he does not demit office even in the defaulting company. The ROC's suggestion that a new director be appointed to enable filings was rejected insofar as it would permit 'dummy' appointments and would circumvent the protective intent of the amendments; accordingly, the Petitioner is entitled to continue as director of DCDPL. [Paras 11, 15]

The Petitioner shall be considered a director of DCDPL and entitled to act as such.

Companies Fresh Start Scheme (CFSS), 2020 as an enabler for defaulting active companies to file belated documents - activation/reactivation of DIN and DSC to enable filings - Whether the Petitioner may file belated returns of the defaulting but active company DCDPL under the CFSS, 2020 and whether his DIN is to be activated for that purpose. - HELD THAT: - The court observed that the CFSS, 2020 is intended as an alleviative and enabling measure permitting active defaulting companies to file belated documents, obtain immunity in certain respects and put affairs in order. Given that purpose, directors of such active companies must be able to avail themselves of the Scheme; the Court followed its earlier reasoning in Sandeep Agarwal to treat the Scheme as a fresh cause of action. Consequently, the Petitioner was held entitled to avail of the Scheme and to file the relevant documents on behalf of DCDPL. To effectuate this relief, the court directed that the Petitioner's DIN be activated within two working days so as to permit filings before the Scheme deadline. [Paras 12, 13, 14, 15, 16]

The Petitioner may avail of CFSS, 2020 to file belated documents for DCDPL and the Petitioner's DIN shall be activated to enable such filings.

Final Conclusion: The petition is allowed: the Petitioner remains director of ABMR and DCD Grand (his DIN/DSC not to be treated as suspended for those companies), he continues as director of the defaulting but active company DCDPL, and he is permitted to avail of the Companies Fresh Start Scheme, 2020 to file belated documents for DCDPL with his DIN to be activated to enable such filings; directions issued accordingly and petition disposed of.

Sanction of scheme of arrangement - transfer and vesting of undertaking by slump sale - treatment of employees on transfer - transfer of liabilities and continuation of proceedings - cash consideration in lieu of share allotment - preservation of revenue/ tax department rights - accounting treatment under applicable Indian Accounting Standards (Ind AS 103) - independent valuation and commercial wisdom of shareholders - statutory notice to regulatory authorities and absence of objections

Sanction of scheme of arrangement - Sanction of the Scheme of Arrangement between the Transferor Company and the Transferee Company. - HELD THAT: - The Tribunal examined the Scheme as a whole, the statutory compliances, reports of statutory authorities and the submissions of the petitioner companies and concluded that the Scheme would be beneficial to the companies and not detrimental to the interests of shareholders. In the absence of objections and having regard to compliance with directions issued for convening meetings and notices to regulatory authorities, the Tribunal exercised its power under the Companies Act, 2013 to sanction the Scheme, while explicitly preserving the right to take action in accordance with law if any statutory violation or deficiency is later found. The sanction does not operate as exemption from stamp duty, taxes or other regulatory permissions required under law. [Paras 13]

The Scheme of Arrangement appended as Annexure '4' is sanctioned.

Transfer and vesting of undertaking by slump sale - transfer of liabilities and continuation of proceedings - All properties, rights, assets and liabilities of the Demerged undertaking shall stand transferred and vested in the Transferee Company by way of slump sale and all pending proceedings shall continue against or by the Transferee Company. - HELD THAT: - Having analysed Part B of the Scheme and Clauses 4 to 12 which set out the transfer, vesting, assets, liabilities, contracts and effective date, the Tribunal directed that the Demerged undertaking be transferred to and vested in the Transferee Company for all intents and purposes pursuant to Section 232 of the Companies Act, 2013. The Tribunal also specified that liabilities, powers, engagements and duties pertaining to the Demerged undertaking shall be transferred to the Transferee Company and that legal proceedings will be continued by or against the Transferee Company. [Paras 13]

The Demerged undertaking is transferred and vested in the Transferee Company and its liabilities and pending proceedings shall stand transferred to the Transferee Company.

Treatment of employees on transfer - Employees of the Demerged undertaking shall be deemed to become employees of the Transferee Company on the same terms without interruption of service. - HELD THAT: - Clause 9 of the Scheme and the Tribunal's consideration confirm that from the Appointed Date the employees engaged in the Demerged undertaking will continue in service with the Transferee Company on the same terms and conditions and without interruption. This protection of employee interests was noted by the Regional Director in his report and taken into account by the Tribunal. [Paras 9, 13]

All employees of the Demerged undertaking shall stand transferred to the Transferee Company on the same terms and conditions without interruption of service.

Cash consideration in lieu of share allotment - independent valuation and commercial wisdom of shareholders - preservation of revenue/ tax department rights - The Scheme provides for lump sum cash consideration to the Transferor Company (rather than allotment of shares to its shareholders); such commercial decision is within shareholders' commercial wisdom and the Income Tax Department's statutory rights to pursue tax dues are preserved. - HELD THAT: - The Tribunal queried conformity with tax law definitions of demerger; petitioners clarified that no tax exemption under the Income Tax Act was sought and capital gains, if any, would be the responsibility of the Transferor Company. The Tribunal noted precedents and authorities stating that consideration for transfer may legitimately be cash and that such mode does not, by itself, render a scheme contrary to shareholders' interests. The Valuer adopted a Discounted Cash Flow method and recommended an enterprise value; the Tribunal declined to intrude upon the commercial wisdom exercised by shareholders. The Tribunal also recorded that the Income Tax Department retains the right to proceed for recovery of dues and that the sanction does not prejudice such rights. [Paras 10, 11, 13]

The Transferee Company shall discharge the lump sum cash consideration as provided in the Scheme; this mode of consideration is permissible and the rights of the tax authorities to pursue statutory dues are preserved.

Accounting treatment under applicable Indian Accounting Standards (Ind AS 103) - The accounting treatment proposed in the Scheme is in conformity with applicable Indian Accounting Standards, in particular Ind AS 103. - HELD THAT: - The Statutory Auditors certified compliance with the proviso to Section 230(7)/Section 232(3) and that the Accounting Treatment in the Scheme conforms with applicable Indian Accounting Standards, more particularly Ind AS 103 relating to Business Combinations; Clause 15 of the Scheme reflects this treatment. [Paras 12, 13]

The accounting treatment in the Scheme is found to be in compliance with applicable Indian Accounting Standards, including Ind AS 103.

Statutory notice to regulatory authorities and absence of objections - Notices were duly served on statutory/regulatory authorities and, save for the Income Tax Department which confirmed its procedural rights, no statutory authority objected to the Scheme. - HELD THAT: - The Tribunal directed issuance of notices and publication; the petitioners filed proof of service and publication as directed. The Regional Director filed a report raising no objection after noting employee protection and statutory compliance. Other authorities either did not file replies or did not raise objections; the Income Tax Department after further notice filed a memo affirming its procedural rights without objecting to the Scheme. On this basis the Tribunal proceeded to sanction the Scheme. [Paras 7, 8, 9]

Statutory notices and publications were effected and no statutory objections were recorded that would preclude sanction of the Scheme.

Final Conclusion: The Tribunal has sanctioned the Scheme of Arrangement whereby the retail pharmacy undertaking of the Transferor Company is transferred to the Transferee Company by way of slump sale with effect from the Appointed Date of 1st April 2019, directing vesting of assets and liabilities, transfer of employees, and payment of the stipulated cash consideration, while preserving the rights of statutory authorities and regulatory compliances.

Scheme of Arrangement - sanction under Sections 230-232 - fairness, justness and reasonableness - protection of revenue - undertaking to honor tax liabilities - transfer and vesting - continuity of employment - registration with Registrar of Companies

Scheme of Arrangement - sanction under Sections 230-232 - fairness, justness and reasonableness - Sanction of the Scheme of Arrangement between the Demerged Company and the Resulting Company under Sections 230 to 232 of the Companies Act, 2013. - HELD THAT: - The Tribunal examined the procedural and substantive compliance required for sanction. Meetings directed by the Tribunal were convened and the Scheme was unanimously approved by members present; statutory publications and service on concerned authorities were effected and affidavits of compliance were filed. The Regional Director filed a report and no objections were received from stock exchanges; no response was received from the Income Tax Department within the statutory period and therefore no representation was inferred. Statutory auditors certified that the accounting treatment conforms to applicable accounting standards. Relying on the settled principle that the Tribunal's role is to ascertain the fairness, justness and reasonableness of a scheme and ensure no law or public interest is compromised, and having found no impediment, the Tribunal granted sanction to the Scheme. [Paras 14, 15, 16, 19, 20]

Sanction granted to the Scheme under Sections 230 to 232 of the Companies Act, 2013.

Protection of revenue - undertaking to honor tax liabilities - Whether the interests of the revenue are adequately protected and the effect of tax-related undertakings furnished by the parties. - HELD THAT: - Affidavits filed by both petitioner companies contain specific undertakings that the Scheme has been drawn to comply with the demerger provisions of the Income-tax Act, that existing proceedings or appeals shall remain unaffected, and that the Resulting Company will honour any tax liabilities as finally determined. The Regional Director reported compliance and no prosecution or investigation pending. The Tribunal held that these undertakings duly protect the revenue interest. The Tribunal further clarified that acceptance of these undertakings does not operate as a bar on the Income Tax Department's statutory powers of assessment or recovery, including imposition or recovery of any taxes, demands or penalties in accordance with law. [Paras 9, 10, 11, 12]

Undertakings accepted as protecting revenue interests, subject to reservation that the sanction does not limit statutory rights of the tax authorities for assessment or recovery.

Transfer and vesting - continuity of employment - Legal effect of the Scheme in relation to transfer of the demerged undertaking, liabilities and continuity of employees. - HELD THAT: - The Tribunal ordered that upon the Effective Date all properties, rights and powers related to the Demerged Undertaking shall transfer to and vest in the Resulting Company without further act or deed, and that all liabilities and duties in respect of the Demerged Undertaking shall become those of the Resulting Company. It was directed that employees in service immediately prior to the Effective Date shall become employees of the Resulting Company without any break in service and upon terms not less favourable than those subsisting prior to the Scheme. These directions implement the operative provisions of the sanctioned Scheme. [Paras 24]

Assets, rights and liabilities of the Demerged Undertaking stand transferred and vested in the Resulting Company; employees to continue in service under the Resulting Company on not less favourable terms.

Registration with Registrar of Companies - Obligation to deliver certified copy of the sanction order to the Registrar of Companies and consequent administrative steps. - HELD THAT: - The Tribunal directed that both petitioner companies shall, within thirty days of receipt of the order, cause a certified copy to be delivered to the Registrar of Companies for registration. Upon such delivery, the Registrar is to place all documents relating to the demerged undertaking on the file of the Resulting Company. The Tribunal also recorded that any person interested shall be at liberty to apply for further directions, preserving appropriate remedies. [Paras 24]

Petitioners directed to file certified copy of the order with the Registrar of Companies within thirty days; Registrar to place relevant documents on the Resulting Company's file; liberty granted to interested persons to seek directions.

Final Conclusion: The Tribunal sanctioned the Scheme of Arrangement between Sharda Motor Industries Limited and NDR Auto Components Limited under Sections 230-232 of the Companies Act, 2013, having found procedural and substantive compliance, accepted undertakings protecting the revenue while reserving statutory rights of tax authorities, ordered transfer and vesting of the demerged undertaking (including liabilities) and continuity of employees, and directed registration of the order with the Registrar of Companies.

Scheme of Amalgamation and Arrangement - Sanction/approval of scheme under Sections 230 to 232 of the Companies Act, 2013 - Transfer and vesting of assets and liabilities on amalgamation - Continuance of proceedings by or against the Transferee Company - Employees' continuity of service and protection of service conditions on amalgamation - Set-off of fees paid to Registrar of Companies on authorised capital - Share exchange ratio - Regulatory clearances and compliance (SEBI/Stock Exchanges/CCI/RoC) - No exemption from tax or statutory obligations upon sanction

Scheme of Amalgamation and Arrangement - Sanction/approval of scheme under Sections 230 to 232 of the Companies Act, 2013 - Approval and sanction of the Scheme of Amalgamation between the Transferor Company and the Transferee Company. - HELD THAT: - The Tribunal considered compliance with the First Motion directions, the reports of the Chairperson and Scrutinizer showing approval by unsecured creditors and shareholders, certificates of statutory auditors as to accounting treatment, and replies to observations of statutory authorities and objectors. Objections received (from RD/RoC, Official Liquidator, BSE, NSE, Income Tax Department and the Workers Union) were examined and addressed on the basis of the Scheme's provisions, relevant precedent and statutory position. Having found no impediment, the Tribunal sanctioned the Scheme and declared it binding on all shareholders and creditors. [Paras 31, 32]

The Scheme is approved and declared binding on all shareholders and creditors.

Transfer and vesting of assets and liabilities on amalgamation - Continuance of proceedings by or against the Transferee Company - Effect of amalgamation on property, rights, liabilities and pending proceedings of the Transferor Company. - HELD THAT: - Pursuant to the sanction, all property, rights and powers of the Transferor Company are transferred and vested in the Transferee Company and all liabilities and duties of the Transferor Company are transferred to and become liabilities of the Transferee Company. Further, all proceedings pending by or against the Transferor Company shall be continued by or against the Transferee Company in the same manner.

Assets and liabilities of the Transferor vest in the Transferee and pending proceedings shall continue against or be continued by the Transferee Company.

Employees' continuity of service and protection of service conditions on amalgamation - Whether the Scheme adversely affects the service conditions of the Transferor Company's employees and the consequence of pending labour proceedings. - HELD THAT: - The Scheme provides that upon effectiveness all Transferor Company employees shall become employees of the Transferee without break and on terms no less favourable than those existing, with continuity of service for benefits such as gratuity taken into account. Objections by the Workers Union that consultation or additional assurances were required were considered and rejected: the Scheme does not propose any change in service conditions and pending proceedings (including before the Labour Commissioner) will be continued against the Transferee Company and any orders will be binding on it. Reliance on judicial authorities was considered and the Tribunal followed the principle that the Company Court's sanction does not supplant employees' remedies in appropriate fora but does not justify refusing sanction on hypothetical prejudice. [Paras 29, 30, 31]

Employees of the Transferor shall be transferred to the Transferee with continuity and protection of service conditions; objections of the Workers Union are rejected.

Set-off of fees paid to Registrar of Companies on authorised capital - Treatment of fees paid to the Registrar of Companies on authorised capital post-amalgamation. - HELD THAT: - The ROC reported that, in terms of Section 232(3), any fee paid by the Transferor on its authorised capital shall be set off against any fee payable by the Transferee on its authorised capital subsequent to amalgamation. The Tribunal noted Clause 20 of the Scheme to be in consonance with the statutory position and directed accordingly. [Paras 17, 18]

The fee paid by the Transferor on its authorised capital shall be set off against any fee payable by the Transferee on its authorised capital after amalgamation.

Regulatory clearances and compliance (SEBI/Stock Exchanges/CCI/RoC) - No exemption from tax or statutory obligations upon sanction - Compliance with regulatory observations and the effect of sanction vis-a -vis tax and other statutory liabilities. - HELD THAT: - The Tribunal recorded that the petitioner had complied with SEBI and stock-exchange requirements to the stage before sanction, and that the Competition Commission had approved the combination. Observations of the Income Tax Department about ongoing assessment proceedings were noted; the Tribunal accepted the companies' undertakings that liabilities in respect of current, pending or future income-tax demands will be honoured, but clarified that sanctioning the Scheme does not constitute exemption from payment of stamp duty, taxes or other statutory charges nor from provisions of the Income Tax Act and Companies Act, and that authorities remain free to take appropriate action in accordance with law. [Paras 26, 27, 32]

Regulatory compliance noted; sanction does not confer any exemption from tax or other statutory obligations and authorities retain their rights under law.

Share exchange ratio - Share exchange ratio to be applied on amalgamation. - HELD THAT: - The Share Exchange Ratio stated in the Scheme (based on expert report) - being 439 equity shares of the Transferee for 100 equity shares of the Transferor - was recorded as the mechanism for issuance of shares upon effectiveness. The Tribunal noted the ratio as determined in the Scheme and particulars of accounting compliance placed on record. [Paras 8, 11]

The share exchange ratio as set out in the Scheme is accepted as the basis for allotment on effectiveness.

Filing of certified copy and ancillary directions - Ancillary directions consequent to sanction (filing with RoC, schedule of properties, deposit with Pay & Accounts Officer). - HELD THAT: - The Tribunal directed that the petitioner shall, within 30 days of receipt of the certified copy, deliver the same to the Registrar of Companies for registration, after which the Transferor shall be dissolved and records consolidated. It further directed filing of schedule of properties by affidavit (freehold and leasehold) and directed deposit of a specified amount with the Pay & Accounts Officer in respect of the Regional Director within the stipulated period. Liberty was reserved for interested persons to apply for further directions. [Paras 33, 34]

Petitioner to deliver certified copy to RoC, file schedule of properties by affidavit and make directed deposit; liberty to apply for further directions is preserved.

Final Conclusion: The Tribunal sanctioned the Scheme of Amalgamation between GlaxoSmithKline Consumer Healthcare Limited and Hindustan Unilever Limited, declared it binding on shareholders and creditors, directed vesting of assets and liabilities and continuance of pending proceedings by/against the Transferee, preserved employees' continuity and service protections, recorded regulatory compliance while emphasising that sanction affords no exemption from taxes or statutory obligations, and issued incidental directions for filing, registration and deposits.

Maintainability of petition under Section 9 of the Insolvency and Bankruptcy Code - existence of disputed operational debt - requirement of undisputed debt to initiate corporate insolvency resolution process - use of the Insolvency and Bankruptcy Code as a recovery mechanism - double jeopardy in relation to concurrent proceedings under the Negotiable Instruments Act - effect of Government notification raising minimum threshold for initiation of CIRP

Maintainability of petition under Section 9 of the Insolvency and Bankruptcy Code - existence of disputed operational debt - requirement of undisputed debt to initiate corporate insolvency resolution process - use of the Insolvency and Bankruptcy Code as a recovery mechanism - double jeopardy in relation to concurrent proceedings under the Negotiable Instruments Act - Petition under Section 9 dismissed as not maintainable on the ground that the debt is disputed and the petition is being used as a recovery device - HELD THAT: - The Tribunal examined the pleadings and documentary record and held that the petition was instituted primarily to recover an alleged debt rather than to commence CIRP. The Tribunal applied the settled principle that initiation of CIRP requires existence of an undisputed operational debt and that the IBC is not a substitute for recovery proceedings. Reliance was placed on the principle in Mobilox Innovations and the Transmission Corporation of A.P. judgment that the Adjudicating Authority must determine whether there is an operational debt, whether documentary evidence shows it is due and unpaid, and whether a dispute or pending suit/arbitration exists. The record disclosed competing contentions, part payments, multiple criminal proceedings under the Negotiable Instruments Act arising from dishonoured cheques and withdrawals in some criminal matters, and post dated cheques/negotiations between the parties. The Tribunal found that these circumstances established a bona fide dispute and that the Petitioner was attempting to use Section 9 for recovery; double jeopardy concerns were noted because parallel NI Act proceedings were pending. In that factual matrix, the summary jurisdiction under Section 9 could not be exercised to admit CIRP and the petition was held not maintainable. [Paras 9, 10, 11]

C.P.(IB) No.399/BB/2019 dismissed as not maintainable for want of an undisputed operational debt and because the Code was being invoked as a recovery mechanism

Effect of Government notification raising minimum threshold for initiation of CIRP - maintainability of petition under Section 9 of the Insolvency and Bankruptcy Code - Government notification raising the minimum amount of default to one crore rupees and related suspension of certain provisions was relevant and to be kept in mind while deciding admission - HELD THAT: - The Tribunal noted the Central Government's notification increasing the threshold for initiating CIRP to one crore rupees and observed that Part II of the Code (Sections 4 to 77) and provisions related to admission were not to be treated as applicable in the present case where the amount of default was below that threshold. While observing that amendments ordinarily have prospective effect, the Adjudicating Authority is legally bound to consider the changed legal position when deciding admission. This development reinforced the need for caution in admitting petitions under Section 9 in the present economic scenario and formed part of the Tribunal's assessment of maintainability. [Paras 7, 8]

The notification raising the threshold to one crore rupees was a relevant development to be considered and supported the conclusion against admission in the present case where default was below that threshold

Final Conclusion: The Company Petition under Section 9 is dismissed as not maintainable because the debt was disputed and the petition was being used as a recovery device; the parties remain free to pursue other remedies, including the pending proceedings under the Negotiable Instruments Act, and there is no order as to costs.

Corporate Insolvency Resolution Process - operational debt - maintainability of application under Section 9 of the IBC - IBC is not a recovery forum - existence of dispute and pendency of other proceedings as bar to admission - arbitration clause as alternative dispute resolution - double jeopardy - effect of Government notification raising minimum default threshold during COVID-19

Maintainability of application under Section 9 of the IBC - operational debt - IBC is not a recovery forum - existence of dispute and pendency of other proceedings as bar to admission - double jeopardy - Whether the company petition filed under Section 9 is maintainable where the claim is disputed, parallel proceedings under the Negotiable Instruments Act are pending and the petition appears to be an attempt to recover dues rather than to initiate CIRP. - HELD THAT: - The Tribunal found that the petition was filed primarily as a recovery measure rather than to legitimately initiate CIRP. The invoices arose under three Master Equipment Rental Agreements and part payments had been made; post-dated cheques were issued and criminal proceedings under Section 138 N.I. Act are pending. The petitioner claimed interest at 21% which was not evidenced in the agreements or invoices, and did not attempt arbitration despite an express arbitration clause. The Tribunal applied the settled principle that the Code is not a substitute for recovery proceedings and that existence of an undisputed debt is a sine qua non of initiating CIRP, as explained in Mobilox and related authorities. Given the disputed nature of the claim, the pendency of other proceedings and the indicia that the petition was used to press recovery, the Adjudicating Authority could not, in summary proceedings under the Code, admit the Section 9 petition. Consequently the petition was dismissed as not maintainable. [Paras 9, 10, 11, 12]

The Section 9 petition is not maintainable and is dismissed as the claim is disputed, parallel NI Act proceedings are pending and the Code cannot be used as a recovery forum.

Effect of Government notification raising minimum default threshold during COVID-19 - maintainability of application under Section 9 of the IBC - Whether the change in statutory threshold and related suspension of provisions (by Government notification increasing minimum default to one crore) is relevant to the question of admission of the Section 9 petition. - HELD THAT: - The Tribunal observed the Central Government notification raising the minimum default threshold to Rs. 1 crore and temporarily suspending provisions of Sections 7, 9 and 10 insofar as they are affected, and noted that Part II of the Code would not apply where the default is below that threshold. While amendments and rules normally have prospective effect, the Adjudicating Authority must take such developments into account when considering admission of a Section 9 application so as to balance interests of stakeholders. In the present case the amount of default was below the notified threshold and that fact was a material consideration in assessing the maintainability of the petition. [Paras 7, 8]

The Government notification increasing the minimum default threshold to Rs. 1 crore is relevant and must be kept in mind when deciding admission; here the default being below that threshold weighed against admission.

Final Conclusion: The Company Petition under Section 9 is dismissed as not maintainable: the claim was disputed, parallel proceedings under the Negotiable Instruments Act were pending, arbitration was not pursued despite a contractual clause, and the Code cannot be used as a recovery forum; the Government's notification raising the minimum default threshold to Rs. 1 crore was a relevant consideration.

Ineligibility under section 29A - wilful defaulter disqualification - power of the Resolution Professional to place resolution plans before the Committee of Creditors - authority of the Committee of Creditors to accept or reject a resolution plan

Power of the Resolution Professional to place resolution plans before the Committee of Creditors - authority of the Committee of Creditors to accept or reject a resolution plan - Whether the Resolution Professional exceeded his power by rejecting the applicant's resolution plan instead of placing it before the Committee of Creditors for decision. - HELD THAT: - The Tribunal examined the material placed on record including the email of rejection sent by the Resolution Professional and the minutes relied upon by the Resolution Professional. The Tribunal was satisfied prima facie that the Resolution Professional had placed the applicant's revised resolution plan and accompanying documents before the Committee of Creditors and that the Committee deliberated on the issue of disqualification under section 29A. The email communicating disqualification records that the explanations offered by the applicant were considered but did not remove the disqualification. Given these documents, the Tribunal found no demonstrable contravention by the Resolution Professional of the Code or the regulations in failing to place the plan before the Committee or in conveying the Committee's considered conclusion regarding ineligibility. [Paras 6, 7, 8]

Application dismissed for having no merit on the ground that the Resolution Professional is shown to have placed the plan before the Committee of Creditors and the Committee found the applicant ineligible under section 29A.

Ineligibility under section 29A - wilful defaulter disqualification - Whether the applicant was ultimately disqualified under section 29A on merits. - HELD THAT: - The Tribunal expressly declined to go into the merits of the Committee of Creditors' decision on disqualification under section 29A. Although an email dated 22.06.2020 by a bank was produced at the hearing indicating removal of the alleged default, the Tribunal noted that as on 18.06.2020 the available records showed the related company to be in the list of defaulters and therefore did not adjudicate the substantive question of ineligibility. The Tribunal left open the right of the applicant to challenge any such disqualification when the Resolution Professional places a plan for approval. [Paras 7, 8]

Merits of the section 29A disqualification were not adjudicated and are left open for determination in any appropriate challenge filed during the approval process.

Final Conclusion: The application challenging rejection of the resolution plan is dismissed on the record that the Resolution Professional placed the plan before the Committee of Creditors which deliberated and found the applicant ineligible under section 29A; the Tribunal did not decide the substantive correctness of that ineligibility finding and left it open for any future challenge. No order as to costs.

Approval of resolution plan under Section 31 - compliance with Section 30(2) of the Code - priority payment of Insolvency Resolution Process costs over other debts - payment to operational creditors not less than liquidation value - equitable treatment of creditors and commercial wisdom of the Committee of Creditors - eligibility of the resolution applicant under Section 29A - performance security and compliance with Regulation 39 - monitoring and implementation of the approved resolution plan - obligation to obtain statutory approvals post approval - forwarding of CIRP records to the Board for recording

Approval of resolution plan under Section 31 - compliance with Section 30(2) of the Code - Whether the Resolution Plan satisfies the requirements of Section 30(2) and regulations so as to merit approval under Section 31 - HELD THAT: - The Tribunal examined the Resolution Professional's certification and the plan's clauses and found that the plan provides for payment of CIRP costs, treatment of operational creditors, management and supervision post implementation, and contains declarations of compliance. The Bench recorded that clause 10.1 and 18.2 provide for CIRP costs to be paid in priority, clause 10.2 addresses payment to operational creditors in accordance with the Board's specifications, clauses 10.3-10.5 deal with management, supervision and declarations, and the RP certified overall compliance with Section 30(2) and Regulations. Having found no contravention of law and no infirmity on screening, the Tribunal approved the Resolution Plan submitted by the successful resolution applicant. [Paras 20, 21, 22, 24, 29]

Resolution Plan complies with Section 30(2) and applicable regulations and is approved under Section 31; the Plan becomes effective from the date of this order.

Priority payment of Insolvency Resolution Process costs over other debts - payment to operational creditors not less than liquidation value - Whether the plan secures priority payment of CIRP costs and ensures operational creditors receive not less than liquidation amount - HELD THAT: - The Tribunal noted that the plan expressly provides for payment of CIRP costs in priority (clauses 10.1 and 18.2) and that clause 10.2 contemplates payment to operational creditors not less than the amount payable on liquidation under Section 53, as certified by the RP. A discrepancy in amounts stated for the Custom Department (Rs. 1 lakh in plan v. Rs. 34 lakhs asserted at hearing) was addressed by directing the resolution applicant to file an affidavit clarifying compliance; the affidavit confirmed payment of Rs. 34 lakhs to the Customs Department and clarified CIRP cost treatment. On that basis the Tribunal was satisfied the requirements of Section 30(2)(a) and (b) were met. [Paras 16, 17, 27, 28]

Plan provides for priority payment of CIRP costs and adequate payment to operational creditors; the clarified position on the Customs claim satisfies Section 30(2)(b).

Equitable treatment of creditors and commercial wisdom of the Committee of Creditors - Whether the plan discriminates unfairly between similarly situated creditors or improperly intrudes on CoC's commercial decision - HELD THAT: - The Tribunal observed that similarly situated creditors receive the same treatment under the plan and reiterated that differential treatment across classes, if compliant with the Code and Regulations, is a matter of the commercial wisdom of the requisite CoC majority. Having found equitable treatment within classes and no contravention of statutory requirements, the Tribunal accepted the CoC's unanimous approval. [Paras 18, 19]

No unfair discrimination found; the CoC's commercial decision to accept the plan is respected.

Eligibility of the resolution applicant under Section 29A - Whether the successful resolution applicant is eligible and not barred under Section 29A - HELD THAT: - The Resolution Applicant furnished a declaration and affidavit regarding eligibility, and the Resolution Professional certified in Form H that the applicant does not fall within any ineligibility category under Section 29A. The Tribunal recorded this certification and found the resolution applicant eligible to submit the plan. [Paras 23, 24]

Resolution applicant is eligible under Section 29A; no bar to approval on that ground.

Performance security and compliance with Regulation 39 - monitoring and implementation of the approved resolution plan - Whether performance security and monitoring arrangements comply with Regulations and whether directions for implementation are required - HELD THAT: - The Tribunal took note of the performance security filed (bank guarantee) as evidence of compliance with Regulation 39(4). It also noted clause 10.4 providing for a monitoring agency and granted liberty to the monitoring committee to seek further directions from the Tribunal for effective implementation. Additionally, matters beyond Tribunal jurisdiction were left to be pursued before relevant authorities by the monitoring committee. [Paras 21, 25, 30, 31]

Performance security on record and monitoring arrangements accepted; monitoring committee granted liberty to seek directions or pursue matters beyond Tribunal's jurisdiction.

Obligation to obtain statutory approvals post approval - forwarding of CIRP records to the Board for recording - Obligations arising from Section 31(4) and Section 31(3)(b) after approval of the plan - HELD THAT: - The Tribunal directed that the resolution applicant shall obtain necessary approvals under any law within one year (or the period provided by such law) as mandated by Section 31(4). The RP was directed to forward all CIRP records and the approved plan to the Board (IBBI) for recording in its database under Section 31(3)(b). The Tribunal also reminded that the plan must adhere to all applicable laws and that Section 30(2)(f) precludes a plan that contravenes existing law. [Paras 32, 33, 34]

Resolution applicant must secure statutory approvals within prescribed time; RP to forward records to IBBI; plan must comply with all applicable laws.

Final Conclusion: The Tribunal, after screening the plan, certifications and the supplementary affidavit on the Customs claim, approved the unanimously approved Resolution Plan submitted by the successful resolution applicant; the Plan is effective from the date of this order, the monitoring committee is granted liberty for implementation related directions and to pursue matters beyond the Tribunal's jurisdiction, statutory approvals must be obtained within the prescribed period, and the RP shall forward CIRP records to the Board for recording.

Duty to extend assistance and cooperation to the interim resolution professional - power of the adjudicating authority to direct non-cooperating personnel to comply with the instructions of the resolution professional - duty of the resolution professional to take immediate custody and control of all assets and business records of the corporate debtor - non-cooperation as ground for directions and consequences under the Insolvency and Bankruptcy Code - exclusion of lockdown period for computation of CIRP timelines - right of the resolution professional to seek orders for access to registered office and documents

Duty to extend assistance and cooperation to the interim resolution professional - power of the adjudicating authority to direct non-cooperating personnel to comply with the instructions of the resolution professional - Whether the Managing Director and other directors/personnel of the corporate debtor were justified in refusing access to records and cooperation with the RP on grounds of alleged harassment, age and COVID-19 related lockdown - HELD THAT: - The Tribunal examined Section 19 and concluded that personnel of the corporate debtor, its promoters or other persons associated with management are statutorily bound to extend all assistance and cooperation to the interim resolution professional as may be required by him. The explanation offered by the applicant - including assertions of harassment, age-related vulnerability and pandemic-related concerns - did not absolve him of the statutory duty or justify continued refusal to provide access to records. The Tribunal observed that practical alternatives (delegation to another director or providing keys/access) were available and that the claimed inability to operate basic virtual meetings or health-based excuses were inconsistent with surrounding facts and correspondence. The Tribunal held that the applicant's conduct amounted to intentional non-cooperation and obstruction of the CIRP, warranting exercise of the adjudicating authority's power to direct compliance. [Paras 13, 17, 18]

Application of the applicant challenging the RP's conduct is dismissed; directors and personnel must cooperate and provide access as required by the RP.

Duty of the resolution professional to take immediate custody and control of all assets and business records of the corporate debtor - right of the resolution professional to seek orders for access to registered office and documents - non-cooperation as ground for directions and consequences under the Insolvency and Bankruptcy Code - exclusion of lockdown period for computation of CIRP timelines - Whether the RP's application for directions to compel delivery of documents, custody of assets and other assistance should be allowed and what reliefs and consequences should follow non-compliance - HELD THAT: - Relying on Section 25 (duty of the resolution professional) and Section 19(2)-(3), the Tribunal recognised the RP's statutory obligation to take immediate custody and control of assets and business records and his entitlement to seek directions where personnel do not cooperate. On the facts, including persistent failure to hand over title deeds, share custody and other records despite repeated requests since initiation of CIRP, the Tribunal found the RP's grievances substantiated. The Tribunal ordered immediate production of the information and documents specified in the RP's schedule, fixed a 15-day timeline from receipt of the order for compliance, and made provision for the RP to approach the Tribunal again or to take other steps under the Code if orders are not complied with. The Tribunal also noted Regulation 40C (exclusion of lockdown period) but treated the applicant's reliance on lockdown and pandemic as insufficient to justify continued non-cooperation when alternative measures and prior opportunities to cooperate existed. [Paras 15, 16, 18]

RP's application is allowed; directors and personnel directed to hand over documents/information within 15 days and to cooperate with the RP, failing which the RP may take further steps under the Code.

Final Conclusion: The application filed by the Managing Director is dismissed with costs; the RP's application is allowed - the CMD, other directors and personnel are directed to provide the documents and information specified in the RP's schedule within 15 days, to cooperate with the RP, and the RP is at liberty to take further steps under the Code in case of non-compliance; both interlocutory applications are disposed of accordingly.

Financial debt - Default - Debenture trustee's authority to file CIRP - Pari passu agreement not amounting to novation - Concurrent suit not a bar to initiation under Section 7 - Admission under Section 7 of the IBC - Moratorium under Section 14 - Appointment of Interim Resolution Professional

Pari passu agreement not amounting to novation - The Pari passu Agreement did not novate or substitute the original Debenture Trust Deed and did not extinguish or alter the petitioner's rights under the Debenture Trust Deed. - HELD THAT: - The Tribunal examined the Pari passu Agreement and concluded that it is an arrangement for sharing security on a pari passu basis and expressly preserves the rights of individual lenders under their original agreements. Clause 3.4 reinforces that no lender taking action may seek advantage over others and that pari passu proportions are to be maintained. Consequently, the contractual arrangement did not operate to novate the original loan agreements or deprive the petitioner of statutory rights of enforcement under the Debenture Trust Deed. [Paras 16]

Pari passu Agreement does not effect novation; petitioner's rights under the Debenture Trust Deed remain intact.

Concurrent suit not a bar to initiation under Section 7 - Filing of a civil suit for recovery in a civil court does not operate as a bar to the petitioner initiating CIRP under Section 7 of the Code. - HELD THAT: - Relying on established authority and reasoning, the Tribunal held that mere pendency of a recovery suit is not ground to reject a Section 7 application. The petitioner is entitled to pursue remedies under the IBC concurrently with civil proceedings; therefore the existence of Commercial Suit (L) No. 968 of 2019 before the Bombay High Court did not preclude admission of the petition under Section 7. [Paras 19]

Pendency of a civil suit does not bar initiation or admission of CIRP under Section 7.

Debenture trustee's authority to file CIRP - Technicalities and formalities in Section 7 proceedings - The petitioner, acting as debenture trustee with a power of attorney and supported by the Central Government notification, was competent to file the Section 7 petition and procedural formalities did not defeat the petition. - HELD THAT: - The Tribunal construed Section 7 together with the Ministry of Corporate Affairs notification dated 27.02.2019 which identifies trustees (including debenture trustees) as persons who may file on behalf of financial creditors. It held that the debenture trustee, acting under the Debenture Trust Deed and a power of attorney, could enforce the debenture holder's rights. Procedural formalities such as the manner of obtaining instructions from debenture holders or the mode of delegation do not strip away the statutory right to seek CIRP when debt and default are established. The Tribunal observed that summary proceedings under the IBC are not to be defeated by civil procedural technicalities when the essential elements of debt and default are satisfied. [Paras 18, 20]

Debenture trustee was competent to file the petition; technical/formal objections were untenable.

Financial debt - Default - Admission under Section 7 of the IBC - There existed a financial debt and a default as required under the Code, and on that basis the Section 7 petition was admitted. - HELD THAT: - The Tribunal found that the Debenture Trust Deed created an enforceable obligation and the Corporate Debtor defaulted in payment as on the stated date. Applying the principle from the Supreme Court that Section 7 admission hinges on existence of debt and default (with Form 1 compliance), the Tribunal concluded both essential requirements were satisfied. Consequently the petition met the statutory threshold for admission under Section 7 and was admitted. [Paras 22, 24, 29]

Existence of financial debt and default established; petition admitted under Section 7.

Appointment of Interim Resolution Professional - Moratorium under Section 14 - An Interim Resolution Professional was appointed and the moratorium under Section 14 was declared effective from the date of the order. - HELD THAT: - The Tribunal recorded that the proposed IRP had furnished written consent and there was no material on record indicating disciplinary proceedings against him; accordingly the Tribunal appointed the proposed IRP. Upon admission of the petition, the statutory moratorium under Section 14 was directed to be operative, prohibiting institution or continuation of suits, enforcement or transfer of assets of the corporate debtor, subject to the exceptions in the Code. The IRP was also directed to make the public announcement and perform duties under Sections 15 and 18 and report progress within the stipulated time. [Paras 25, 26, 27, 28]

IRP appointed; moratorium declared effective from the date of the order and related statutory steps directed.

Final Conclusion: The petition under Section 7 was admitted: the Debenture Trust Deed and Pari passu arrangement did not extinguish the petitioner's rights, debt and default were established, the debenture trustee was competent to file the petition, the pendency of a civil suit did not bar initiation of CIRP, an Interim Resolution Professional was appointed and the moratorium under Section 14 was declared operative.

Delivery of demand notice - notice of dispute under Section 8(2) - admissibility under Section 9 of the IBC - plausible contention test (Mobilox principle) - moratorium under Section 14 - appointment of interim resolution professional

Delivery of demand notice - notice of dispute under Section 8(2) - Whether the demand notice was delivered and whether the corporate debtor replied within ten days as required by Section 8(2) of the IBC - HELD THAT: - Tribunal examined the tracking report and documents on record and held that the demand notice dated 23.07.2019 was delivered to the corporate debtor's registered office on 29.07.2019, as evidenced by the tracking report. The corporate debtor's reply dated 16.08.2019 was not supported by any material to show receipt of the notice on 10.08.2019 and therefore was held to be beyond the ten day period prescribed under Section 8(2). Consequently the alleged notice of dispute was not raised within the statutory ten day window and could not be relied upon as a valid Section 8(2) notice of dispute. [Paras 16, 17, 19]

Demand notice was delivered on 29.07.2019 and the corporate debtor's reply was not made within ten days; the notice of dispute under Section 8(2) was not validly raised within the statutory period.

Notice of dispute under Section 8(2) - plausible contention test (Mobilox principle) - Whether the post 10 day contentions and annexures relied upon by the corporate debtor constituted a genuine dispute sufficient to defeat admission under Section 9 - HELD THAT: - Applying the Mobilox principle, the Tribunal considered whether the corporate debtor's contention of excessive pricing amounted to a plausible dispute requiring further investigation. It found that the corporate debtor did not deny receipt of services and the sole grievance related to rates charged. The purported WhatsApp communications were between the corporate debtor and a third party (Hindustan Media Ventures Ltd.), not between the operational creditor and the corporate debtor, and therefore were not relevant. There was no record of any suit or arbitration pending prior to receipt of the demand notice and no contemporaneous evidence of dispute within the ten day period. The Tribunal held that the post expiry contentions were insufficient to raise a bona fide dispute for the purposes of Section 9(5)(ii)(d). [Paras 20, 21, 23]

The alleged dispute over rates was not a valid Section 8(2) notice of dispute and did not satisfy the Mobilox plausibility test to defeat admission under Section 9.

Admissibility under Section 9 of the IBC - moratorium under Section 14 - appointment of interim resolution professional - Whether the Section 9 application was complete and liable to be admitted, and consequential orders including moratorium and appointment of IRP - HELD THAT: - Having found that the invoice/demand notice was delivered, that there was no payment of the unpaid operational debt, and that no valid notice of dispute had been received within the statutory period or recorded in the information utility, the Tribunal held that the conditions of Section 9(5)(i) were met. Consequently the adjudicating authority was obliged to admit the application. The Tribunal admitted the petition, directed commencement of moratorium in terms of Section 14, and appointed the operational creditor's proposed Insolvency Resolution Professional as Interim Resolution Professional, with directions regarding fee deposit and compliance with statutory duties. [Paras 24, 25, 26, 27, 28]

Application under Section 9 was admitted; moratorium under Section 14 was imposed and the proposed IRP was appointed with directions as recorded.

Final Conclusion: The Tribunal held that the demand notice was duly delivered and the corporate debtor failed to raise a notice of dispute within ten days; the post expiry contentions and annexures did not constitute a bona fide dispute under the Mobilox test; the Section 9 application was therefore admitted, moratorium was imposed and the proposed IRP appointed.

Liquidation under Insolvency and Bankruptcy Code - Committee of Creditors' resolution to liquidate - appointment of liquidator - cessation of powers of board of directors and key managerial personnel - liquidator's authority to recover assets and institute proceedings on behalf of corporate debtor - liquidator's fees payable from proceeds of the liquidation estate - moratorium ceases on initiation of liquidation - compliance with Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016

Liquidation under Insolvency and Bankruptcy Code - Committee of Creditors' resolution to liquidate - Corporate Debtor ordered to be liquidated where no resolution plan or expression of interest was received and the Committee of Creditors resolved to liquidate with requisite majority. - HELD THAT: - The Corporate Insolvency Resolution Process for the company expired without any Resolution Plan or EOI being received. The Committee of Creditors, in its meeting dated 26.09.2019, passed a resolution with 100% voting recommending liquidation. Having considered the factual position and applicable provisions, the Adjudicating Authority found that there remained no option but to pass an order of liquidation and accordingly directed that the company be liquidated.

Order of liquidation of the Corporate Debtor is passed.

Appointment of liquidator - cessation of powers of board of directors and key managerial personnel - The Resolution Professional was appointed as Liquidator and all powers of the board, partners and KMP ceased and vested in the Liquidator. - HELD THAT: - The CoC had approved the Resolution Professional to act as Liquidator and the Applicant had given written consent. Pursuant to the CoC approval and applicable law, the Adjudicating Authority appointed the Resolution Professional as Liquidator and declared that all powers of the Board of Directors, partners and key managerial personnel of the Corporate Debtor cease to exist and henceforth vest with the Liquidator.

Resolution Professional appointed as Liquidator; powers of board/KMP cease and vest in the Liquidator.

Liquidator's authority to recover assets and institute proceedings on behalf of corporate debtor - liquidator's fees payable from proceeds of the liquidation estate - Liquidator empowered to recover trade receivables and other credits and to institute suits on behalf of the Corporate Debtor with prior approval; liquidator's fees to be charged and paid from liquidation estate proceeds as per IBBI norms. - HELD THAT: - The Tribunal directed that the Liquidator shall take necessary legal action to recover receivables, loans and advances reflected in the latest balance sheet, exercising jurisdiction under the Code. The Liquidator is permitted to institute suits or other legal proceedings on behalf of the Corporate Debtor subject to prior approval of the Adjudicating Authority. Further, the Liquidator will charge fees in proportion to the value of the liquidation estate as specified by the IBBI and such fees shall be paid from the proceeds of the liquidation estate under the statutory scheme.

Liquidator authorised to recover assets and to initiate proceedings with prior approval; liquidator's fees to be paid from the liquidation estate in accordance with IBBI.

Moratorium ceases on initiation of liquidation - The moratorium previously declared during CIRP ceases upon initiation of liquidation. - HELD THAT: - The order records that the moratorium declared by the earlier admission order ceases to exist once liquidation is initiated, subject to the statutory framework governing the liquidation process.

Moratorium ceases with commencement of liquidation.

Compliance with Insolvency and Bankruptcy Board of India (Liquidation Process) Regulations, 2016 - Liquidation process shall be initiated and completed by the Liquidator in accordance with Chapter III of the Code and the IBBI (Liquidation Process) Regulations, 2016, with registry and administrative directions to publish and communicate the order. - HELD THAT: - The Tribunal directed the Liquidator to follow the statutory liquidation process as specified in the Code and the IBBI Regulations, 2016. Administrative directions were given for uploading the order on the official website within two working days and for sending authenticated copies to relevant stakeholders by speed post within one week to facilitate the liquidation process.

Liquidation to proceed in accordance with the Code and IBBI Regulations; registry to upload and circulate the order as directed.

Final Conclusion: The application for liquidation is allowed; the Corporate Debtor is ordered to be liquidated, the Resolution Professional is appointed as Liquidator with specified powers and duties, the moratorium ceases, and the Liquidator shall conduct the liquidation in accordance with the Code and IBBI Regulations with the registry directed to publish and circulate the order.

Duty to assist during Corporate Insolvency Resolution Process - directions to cooperate with Interim Resolution Professional - violation of moratorium under section 14 of the Code - completion of transaction audit - inspection by valuer and requirement of police protection - refund of unauthorised withdrawals and contempt remedy - extension of time for filing reply due to lockdown

Duty to assist during Corporate Insolvency Resolution Process - directions to cooperate with Interim Resolution Professional - Directors and persons associated with the management of the corporate debtor must cooperate with the IRP to enable timely completion of the CIRP. - HELD THAT: - The Tribunal found that the suspended board and senior executives were not extending cooperation required under the Code and that such non-cooperation was unduly hampering the IRP's statutory duties and the time-bound CIRP. Having considered the RP's complaints, the pendency of other proceedings and the effects of the lockdown, the Tribunal concluded that directions compelling cooperation were warranted to ensure orderly conduct of the CIRP.

Directors of the suspended board are directed to cooperate with the IRP and provide all assistance to complete the CIRP in time.

Completion of transaction audit - directions to auditors - The transaction audit must be completed promptly despite lockdown-related difficulties. - HELD THAT: - The Tribunal noted the auditors' inability to complete the transaction audit and the IRP's need for audit completion to progress CIRP. Balancing the public-health restrictions and the IRP's mandate, the Tribunal directed the auditors to complete the transaction audit expeditiously, specifying a timeline for completion from receipt of the order.

Auditors are directed to complete the transaction audit immediately, preferably within two weeks from receipt of the order by email; RP to serve the auditors with the order.

Violation of moratorium under section 14 of the Code - refund of unauthorised withdrawals and contempt remedy - Amounts withdrawn from the corporate debtor's bank accounts during CIRP without the IRP's knowledge/permission are to be refunded unless proven to have been paid to suppliers, and failure to comply may invite contempt proceedings. - HELD THAT: - The Tribunal observed allegations of withdrawals during the moratorium period and noted the respondents' incomplete explanation and lack of documentary proof that withdrawals were for discharge of debts to suppliers. The Tribunal held that withdrawals during CIRP without IRP's permission contravene the moratorium regime and directed restitution subject to RP's satisfaction on proof of bona fide payment; non-compliance was made actionable by contempt remedy.

Directors are directed to refund the withdrawn amounts, less any payments to suppliers substantiated to the satisfaction of the RP, within two weeks, failing which the IRP may move for contempt.

Inspection by valuer and requirement of police protection - facilitation of asset valuation - Valuers must be enabled to inspect the Hosur plant for asset valuation and the local police are to provide necessary protection to facilitate such inspection. - HELD THAT: - The Tribunal accepted that plant inspection is essential for valuation under the Regulations and that prior strike-related suspension raised safety concerns. To remove impediments to valuation, the Tribunal directed the Superintendent of Police to instruct the local SHO to provide police protection so that the valuer and RP can inspect the plant site.

SP of the relevant jurisdiction to issue directions to the SHO to provide necessary police protection for inspection of the Hosur plant by the valuer/RP.

Extension of time for filing reply due to lockdown - Respondents are permitted to file a reply affidavit within a specified timeframe cognisant of the lockdown. - HELD THAT: - Recognising the constraints imposed by the lockdown and the respondents' request for time to file a detailed reply, the Tribunal allowed a limited extension for submission of written replies, subject to the timeline tied to lifting of lockdown in the Tribunal or a fixed period, while ensuring the CIRP is not unduly delayed.

Respondents allowed to submit reply affidavit within two weeks or within one week of the date of lifting the lockdown in the Tribunal, on service of advance copy to the RP.

Final Conclusion: The Tribunal directed the suspended board to cooperate with the IRP, ordered immediate completion of the transaction audit, required refund of unauthorised withdrawals subject to RP's satisfaction (with contempt remedy for non-compliance), instructed local police to facilitate valuer inspection of the Hosur plant, and allowed the respondents time-limited leave to file reply affidavits; the IA is posted before the regular bench after lifting of the lockdown.

Limitation under Article 137 of the Limitation Act - Application under Section 9 of the Insolvency and Bankruptcy Code by an operational creditor - Decree as evidence but not a standalone basis for a Section 9 application - Notice of dispute under Section 8(2) and its effect under Mobilox - Rejection of Section 9 application under Section 9(5)(2)(d)

Limitation under Article 137 of the Limitation Act - Application under Section 9 of the Insolvency and Bankruptcy Code by an operational creditor - Whether the Section 9 application was barred by limitation. - HELD THAT: - The Tribunal applied the Supreme Court's reasoning in B.K. Educational Services to hold that Article 137 of the Limitation Act governs applications under Sections 7 and 9 of the Code. The petition rests on defaults and transactions dating back to 1998-2002 and the recovery suit filed on 12.08.2002; hence the cause of action arose well over three years before the Section 9 filing. The operational creditor's reliance on Article 136 (limitation for execution of decrees) was rejected as inapplicable to the present Section 9 proceedings. The asserted subsequent acts - including issuance of a cheque in June 2018 for a part amount - were held to be conditional (offered as full and final settlement of a much smaller amount) and therefore did not operate as an acknowledgment that would avail a fresh limitation period; in any event, such payment, if treated as acknowledgment, would still lie beyond three years from the date the debt became due. For these reasons the Tribunal found the application time barred under Article 137. [Paras 18, 19, 20, 21, 22]

The Section 9 application is barred by limitation and is rejected on this ground.

Notice of dispute under Section 8(2) and its effect under Mobilox - Rejection of Section 9 application under Section 9(5)(2)(d) - Whether a bona fide dispute existed such that the Section 9 application must be rejected under Section 9(5)(2)(d). - HELD THAT: - Applying the test in Mobilox, the Tribunal examined the reply to the demand notice (dated 26.06.2018) and contemporaneous correspondence from 2001. HIM Teknoforge had, as early as 2001, denied the claimed amounts, raised quality and quantity disputes, and issued debit notes; replies to legal notices of 2001 were on record and their receipt was not disputed. The Tribunal found these contentions to be plausible and supported by documentary contemporaneous correspondence (including replies dated 9.8.2001 and 03.09.2001), and not merely feeble or an afterthought. Consequently, a real dispute existed in fact such that the adjudicating authority must reject the Section 9 application without undertaking a merits trial. [Paras 24, 25, 29, 30, 31]

Alternatively, the Section 9 application is rejected because a genuine dispute existed and notice of dispute had been received by the operational creditor.

Decree as evidence but not a standalone basis for a Section 9 application - Application under Section 9 of the Insolvency and Bankruptcy Code by an operational creditor - Whether the decree in the name of the predecessor company (Indian Seamless Steels & Alloys Ltd.) precluded the Section 9 application by ISMT Limited or required rectification before proceedings could continue. - HELD THAT: - The Tribunal observed that while a decree may be evidence of non payment, Section 9 of the Code must be founded on the operational creditor's entitlement under Sections 5(20) and 5(21) (claim in respect of supply of goods or services). A decree alone cannot automatically satisfy the statutory conditions for a Section 9 application. Consequently, whether the decree needed to be in the amended name of ISMT was not determinative of the Code based inquiry; the validation of substantive rights following change of name did not obviate the requirement that the Section 9 application comply with the Code's conditions. The Tribunal therefore treated the name/decree rectification issue as not relevant to the disposal of the Section 9 petition. [Paras 7, 9, 16]

The question of the decree being in the amended name was held not material to the maintainability of the Section 9 petition and does not cure the statutory deficiencies identified.

Final Conclusion: The petition under Section 9 is dismissed: it is barred by limitation under Article 137 of the Limitation Act, and alternatively is rejected because a pre existing, plausible dispute was shown to exist (notice of dispute), so the application fails under Section 9(5)(2)(d).

Operational debt - Debt - Vesting period - Presence condition - Performance condition - Demand notice to key managerial personnel - Summary proceedings under IBC - Default - Corporate insolvency initiation

Operational debt - Debt - Performance Shares fall within the definitions of 'debt' and 'operational debt' under the IBC for purposes of section 9 proceedings. - HELD THAT: - The Tribunal held that the IBC is a self-contained code and its definitions govern proceedings thereunder. A claim in respect of Performance Shares granted to employees by virtue of employment qualifies as a 'claim' and hence within the scope of 'debt' and 'operational debt' as defined under the Code. This legal characterization was accepted even though the grant was subject to conditions under the Performance Share Plan. [Paras 9]

Performance Shares are capable of constituting a 'debt' and an 'operational debt' under the Code.

Demand notice to key managerial personnel - Summary proceedings under IBC - The Demand Notice served on the President, CEO and Head of HR of the Corporate Debtor was valid and service on such key managerial personnel satisfies the requirements for a Demand Notice under the Code. - HELD THAT: - The Tribunal observed that Rule 5 and section 8(2) permit service of the Demand Notice on whole-time directors or key managerial personnel. The persons served were held to be key managerial personnel of the company and the notice served at the company's official address was therefore valid. The Tribunal also emphasised that section 9 proceedings are summary in nature and do not permit detailed inquiry into disputed facts at the admission stage. [Paras 9]

The Demand Notice was validly issued and served.

Vesting period - Presence condition - Performance condition - The petitioner failed to satisfy the vesting 'presence' (and thus the overall vesting) conditions of the Performance Share Plan and accordingly had no right to the final grant of the Performance Shares at the relevant delivery dates. - HELD THAT: - On the record and on a plain reading of Clauses III and IV of the Performance Share Plan, vesting occurs only on the Final Delivery Date after completion of the vesting period and satisfaction of performance and presence conditions. The petitioner resigned and ceased to hold employee functions with the Essilor Group prior to the Final Delivery Dates for the grants in 2015, 2016 and 2017 (the vesting anniversaries in 2019, 2020, 2021 respectively). Clause IV provides forfeiture of rights on cessation of employment except for retirement exceptions, which did not apply because the petitioner did not retire in the normal course but left prior to the extended retirement date. The Tribunal found that the petitioner continued in service after the 2016 extension of retirement age and could not credibly claim ignorance of that notice; no materials established that the extension was inapplicable to him. Consequently, the presence condition was not met and the claimed rights were forfeited as of cessation of employment (31.12.2018). The Tribunal also noted that several factual/contention issues raised by the petitioner (e.g., circumstances of resignation, alleged coercion, scope of the full and final settlement) required fuller investigation which is not permissible in summary section 9 proceedings. [Paras 12, 13, 14, 15, 16]

Petitioner was ineligible for the Performance Shares because the vesting 'presence' condition was not fulfilled and rights were forfeited on cessation of employment.

Default - Corporate insolvency initiation - There was no default by the Corporate Debtor and no case to initiate CIRP; the Corporate Debtor's insolvency was not established. - HELD THAT: - Because the petitioner lacked entitlement to the Performance Shares (forfeiture under the Plan), there was no debt or default as required under the Code. Separately, the Tribunal observed from the Corporate Debtor's annual filings and financial particulars on record that the company was not shown to be insolvent or to have lost its substratum. The IBC cannot be used merely as a recovery mechanism and initiation of CIRP requires clear, undisputed debt and default together with insolvency; those prerequisites were absent. [Paras 17, 18]

No debt or default was established and initiation of Corporate Insolvency Resolution Process was not warranted.

Summary proceedings under IBC - Minor delay in the Corporate Debtor's reply to the Demand Notice was not material where a substantive dispute had been raised. - HELD THAT: - The Tribunal distinguished Mobilox (where no reply was received) from the present case in which the Corporate Debtor replied within a short period raising a substantive dispute over eligibility. The reply was not an illusory dispute and therefore the two-day delay in responding to the Demand Notice did not preclude treating the reply as a valid dispute in these summary proceedings. [Paras 9]

The brief delay in replying to the Demand Notice did not preclude the Corporate Debtor's substantive dispute being considered.

Final Conclusion: The petition under section 9 was dismissed: while Performance Shares may fall within 'debt' and 'operational debt' generally and the Demand Notice was valid, the petitioner was ineligible for the final grant of the Performance Shares because the vesting 'presence' condition was not met and no default or insolvency was shown; CP(IB) No.317/BB/2019 is dismissed with no costs, without prejudice to the petitioner's rights in other fora.

Exclusion of time from the CIRP period - restoration of admission order - appointment of Interim Resolution Professional - commencement of CIRP afresh - circumstances justifying exclusion of CIRP time - public announcement requirement under the Insolvency and Bankruptcy Code

Appointment of Interim Resolution Professional - restoration of admission order - commencement of CIRP afresh - Appointment of a new Interim Resolution Professional and direction to commence the Corporate Insolvency Resolution Process afresh following restoration of the admission order. - HELD THAT: - The Tribunal recorded that the admission order dated 22.08.2017 was restored by the Hon'ble Supreme Court and that the earlier IRP had communicated his inability to continue. Relying on the procedural framework and the recommendation of the Insolvency and Bankruptcy Board of India, the Tribunal appointed Mr. P V B Sudhakararao as Interim Resolution Professional and directed him to file consent in Form-2 within two days. The Tribunal held that, in view of the restoration of the admission order, the CIRP must start afresh from the date specified by the Tribunal so that the IRP can undertake the statutory functions under the Code without impediment. [Paras 9, 11, 12]

Mr. P V B Sudhakararao is appointed as Interim Resolution Professional and the CIRP is directed to commence afresh from 25.02.2020.

Exclusion of time from the CIRP period - circumstances justifying exclusion of CIRP time - public announcement requirement under the Insolvency and Bankruptcy Code - Exclusion of the intervening period lost in appellate and related proceedings from the CIRP timeline and consequential directions for public announcement and continuation of prior procedural directions. - HELD THAT: - The Tribunal referred to the NCLAT jurisprudence enumerating categories in which time may be excluded from the CIRP (including stays, absence of a functioning RP, interval between admission and RP taking charge, setting aside and subsequent restoration of CIRP, and other justified circumstances). Applying those principles, the Tribunal concluded that more than two years were lost due to appellate orders and related legal hurdles, and that such period should not be counted for the purpose of the CIRP. The Tribunal therefore ordered that the CIRP shall start afresh from 25.02.2020, directed immediate public announcement of initiation as prescribed under the Code, and stated that para 11(2) of its earlier order dated 22.08.2017 shall apply to the present order as well, so that the IRP may carry out the functions mandated by the Code without disadvantage from the intervening period. [Paras 10, 11, 12]

The period between 22.08.2017 and the appointment of the new IRP is excluded from the CIRP timeline; public announcement to be made immediately and prior procedural directions (para 11(2) of the order dated 22.08.2017) shall apply.

Final Conclusion: The Tribunal restored the CIRP by appointing an Interim Resolution Professional and ordered the process to commence afresh from 25.02.2020, excluded the intervening period lost in litigation from the CIRP timeline, directed immediate public announcement as required under the Code, and applied earlier procedural directions to enable the IRP to proceed.

Debt and default - solvency of the corporate debtor - misuse of the Code and Section 65 - admission under Section 7 - Form 1 compliance and evidence of default - appointment of Interim Resolution Professional - moratorium under the Code

Debt and default - solvency of the corporate debtor - The financial creditor's claim of debt and occurrence of default by the corporate debtor is established and the corporate debtor is not shown to be solvent so as to defeat the petition. - HELD THAT: - The Tribunal found that the loans were sanctioned and the relevant loan agreements, guarantees and Memorandum of Deposit of Title Deeds existed. The respondent's contentions that payments had been made and that the company remained solvent were examined against the records. The Tribunal observed that partial payments and a settlement proposal did not negate the existence of debt or default, and financial statements placed on record showed deterioration in the company's financial position (increase in short term borrowings and other current liabilities and a transition from profit to loss), undermining the respondent's plea of solvency. Accordingly, the contentions that no default occurred or that the company was solvent were rejected and the debt/default stood established for the purposes of Section 7. [Paras 10, 11]

Debt and default established; respondent's plea of solvency rejected.

Form 1 compliance and evidence of default - admission under Section 7 - appointment of Interim Resolution Professional - moratorium under the Code - misuse of the Code and Section 65 - The petition under Section 7 was filed in accordance with law, defects (if any) were not such as to bar admission, the proposed IRP was fit and consented, the petition was admitted, IRP appointed and moratorium declared; the allegation of misuse under Section 65 was not sustained. - HELD THAT: - Applying the principles in Innoventive Industries, the Tribunal considered whether a default had occurred and whether the application complied with the procedural requirements. It noted the existence of requisite loan documentation, the auditor reported default, and the petitioner's adherence to prescribed procedure including proposing a qualified insolvency professional who filed Form 2 consent. The Tribunal rejected the respondent's argument that technical defects, partial payments or a pending settlement offer precluded admission. The contention that the petitioner was abusing the Code and that Section 65 proceedings should follow was considered but not accepted as a ground to dismiss the petition. Exercising powers under Section 7(5)(a) and related provisions, the Tribunal admitted the petition, appointed the suggested IRP and declared the statutory moratorium; fees for the IRP were fixed and the directors/staff were directed to cooperate. [Paras 9, 14, 15]

Petition admitted under Section 7; IRP appointed; moratorium imposed; misuse allegation not upheld.

Final Conclusion: The Company Petition under Section 7 is admitted: the Tribunal found debt and default proved, held the application compliant and fit for admission, appointed the nominated Interim Resolution Professional, and declared the moratorium, directing cooperation from the corporate debtor and progress reporting by the IRP.

Condonation of delay - compliance with court directions - application under Section 31 or 33 of the Code - extension of CIRP timelines in exceptional cases - failure of a CoC member to vote and its consequences - affidavit of explanation for delay and potential exemplary costs

Condonation of delay - application under Section 31 or 33 of the Code - Whether condonation of delay should be granted for non-compliance with the earlier order directing filing of an application under Section 31 or 33. - HELD THAT: - The Court noted that the resolution professional had not filed the application under Section 31 or Section 33 despite the earlier direction dated 31.10.2019 and that, as a consequence, the question of condoning delay in complying with that order did not arise. Having found no compliance with the operative direction, the application for condonation of delay seeking relief for failure to act within the mandated period was dismissed. [Paras 6]

CA No.1078/2019 is dismissed; condonation of delay is not granted because the resolution professional failed to file the application under Section 31 or 33.

Failure of a CoC member to vote and its consequences - extension of CIRP timelines in exceptional cases - affidavit of explanation for delay and potential exemplary costs - What directions should be given where a CoC meeting failed to produce the requisite vote because a major member abstained and the resolution professional seeks further time and another meeting. - HELD THAT: - The Tribunal recorded that the resolution plan did not receive the requisite 66% approval because a major CoC member (State Bank of India) abstained from voting. While recognising that timelines under the Code can be extended in exceptional circumstances, the Tribunal observed that where a CoC member failed to act despite specific directions and an opportunity to consider the plan, the member must explain its conduct. Accordingly the resolution professional was directed to serve notice on the abstaining member and to file affidavit of service. The abstaining member (SBI) was directed to file an affidavit explaining the day-to-day delay from the last CoC meeting and to explain why exemplary costs should not be imposed for its conduct. The matter was listed for further hearing. [Paras 8, 10, 11, 12, 13]

Resolution professional to serve notice on State Bank of India and file affidavit of service; State Bank of India to file an affidavit explaining the delay and why exemplary costs should not be imposed; matter listed on 06.03.2020.

Compliance with court directions - Miscellaneous procedural filings and appearances recorded and taken on record. - HELD THAT: - The Tribunal recorded the filing of an additional affidavit in CA No.375/2018 and took it on record. For CA No.572/2018 replies filed by respondents were taken on record, personal presence of respondents was exempted until further orders, and rejoinders were permitted within a stipulated time. Procedural listings were ordered as requested. [Paras 1, 2, 3, 4]

Additional affidavit in CA No.375/2018 taken on record; procedural filings in CA No.572/2018 taken on record with directions on rejoinder and listing; matters listed as directed.

Final Conclusion: The Tribunal dismissed the condonation application for non-compliance with its prior direction to file an application under Section 31 or 33; directed procedural steps requiring the resolution professional to serve notice on the abstaining CoC member and for that member to file an explanatory affidavit addressing the delay and the question of exemplary costs; and recorded and ordered various procedural filings and listings as set out in the order.

Moratorium under Section 14(1)(a) of the Insolvency and Bankruptcy Code, 2016 - overriding effect of Section 238 of the Insolvency and Bankruptcy Code, 2016 - invalidity of proceedings initiated after commencement of moratorium - nullity of orders contrary to the moratorium and Section 238 - binding precedential effect of the Supreme Court's ratio (Articles 141 and 144 of the Constitution)

Moratorium under Section 14(1)(a) of the Insolvency and Bankruptcy Code, 2016 - overriding effect of Section 238 of the Insolvency and Bankruptcy Code, 2016 - nullity of orders contrary to the moratorium and Section 238 - binding precedential effect of the Supreme Court's ratio (Articles 141 and 144 of the Constitution) - Validity of the Presiding Officer's order under the Payment of Wages Act, 1936 directing payment by the Corporate Debtor after commencement of CIRP and imposition of moratorium. - HELD THAT: - The Tribunal found that the Presiding Officer had passed a payment order after recording that the Corporate Debtor was undergoing Corporate Insolvency Resolution Process and after a Resolution Professional had been appointed. The Presiding Officer failed to give effect to the moratorium imposed by Section 14 and to the overriding effect of Section 238 of the IBC, 2016. Relying on the Supreme Court's decision in Alchemist Asset Reconstruction Company Ltd. v. Hotel Gaudavan Pvt. Ltd., the Tribunal applied the principle that once an insolvency petition is admitted the moratorium under Section 14(1)(a) interdicts institution or continuation of proceedings against the corporate debtor, and that proceedings initiated or continued in contravention of the moratorium are non-est in law. The Tribunal held that an order passed contrary to these provisions is void ab initio and cannot stand. The Tribunal therefore declared the Payment of Wages Act order of 08.11.2019 to be null and invalid and directed that a copy of this order be served on the Presiding Officer.

The order passed by the Presiding Officer under the Payment of Wages Act, 1936 dated 08.11.2019 is void ab initio and is invalidated; IA No. 50/JPR/2020 is allowed; Registry to serve a copy on the Presiding Officer and the RP to report developments.

Final Conclusion: The Tribunal set aside and declared void the payment order issued post-commencement of CIRP as being inconsistent with the moratorium under Section 14 and the overriding effect of Section 238 of the IBC, 2016, in line with the binding Supreme Court ratio; the interlocutory application is allowed and administrative directions were given to inform and report further developments.

Eligibility under SVLDR Scheme - quantified duty - enquiry or investigation or audit - voluntary disclosure - designated committee consideration and hearing - reopening within one year for false particulars - liberal approach in entertaining SVLDR declarations

Eligibility under SVLDR Scheme - quantified duty - enquiry or investigation or audit - voluntary disclosure - Whether the petitioner was eligible to make declarations under the SVLDR Scheme despite the existence of an investigation. - HELD THAT: - The Court held that an investigation or enquiry does not ipso facto render a declarant ineligible where the amount of duty for the matters declared has been "quantified" before 30.6.2019. The statutory and scheme definitions of "quantified" include a written communication of duty demand as well as duty liability admitted by the person during enquiry, investigation or audit. The petitioner had filed returns and admitted the tax liability for the periods APR-SEP 2016, OCT 2016-MAR 2017 and APR-JUNE 2017 (revised by Ext.P3A) prior to the initiation of verification on 07.09.2017. Those admitted amounts therefore qualify as the quantified amount for testing eligibility under section 125 and the SVLDR circular. Consequently, the prior or concurrent investigation pertaining to earlier periods did not render the petitioner ineligible to declare the specified arrears under the Scheme. [Paras 16]

The petitioner was eligible to make declarations under the SVLDR Scheme in respect of the specified periods because the amounts admitted in Exts.P1-P3A constitute the quantified duty for the purpose of eligibility.

Designated committee consideration and hearing - liberal approach in entertaining SVLDR declarations - reopening within one year for false particulars - Whether the declarations filed by the petitioner should be considered and what further procedure should follow. - HELD THAT: - Having found the petitioner eligible, the Court set aside the Joint Commissioner's rejection (Ext.P18) and directed that the declarations (Exts.P15-P17) be placed before the Designated Committee. The Committee must decide the applications after affording the petitioner an opportunity of hearing. The Court emphasised the Scheme's object of unloading legacy disputes and the provision for reopening a discharged declaration within one year if any material particular is found false; the respondents retain that limited right. The Court also noted the Scheme and circular envisage a liberal approach in entertaining voluntary declarations, subject to safeguards for revenue. [Paras 19]

Ext.P18 is set aside; the declarations shall be placed before the Designated Committee which shall decide them after giving the petitioner an opportunity of hearing, subject to the Scheme's power to reopen within one year for false particulars.

Final Conclusion: Ext.P18 rejecting the petitioner's SVLDR declarations is set aside. The declarations (Exts.P15-P17) shall be placed before the Designated Committee for consideration and decision after hearing the petitioner; any Discharge Certificate issued may be reopened within one year if material particulars are subsequently found to be false.

Disallowance of input tax credit under Section 9(2)(g) of the Delhi Value Added Tax Act, 2004 - validity of default assessment notices for tax periods 1st and 2nd quarters 2015-2016 - setting aside administrative order and remand for fresh consideration - liberty to pass a fresh order after hearing in a time-bound manner - limitation defence raised against assessment

Disallowance of input tax credit under Section 9(2)(g) of the Delhi Value Added Tax Act, 2004 - setting aside administrative order and remand for fresh consideration - liberty to pass a fresh order after hearing in a time-bound manner - Impugned OHA order dated 25th June, 2020 disallowing the petitioner's claim for input tax credit set aside and matter remanded to OHA for fresh decision. - HELD THAT: - The State informed the Court that, after instructions and consultation with the Zonal In charge, it wished to withdraw the impugned OHA order and permitted the OHA to pass a fresh order after hearing the petitioner. In view of the existence of other contrary orders on identical facts and the respondents' concession to seek fresh consideration, the Court set aside the impugned order and remanded the matter to the OHA for fresh adjudication. The OHA has been directed to decide the matter within twelve weeks and to do so in accordance with law after hearing the petitioner. The Court left all rights and contentions of the parties open for adjudication by the OHA.

Impugned OHA order set aside; matter remanded to OHA to decide afresh within twelve weeks with liberty to pass a fresh order after hearing the petitioner.

Validity of default assessment notices for tax periods 1st and 2nd quarters 2015-2016 - limitation defence raised against assessment - Limitation objection to the assessments noted but not adjudicated; rights preserved for fresh consideration by the OHA. - HELD THAT: - The petitioner asserted that the assessments were barred by limitation. The Court did not rule on the merits of the limitation defence. Instead, by remanding the matter for fresh decision, the Court expressly left all rights and contentions open, thereby requiring the OHA to consider the limitation plea when it re-adjudicates the claims and the default notices in accordance with law.

Limitation contention left open for determination by the OHA on remand.

Final Conclusion: The impugned OHA order dated 25th June, 2020 is set aside and the matter remanded to the OHA for fresh adjudication in accordance with law after hearing the petitioner; the OHA is directed to decide the matter within twelve weeks and all rights and contentions, including the limitation defence, are left open.

Conviction under Section 21(c) of the NDPS Act - chain of custody - compliance with Section 50 of the NDPS Act - mitigating circumstances in sentencing - reduction of sentence to period already undergone - modification of default imprisonment for non-payment of fine - destruction and disposal of seized contraband and vehicle

Conviction under Section 21(c) of the NDPS Act - chain of custody - The conviction of the appellant for an offence punishable under Section 21(c) of the NDPS Act was upheld on the evidence led by the prosecution. - HELD THAT: - The prosecution established recovery of contraband from the truck, testing of samples which confirmed the presence of Diacetylmorphine (Heroin) with specified purity, and the chain of custody for the samples. Witness testimony of investigating officers and the Chemical Examiner was accepted and the possibility of tampering was ruled out. The appellant's initial explanations and searches at his residence did not undermine the prosecution case. The Court found no merit in the appellant's challenges to the proof of recovery and admissibility of the samples. [Paras 8, 12, 13]

Conviction under Section 21(c) of the NDPS Act is maintained.

Compliance with Section 50 of the NDPS Act - The contention that the requirements of Section 50 of the NDPS Act were not complied with was rejected. - HELD THAT: - The record shows that the accused persons were informed of the secret information, served with notices under Section 50 and their right to be searched before a Gazetted Officer or Magistrate was explained; searches were conducted in the presence of a Gazetted Officer. The argument alleging non-compliance did not succeed and, insofar as pre-charge evidence/cross-examination was pressed, that contention was conceded not to survive in view of relevant precedent. [Paras 4, 15]

Non-compliance with Section 50 was not established and this challenge to conviction fails.

Mitigating circumstances in sentencing - reduction of sentence to period already undergone - modification of default imprisonment for non-payment of fine - The sentence awarded by the trial court was modified having regard to mitigating circumstances, the appellant's antecedents and the period already undergone in custody. - HELD THAT: - Although the conviction was upheld, the Court considered mitigating factors including that the appellant was the sole male earning member of his family, was of middle age at the relevant time, had no criminal antecedents and had undergone more than ten years and six months of imprisonment with satisfactory jail conduct. The Court noted precedent where sentences were reduced in comparable circumstances and exercised its discretionary power to mitigate the sentence. Accordingly, the substantive term of rigorous imprisonment of twelve years was reduced to the term already served; the fine as imposed was retained but the default period of simple imprisonment in lieu of non-payment was reduced from one year to three months. [Paras 16, 18, 20]

Sentence modified: main term reduced to period already served; fine maintained; default simple imprisonment reduced to three months.

Destruction and disposal of seized contraband and vehicle - The seized contraband and the motor vehicle are permitted to be destroyed and disposed of in accordance with law now that conviction has been upheld. - HELD THAT: - Having upheld the conviction, the Court held there was no requirement to continue preservation of the case property in terms of the trial court's order. The respondent was permitted to destroy the recovered contraband and to dispose of the seized truck in accordance with law. [Paras 22]

Seized contraband may be destroyed and the seized vehicle may be disposed of in accordance with law.

Final Conclusion: The appellant's conviction under Section 21(c) of the NDPS Act is affirmed. The sentence of twelve years RI is modified to the period already served; the fine of Rs.1,00,000/- is confirmed and the default imprisonment reduced to three months. Seized contraband may be destroyed and the vehicle disposed of in accordance with law. The appeal is otherwise dismissed.

Invocation of Section 427 Cr.P.C. by exercise of inherent jurisdiction under Section 482 Cr.P.C. - concurrent sentences under Section 427 Cr.P.C. - single transaction rule for concurrent sentences - judicial discretion in sentencing

Invocation of Section 427 Cr.P.C. by exercise of inherent jurisdiction under Section 482 Cr.P.C. - Whether a separate proceeding under Section 482 Cr.P.C. is maintainable to invoke the discretion under Section 427 Cr.P.C. - HELD THAT: - The Court considered the conflict in precedents and observed that earlier two-Judge authority (M.R. Kudva) disapproved such separate proceedings but subsequent and larger Bench decisions (Madan Lal and V.K. Bansal) have proceeded upon and upheld High Court orders made under Section 482 Cr.P.C. invoking Section 427 Cr.P.C. Having regard to the later and larger Bench rulings, the Court concluded that a separate petition under Section 482 Cr.P.C. seeking application of Section 427 Cr.P.C. is maintainable and may be entertained by the High Court for exercise of its inherent jurisdiction to secure ends of justice. [Paras 24]

A proceeding under Section 482 Cr.P.C. is maintainable for invoking the discretionary power under Section 427 Cr.P.C.

Concurrent sentences under Section 427 Cr.P.C. - single transaction rule for concurrent sentences - judicial discretion in sentencing - Whether the petitioner was entitled to have the sentences in the three convictions ordered to run concurrently under Section 427 Cr.P.C. - HELD THAT: - Applying the principles that concurrent sentences are appropriate where offences arise from a single transaction, the Court acknowledged that the three cheque-dishonour convictions might fall within the single-transaction concept relied upon by the petitioner. However, sentencing is discretionary and must balance competing interests, including compensation to the victim. The Court noted that the petitioner, despite orders directing payment of compensation and fines, had not paid any part of the compensation to the complainant (an elderly person). In these circumstances the Court held that exercise of discretion in favour of concurrent sentences was not warranted and the Trial Court and revisional court rightly refused the prayer for concurrency. [Paras 31]

The prayer for directing the sentences in the three convictions to run concurrently was refused; the courts below were rightly affirmed in declining to grant concurrent sentences.

Final Conclusion: The High Court held that a petition under Section 482 Cr.P.C. is maintainable to seek application of Section 427 Cr.P.C., but on the facts - including non-payment of ordered compensation - the exercise of discretion to direct concurrent sentences was declined; all three petitions were dismissed.

Power under Section 311 CrPC - Essentiality of witness and documents - Discretionary power to secure a just decision / ends of justice - Exercise of discretion must not be arbitrary - Right to fair trial of accused

Power under Section 311 CrPC - Essentiality of witness and documents - Exercise of discretion must not be arbitrary - Right to fair trial of accused - Whether the trial Court was justified in rejecting the petitioner's application under Section 311 CrPC for summoning a bank employee and bank documents in defence. - HELD THAT: - The Court applied the guiding principles laid down by the Supreme Court in Rajaram Prasad Yadav regarding the scope and exercise of power under Section 311 CrPC, including that the power is wide but must be exercised judiciously to secure a just decision and not arbitrarily. The petitioner failed to specify the purpose for which the bank employee was to be summoned, failed to identify which bank documents were sought, and did not demonstrate the essentiality of the proposed witness or documents to his defence. Given the absence of reasonable cause and lack of particularity as to the relevance and necessity of the evidence sought, the trial Court was entitled to conclude that the requirements for exercise of its Section 311 power were not satisfied. The rejection of the application therefore did not amount to denial of a fair trial, as the discretionary power to summon was properly declined for want of material showing essentiality and relevance. [Paras 9, 10]

Application under Section 311 CrPC to summon the respondent-bank's employee and bank documents was rightly rejected for want of particularity and failure to establish essentiality; petition dismissed.

Final Conclusion: The petition under Section 482 CrPC is dismissed; the trial Court's order rejecting the application under Section 311 CrPC is upheld for lack of demonstrated necessity and essentiality of the proposed witness and documents.

Quashing of criminal proceedings under Section 482 Cr.P.C. - Summoning order and prima facie case - Scope of judicial review at the summoning stage - Categories justifying quashing under inherent powers - Compounding of offence under the Negotiable Instruments law - Stay on coercive measures pending settlement/compounding

Summoning order and prima facie case - Scope of judicial review at the summoning stage - Quashing of criminal proceedings under Section 482 Cr.P.C. - Categories justifying quashing under inherent powers - Whether the summoning order and the criminal proceedings should be quashed under Section 482 Cr.P.C. - HELD THAT: - The High Court held that the contentions raised by the applicant principally involved disputed questions of fact and issues as to testimonial worth and credibility of prosecution material which are unsuitable for determination at the pre-trial/summoning stage. The court reiterated the settled law that at the stage of summoning only a prima facie satisfaction about the existence of sufficient ground to proceed is required and that courts must refrain from embarking on a roving inquiry or prejudging the question of conviction. Recognising the illustrative categories in which quashing may be appropriate, the court found that the case on record did not fall within those categories (such as allegations not constituting an offence, absurd or impossible allegations, legal bar, or mala fide prosecution) and therefore there was no justification to quash the complaint, the summoning order or the proceedings. The prayer for quashing was accordingly refused and no abuse of process was found. [Paras 3, 4, 6, 8, 9]

Prayer to quash the summoning order and proceedings refused; prima facie case found and matter left to trial.

Compounding of offence under the Negotiable Instruments law - Stay on coercive measures pending settlement/compounding - Whether directions should be given to permit the accused to seek compounding of the offence and whether coercive measures should be restrained temporarily. - HELD THAT: - Having considered Supreme Court guidance encouraging early compounding in cheque dishonour cases to prioritise compensatory aspects and reduce pendency, the High Court accepted that the submission for facilitating amicable settlement had substance. The court directed that the accused may appear through counsel within one month and move an application for compounding; the trial court was directed to take steps in accordance with law, to provide the accused an opportunity not exceeding four months to endeavour settlement, and to decide the application within five months from the date of the order keeping in view the Supreme Court's law. Pending decision in that period (or until an earlier decision), no coercive measures shall be adopted against the accused. The order was clarified to apply only to the accused on whose behalf the Section 482 application was filed, and if compounding does not conclude the proceedings the trial court remains at liberty to proceed and procure attendance as per law. [Paras 11, 12, 13, 14, 15]

Accused permitted to seek compounding; interim restraint on coercive measures for the specified period; trial court to decide application within the prescribed timeframe.

Final Conclusion: The petition for quashing under Section 482 Cr.P.C. is dismissed as the court finds a prima facie case and no ground for quashing; concurrently, directions are issued permitting the accused a limited, time-bound opportunity to move for compounding and restraining coercive steps pending the court's decision within the stipulated period.

Limitation for taking cognizance in offences under Section 138 of the Negotiable Instruments Act - Power to condone delay in taking cognizance under Section 142 of the Negotiable Instruments Act - Judicial exercise of discretion to condone delay and necessity of recording reasons by a speaking order - Requirement of hearing the accused before condoning delay

Limitation for taking cognizance in offences under Section 138 of the Negotiable Instruments Act - Power to condone delay in taking cognizance under Section 142 of the Negotiable Instruments Act - Whether the Magistrate could take cognizance of the complaint filed after the one month period prescribed for filing complaints under the N.I. Act without recording reasons for condoning the delay. - HELD THAT: - The Court noted that Section 142(1) of the N.I. Act prohibits taking cognizance after the one month period unless the complainant satisfies the Court that there was sufficient cause for delay, thereby conferring a discretion on the Court to condone delay. Drawing analogy to the power under the Cr.P.C., the High Court emphasised that the discretion to condone limitation must be exercised judicially and by a speaking order indicating satisfaction that the delay was satisfactorily explained and that condonation is in the interest of justice. The absence of any recorded satisfaction or reasons for condoning the delay rendered the Magistrate's cognizance impermissible insofar as it proceeded without such justification being placed on record. [Paras 5, 6, 7, 10, 13]

Impugned order taking cognizance was quashed and the matter remitted to the Magistrate to consider, by a reasoned order, whether sufficient cause for delay is made out.

Requirement of hearing the accused before condoning delay - Judicial exercise of discretion to condone delay and necessity of recording reasons by a speaking order - Whether the accused must be heard before the Magistrate exercises the power to condone the delay in taking cognizance. - HELD THAT: - Relying on precedent concerning analogous provisions under the Cr.P.C., the Court held that condonation of delay affecting the accused's right cannot be done behind their back. Before condoning delay the magistrate must hear the accused and record reasons for condonation; failure to afford an opportunity to be heard and to record reasons would vitiate the exercise of discretion. Consequently, where cognizance has been taken without such hearing and reasons, the appropriate course is to quash the order and direct fresh consideration after hearing the accused. [Paras 11, 12, 13]

Magistrate directed to decide afresh, after hearing the accused, whether the complainant has established sufficient cause for filing the complaint beyond the prescribed period.

Final Conclusion: The High Court quashed the Magistrate's order taking cognizance and remitted the matter for fresh consideration; the Magistrate is to decide, by a reasoned order and after hearing the accused, whether sufficient cause is shown for filing the complaint beyond the one month period prescribed under the N.I. Act.

Compounding of offence under the Negotiable Instruments Act - quashing of criminal proceedings - conviction under Section 138 of the Negotiable Instruments Act - inherent jurisdiction under Section 482 of the Code of Criminal Procedure - power under Section 147 of the Negotiable Instruments Act - payment of costs as condition for compounding (Damodar S. Prabhu guidelines) - dishonour of cheque due to insufficient funds

Delay in filing revision - Delay of 265 days in filing the revision was condoned and the revision was ordered to be registered. - HELD THAT: - The Court examined the application for condonation and found the delay of 265 days to be bona fide. Having been satisfied with the explanation, the Court allowed the application and directed registration of the revision petition. This constituted a preliminary procedural finding permitting adjudication on merits. [Paras 1]

Application for condonation of delay allowed; delay condoned and revision registered.

Compounding of offence under the Negotiable Instruments Act - inherent jurisdiction under Section 482 of the Code of Criminal Procedure - power under Section 147 of the Negotiable Instruments Act - payment of costs as condition for compounding (Damodar S. Prabhu guidelines) - quashing of criminal proceedings - Conviction under Section 138 of the Negotiable Instruments Act was compounded and consequent criminal proceedings were quashed subject to specified conditions. - HELD THAT: - The Court, relying on its inherent jurisdiction under Section 482 Cr.P.C. and the enabling provision of Section 147 of the N.I. Act, held that continuation of proceedings would serve no useful purpose where the parties have effected settlement. The Court applied the compounding framework laid down in Damodar S. Prabhu v. Sayed Babalal H., allowing compounding at the High Court stage subject to payment of 15% of the cheque amount as costs to the State Legal Services Authority. The Court ordered that the conviction and appellate confirmation be quashed and the petitioner acquitted on the condition that the complainant is given the compensation amount and that the petitioner deposits 15% of the cheque amount with the H.P. State Legal Services Authority. Directions were given for release/handling of deposited funds, treatment of interest on fixed deposit, and a timeline for compliance with a proviso that failure to comply by 31.3.2020 would automatically revoke the compounding and reinstate conviction. [Paras 7, 9, 10, 11, 12]

Judgment of conviction under Section 138 N.I. Act quashed and proceedings set aside; accused acquitted subject to payment of the compensation to the complainant and deposit of 15% of the cheque amount with the State Legal Services Authority, with specified directions regarding interest and timeline.

Final Conclusion: Delay in filing the revision was condoned and the revision registered; the conviction under Section 138 N.I. Act was compounded and the criminal proceedings quashed on payment of the cheque compensation to the complainant and deposit of 15% of the cheque amount with the State Legal Services Authority in terms of the Damodar S. Prabhu guidelines, subject to the Court's directions and the stipulated timeline.

Quashing of criminal proceedings under Section 482 Cr.P.C. - summoning order and prima facie satisfaction to proceed - categories for quashing recognised in Bhajan Lal - compounding of offence under Section 138 of Negotiable Instruments Act - temporary bar on coercive measures pending consideration of compromise

Quashing of criminal proceedings under Section 482 Cr.P.C. - summoning order and prima facie satisfaction to proceed - categories for quashing recognised in Bhajan Lal - Validity of the summoning order dated 16.01.2019 and the maintainability of the complaint under Section 138 of the Negotiable Instruments Act against the accused; whether the complaint and summoning order ought to be quashed under Section 482 Cr.P.C. - HELD THAT: - The court declined to embark upon a roving inquiry into disputed questions of fact or to assess testimonial credibility at the summoning stage. Applying established principles, a magistrate need only be prima facie satisfied that sufficient ground exists to proceed. The material on record and the complaint, as per the court's perusal, disclose a prima facie case and do not fall within the illustrative categories recognised by the Apex Court in which criminal proceedings may be quashed (for example, where allegations do not constitute an offence, are absurd or impossible, prosecution is barred, or proceedings are mala fide). Consequently, there is no justification to quash the complaint or the summoning order and no abuse of process was found. [Paras 8, 9]

Prayer to quash the complaint and the summoning order refused; the matter is to proceed before the trial court.

Compounding of offence under Section 138 of Negotiable Instruments Act - temporary bar on coercive measures pending consideration of compromise - Whether the accused should be permitted an opportunity to seek compounding/compromise and whether coercive measures should be restrained pending such endeavour. - HELD THAT: - Having noted the Supreme Court's guidance that compensatory settlement in cheque dishonour cases should be encouraged at an early stage to reduce pendency, the High Court directed that the accused may appear through counsel within one month and move an application for compounding by compromise. The trial court is directed to take steps in accordance with law and to provide further opportunity, not exceeding four months, for pursuing settlement; thereafter the trial court shall pass appropriate orders within five months from the date of this order in accordance with the law laid down by the Supreme Court. During this period (or until the court's decision on the application), no coercive measures shall be adopted against the accused. The order is limited to the accused on whose behalf the Section 482 application was filed. [Paras 13, 15, 16]

Accused granted time-limited opportunity to apply for compounding; trial court to consider and decide within prescribed time; coercive steps restrained for the specified period.

Final Conclusion: The petition for quashing is dismissed as the complaint and summoning order disclose a prima facie case; however, the accused is permitted a limited opportunity to seek compounding of the offence and, pending the trial court's consideration within specified time limits, no coercive measures shall be taken against the accused.