TaxTMI 
TaxTMI 
2026 (7) TMI 378
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....025, CA No.226/2025 & CA No.368/2025 in C.P. No.3638(MB)/2018. By the impugned order, NCLT has dismissed the CA No.226/2025 filed by the appellant and allowed the CA No.368/2025 as well as CA No.99/2025 filed by the respondent. Aggrieved by the order dated 13.04.2026 passed in the above three applications, these three appeals have been filed. 2. Brief background facts, giving rise to these appeals are: i. IL&FS has been registered with reserve Bank of India ("RBI") as core investment company and has been engaged in business of giving loans and advances to its group companies and holding investments in its group companies. IL&FS Financial Services Ltd. ("IFIN") is a wholly owned subsidiary of the appellant, which is registered as a Non-Banking Finance Company ("NBFC") with the RBI. ii. RBI after inspection held on 01.11.2017 gave a direction to the IFIN directing the company to run down its exposure to group companies with no fresh lending to them. iii. From March 2017 to March 2018, IFIN, SREI Infrastructure Finance Limited ("SIFL") and IL&FS Group Entities and SREI Group Entities undertook transactions wherein IFIN lend money to IL&FS Group Entities u....
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....FIN lend loans to external parties which were transferred to IFIN group companies namely; ITNL in order to circumvent the RBI directions. viii. Grant Thornton Bharat LLP ("GT") also prepared a Report recording that loans were disbursed by IFIN to various third-party borrowers in the SREI groups post the RBI Report dated 01.11.2017, to circumvent RBI's advice on reducing exposure to group companies. The money being lend by way of subject transaction and being lend to ITNL. ix. SEBI also passed an order on 15.12.2022 finding that IFIN had lend monies to ITNL using external parties that is SREI Group Entities as intermediary. Various proceedings were initiated by IFIN against third parties under Section 7, namely; Attivo Economic Zone (Mumbai) Private Limited ("Attivo"), Sahaj E-Village Ltd. ("Sahaj"), Giridhan Projects Private Limited ("Giridhan"), Bharat Road Network Limited ("BRNL") and Vistar Financers Private Limited ("Vistar"). Some of the petitions under Section 7 were admitted and some of the petitions under Section 7 were rejected. x. Corporate Insolvency Resolution Process ("CIRP") against SREI Equipment Finance Ltd. ("SEFL")/SIFL also commenced in....
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....SEL settlement amount to SIFL. CA No.368/2025 was filed by the SIFL seeking permission to use the amount deposited by Cube Highways towards distribution to Chennai Nashri Tunnelways ("CNTL") Creditors. CA No.226/2025 was opposed by SIFL by filing a reply/additional reply. Rejoinder was also filed by the appellant in CA No.226/2025. NCLT heard the parties and by impugned order has dismissed CA No.226/2025 and allowed CA No.99/2025 and CA No. 368/2025. Aggrieved by the impugned order 13.04.2026, these appeals have been filed. xiv. NCLT Mumbai by the impugned order interpreting the order dated 16.01.2025 held that direction of the NCLT was clear that Mutual Agreement was mandatory for collapsing of any transaction and no consent having been given by SIFL, transaction cannot be collapsed. NCLT further held that reports by the RBI were only advisory and breach of the advisory/directions cannot invalidate the transaction or void the financing arrangement between SIFL and IL&FS group entities. xv. NCLT further held that IFIN having elected to take independent proceedings against third parties, it cannot be allowed to change its strategy and file a collapsing application.....
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....here consent is obtained from the third party. It is submitted that Section 242(2)(f) is not attracted in the facts of the present case where transactions were alleged to be fraudulent and void. Section 242(2)(f) which required consent was with respect to valid transactions and the said proviso is not attracted with respect to void and fraudulent transactions. It is submitted that Section 242(2) is only illustrative and not exhaustive, the powers under Section 242(1) are wide and general powers which are not controlled by illustration given in Section 242. It is submitted that resolution of IL&FS group is being carried under Section 241 & 242 of the Companies Act, 2013, as per the resolution framework approved by this Tribunal. In order dated 12.03.2020, objection with regard by the various respondent relying on Section 242(f) was noticed and ultimately were not accepted. The order of the NCLT that directions of the RBI is only advisory is not correct. Directions issued by the RBI are statutory and they are binding on all NBFC. NCLT has also selectively read the Minutes of the Meeting dated 14.03.2023 of the new Board. New Board having considered all aspect of the matter decided to....
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....by holding that execution of the Mutual Agreement was necessary for collapsing. It is further submitted that NCLT Mumbai did in fact consider the collapsing application in detail and rejected the same by well-reasoned order on several grounds including lack of consent, no allegation of fraud being done RBI direction being advisory, ground of election and clean slate etc. NCLT cannot be directed to exercise powers of investigation collapsing a transaction in oppression and mismanagement petition, which jurisdiction does not possess. It is submitted that consent contemplated under Section 242(2)(f) of the Companies Act, 2013 is mandatory and dehors the consent, no agreement with third-party can be terminated. Reliance on Section 242(m) and inherent power of the NCLT are misplaced. General or inherent powers cannot be exercised in derogation of statutory prescription. The interpretation of the NCLT on Sections 241, 242(2)(f) proviso is in accordance with the judgements of various High Courts. It is further submitted that IFIN having adopted a course of action by filing Section 7 application against SREI entities, it cannot change its strategy. IL&FS concisely elected to plead the tran....
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.... against SIFL entities? V. Relief, if any, to which appellant may be entitled? Question No. (I) 8. As noted above collapsing application was initially filed by IL&FS in this Tribunal being I.A. No.3169/2023 & I.A. No.5300/2023. In the application 3169/2023 various transactions including the transactions which are subject matter of present appeal were subject matter of consideration. Out of 16 transactions which were prayed to be collapsed, 6 transactions which was subject matter of these appeals were also prayed to be collapsed. This Tribunal noticed the steps which was proposed for collapsing and this Tribunal observed that one of the steps which was contemplated for collapsing the agreement when an agreement is entered. No agreement was given by SIFL with respect to transaction regarding R-8 to R-12 to the application, who were group entities of SIFL. It is useful to notice paragraphs 16 to 19 of the order where following directions were issued to: "16. We have already noticed from the pleadings in IA No.3169 of 2023 that one of the steps, which has been contemplated is an Agreement between IL&FS and third party borrowers for collapsing the Agreement and t....
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....rowers as well as lending money to IL&FS entities. Present Applications, are not the appropriate proceedings to grant declaration as prayed by the Applicant and direct for collapsing the third party Agreements and transactions entered with Respondent Nos.3 to 12. We, however, make it clear that the said issues can be gone into and examined by NCLT in the pending proceedings and appropriate decisions can be taken with regard to borrowing with respect to Respondent Nos.8 to 12. 19. In result, IA No.3169 of 2023 is partly allowed (except against Respondent Nos.8 to 12). As noticed above for collapsing transaction, necessary Agreement as contemplated in Step-2, noticed above is precondition. Mutual agreement for collapsing the transaction with other Respondents (except with regard to whom orders have already been passed) is necessary. We, however, clarify that rights and remedies of IFIN shall remain open and would not be prejudice by the submissions made by the IFIN in IA No.3169 of 2023. IA No.3169 of 2023 is disposed of accordingly." 9. With respect to transaction which are subject matter of the present appeal, it was observed that the I.A. No.3169/2023 is not the approp....
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....that a present application (I.A. No.3169/2023) is not the appropriate proceeding to grant declaration as prayed by the applicant. The observation was made that the said issues can be gone into and examined by the NCLT in the pending proceeding and appropriate decision can be taken with regard to borrowing with respect to R-8 to R-12 (6 transactions in question). The observations of this Tribunal as noted above in no manner can be read to mean that this Tribunal has held that for collapsing/unwinding the transaction consent is precondition. The application 3169/2023 was proceeded to examine and decided, relying on the consent it was one of the steps contemplated in the application and it was due to this reason that transaction qua R-8 to R-12 was not collapsed since no consent was given. However, the fact that liberty was granted to raise the issue and the issue can be examined by NCLT clearly means that even without there being consent, the issue can be gone into by the NCLT. We, thus are of the opinion that interpretation of the order dated 16.01.2025 as made by the NCLT in paragraphs 5.23 and 5.26 as extracted above is incorrect. This Tribunal in its order dated 16.01.2025 has ne....
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.... a winding-up order on the ground that it was just and equitable that the company should be wound up, the Tribunal may, with a view to bringing to an end the matters complained of, make such order as it thinks fit. (2) Without prejudice to the generality of the powers under sub-section (1), an order under that subsection may provide for-- (a) the regulation of conduct of affairs of the company in future; (b) the purchase of shares or interests of any members of the company by other members thereof or by the company; (c) in the case of a purchase of its shares by the company as aforesaid, the consequent reduction of its share capital; (d) restrictions on the transfer or allotment of the shares of the company; (e) the termination, setting aside or modification, of any agreement, howsoever arrived at, between the company and the managing director, any other director or manager, upon such terms and conditions as may, in the opinion of the Tribunal, be just and equitable in the circumstances of the case; (f) the termination, setting aside or modification of any agreement between the company and any person other than those re....
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....e Companies Act 1956, Bombay High Court laid down following in paragraph 14: "14. ...Similarly, under section 398 read with section 402 power has been conferred upon the court "to make such orders as it thinks fit". if it comes to the conclusion that the affairs of the company are being conducted in a manner prejudicial to public interest or in a manner prejudicial to the interests of the company or that a material change has taken place in the management or control of the company by reason of which it is likely that the affairs of the company will be conducted in a manner prejudicial to public interest or in a manner prejudicial to the interests of the company, "with a view to bringing to an end or preventing the matters complained of or apprehended". Both the wide nature of the power conferred on the court and the object or objects sought to be achieved by the exercise of such power are clearly indicated in sections 397 and 398. Without prejudice to the generality of the powers conferred on the court under these sections, section 402 proceeds to indicate what type of orders the court could pass and clauses (a) to (g) are clearly illustrative and not exhaustive of the typ....
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.... [2009 SCC OnLine Bom 1750], Hon'ble Mr. Justice D.Y. Chandrachud as he then was, had occasion to consider Sections 397, 398 & 402 of the Companies Act 1956. Bombay High Court held that illustration contained in clauses (a) to (g) of Section 402, are but examples of the nature of the reliefs that can be granted and they are not exhaustive of the reliefs that can be granted but are only illustrative. In paragraph 9 of the judgement following was laid down: "9. Section 402 is without prejudice to the generality of the powers of the Board under section 397 or 398. Section 402 describes the nature of the reliefs that can be granted in a petition under section 397 or 398. The illustrations which are contained in clauses (a) to (g) of section 402, are, but examples of the nature of the reliefs that can be granted in a petition under sections 397 and 398. Clauses (a) to (g) of section 402 are not exhaustive of the reliefs that can be granted by the Board but are only illustrative of the wide powers that are granted upon the Board with a view to ameliorating a situation of oppression and mismanagement." 18. A very pertinent observation was made in paragraph 12 of the judgement ....
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....late of natural justice. Nothing, except a clear statutory provision to that effect should lead the court to adopt such a construction..." 19. We may also notice the judgement of Delhi High Court in 'Pearson Education INC (formerly Prentice Hall Inc.)' Vs. 'Prentice Hall India P. Ltd. & Ors.' reported in [2005 SCC OnLine Del 945]. In the above case also Delhi High Court had occasion to consider the provisions of Sections 397, 398 & 402 of the Companies Act 1956. Delhi High Court in the above case has held that jurisdiction under Sections 397, 398 & 402 also can be exercised to terminate, set aside or modify the contractual arrangement between the companies and any person. Following was held by the Delhi High Court in the above judgement: "...The jurisdiction of the Company Law Board (and ultimately of this court in appeal) under sections 397/398 and 402 is much wider and direction can be given even contrary to the provisions of the articles of association. It has even right to terminate, set aside or modify the contractual arrangement between the company and any person (see section 402(d) and (e)). Section 397 specifically provides that once the oppression is establishe....
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.... Act empower the Company Law Board to remove oppression and mismanagement. If the consequences of refusal to exercise jurisdiction would lead to a total chaos or mismanagement of the company, would still the Company Law Board be powerless to pass appropriate orders is the question. If a literal interpretation to the provisions of Section 397 or 398 is taken recourse to, may be that would be the consequence. But jurisdiction of the Company Law Board having been couched in wide terms and as diverse reliefs can be granted by it to keep the company functioning, is it not desirable to pass an order which for all intent and purport would be beneficial to the company itself and the majority of the members? A court of law can hardly satisfy all the litigants before it. This, however, by itself would not mean that the Company Law Board would refuse to exercise its jurisdiction, although the statute confers such a power on it." 21. In the above case, the judgement of the Delhi High Court in 'Pearson Education INC (formerly Prentice Hall Inc.)' (supra) was quoted with approval in paragraph 25. Paragraph 25 of the judgement of the Hon'ble Supreme Court is as follows: "25. In Pearso....
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....reme Court in 'Phoenix ARC Private Limited' Vs. 'Spade Financial Services Ltd. & Ors.' reported in [(2021) 3 SCC 475], in which case Hon'ble Supreme Court has occasion to consider the financial transaction within meaning of Section 5(8) of the IBC. Hon'ble Supreme Court in the said case has held that the transaction which is a sham or collusive or only create an illusion that money has been disbursed to the borrower with the object of receiving consideration in the form of time value of money, when in fact the parties have entered into transaction with the different or ulterior motive. In paragraph 48 following observations were made by the Hon'ble Supreme Court: "48. The above discussion shows that money advanced as debt should be in the receipt of the borrower. The borrower is obligated to return the money or its equivalent along with the consideration for a time value of money, which is the compensation or price payable for the period of time for which the money is lent. A transaction which is sham or collusive would only create an illusion that money has been disbursed to a borrower with the object of receiving consideration in the form of time value of money, when in ....
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.... Network Limited) and by Attivo Economic Zone (Mumbai) Private Limited to IL&FS Financial Services Limited;" The application CA No.226/2025 has not sought for termination of 6 transactions so as to make provisions of Section 242(2)(f) applicable. 24. Learned counsel for the respondent in support of his submissions has also placed reliance on the various judgements which need to be noticed. The first judgement which has been relied by the counsel for the respondent is 'Incable Net (Andhra) Limited & Ors.' Vs. 'Apaksh Broadband Ltd. & Ors.' reported in [2008 SCC OnLine AP 832]. In the above case, appellant had filed a proceeding under Section 397, 398, 402 & 403 of the Companies Act, 1956, alleging mismanagement by the majority shareholder of the first respondent company. The Company Law Board decline to grant the relief against which the appeal was filed in the High Court. The High Court has noted that an appeal under Section 10(f) of the Companies Act, 1956 contemplated appeal only on question of law. In paragraph 6 of the judgement, High Court has laid down following observation: "6. After entrustment of corporate dispute resolution to the Company Law Board by reaso....
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.... modify the agreement between APAKSH and AKSH is the question of law under section 10F of the Act. The submission cannot be accepted. Assuming that the petitioners as shareholders made out genuine grievance of about alleged non-performance of obligations by AKSH under EPC contract resulting in financial loss to APAKSH, the same cannot be in the facts and circumstances of this case, be branded as an act of mismanagement and oppression by the majority against minority shareholders. Secondly, any such breach of contract or non-performance of obligations cannot and should not be in relation to only two players - respondents Nos. 1 and 5 - but such alleged breach can affect the rights and obligations of all the corporate players in the project. 13. In the absence of two other players, namely, the Government of Andhra Pradesh and APTS, the Company Law Board could not have exercised their power under section 402(e) of the Act. Thirdly, any modification of an agreement by the Company Law Board can be only be after obtaining consent of the party concerned. It is nobody's case that the Government of Andhra Pradesh, APTS and AKSH gave consent for modification of EPC contract. Ind....
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....n any of the species of cases contemplated by Section 242 of the Act? In our considered opinion, no. 116. Section 242(1) is clearly inapplicable, as it applies only in a case where the Tribunal is of the opinion that "the winding of the company would unfairly prejudice such member or members, but that otherwise the facts would justify the making of a winding up order on the ground that it was just and equitable that the company should be wound up". Even if the notice, dated 8th August 2017, or the Board meeting of 26th August 2017 proposed therein, were illegal, it cannot be said that any case for winding up of the Company, even prima facie, was made out. 117. Adverting, now, to Section 242, clauses (a) to (g) and (i) to (l) thereof are obviously inapplicable. Clause (h) would, in fact, indicate that the reliefs prayed for in CS (OS) 285/2017 were outside the jurisdiction of the Tribunal, as the said clause empowers the NCLT to pass an order providing for removal of the managing director, manager or any of the directors of the Company. If one were to apply the expression unius est exclusion alterius principle, by inference, it would not be open to the NCLT to adju....
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....the parties to a contract agree to substitute a new contract for it, or to rescind or alter it, the original contract need not be performed." Thus, for any novation, rescission and alteration of the contract, it can be made only bilaterally and with the amicable consent of both the parties. Thus, a deed of cancellation of the earlier registered sale deed executed in favour of the Smt Veeravali Anand would amount to an illegal rescission of the absolute sale deed because if the issue in question is viewed from the application of Section 62 of the Contract Act, 1872, then it is clear that any rescission must be done only bilaterally." 31. There can be no dispute to the proposition laid down by the Hon'ble Supreme Court in the above case. The judgement of the Hon'ble Supreme Court was on the novation of contract. Present is not a case where reliance is placed on Section 62 by the appellant/applicant. Section 62 of the Contract Act, 1872, is wholly inapplicable and not attracted. Similarly, the judgement of Hon'ble Supreme Court in 'Lata Constructions & Ors.' Vs. 'Dr. Rameshchandra Ramniklal Shah & Anr.' reported in [(2000) 1 SCC 586] also dealt with novation of contract un....
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.... as more particularly set out below. 21. The particulars of such transactions involving IFIN, IL&FS Group entities, SIFL and Srei Group entities, the unwinding of which is sought in the present Application (the "Subject Transactions"), are detailed hereinbelow: S.N. IL&FS Group Lender Srei Group Borrower and Loan Date IFIN Loan (principal) (INR Crores) Srei Group Lender IL&FS Group Borrower and Loan Date Srei Loan (principal) (INR Crores) 1. IFIN Attivo on August 23, 2017 110 SIFL (assigned to BRNL) ITNL on August 23, 2017 110 2. IFIN Attivo on March 31, 2018 195 SIFL FSEL on March 29, 2018, and on- lent to ITNL 200 3. IFIN Vistar on March 26, 2018 205 SIFL CTNL on March 27, 2018 and on- lent to ITNL 90 CTNL on March 28, 2018 and on- lent to ITNL 110 4. IFIN BRNL on March 31, 2017 70 SIFL SPPL on March 31, 2017 100 5. IFIN Sahaj on March 30, 2017 68 SIFL GIMCO on March 30, 2017 68 Sahaj on March 31, 2017 212 GIMCO on March 31, 2017 182 6. IFIN ....
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....wing SIFL's claim status with respect to the said transaction is annexed hereto and marked as Annexure 18. iii. Third transaction a) INR 205 crores was received by Vistar from IFIN on March 26, 2018. SIFL also lent an amount of INR 90 crores and INR 110 crores to CNTL on March 27, 2018, and March 28, 2018, respectively which was on-lent to ITNL. Pertinently, the loan advanced by IFIN to Vistar was backed by a letter of awareness dated March 22, 2018, issued by SIFL to IFIN, a copy of which is annexed hereto and marked as Annexure 19. Similarly, the loan advanced to CNTL by SIFL, was backed by a letter of awareness dated March 23, 2018, issued by IFIN to SIFL, a copy of which is annexed hereto and marked as Annexure 20. b) Thereafter, SIFL has filed its claims against CNTL with GT. A copy of the list of creditors of CNTL as published by GT showing SIFL's claim status with respect to the said transaction is annexed hereto and marked as Annexure 21. iv. Fourth transaction a) INR 70 crores was received by BRNL from IFIN on March 31, 2017. On the same date, SIFL also lent an amount of INR 100 crores to SPPL. Pertinently, the loan adva....
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....ter, SIFL has filed its claims against SPPL, GIMCO with GT. A copy of the list of creditors of GIMCO as published by GT showing SIFL's claim status with respect to the said transaction is annexed hereto and marked as Annexure 30. The claims status for SPPL and ITNL are already set out at Annexure 24 and Annexure 15 above. Note: The amounts involved in the fourth and fifth transaction aggregate to INR 350 crores as reflected in SIFL's claim against SPPL approximately amounting to INR 100 crores and SIFL's claim against GIMCO approximately amounting to INR 250 crores. vi. Sixth transaction a) IFIN lent the following amounts to the following Srei Group entities: • Sahaj on March 27, 2018 - INR 90 crores • Giridhan on March 28, 2018 - INR 110 crores b) INR 200 Crores was received by ITNL from SIFL on March 26, 2018. Parallelly INR 90 Crores was received by Sahaj from IFIN on March 27, 2018 and INR 110 crores was received by Giridhan from IFIN on March 28, 2018. Pertinently, the loan advanced by IFIN to Sahaj and Giridhan was backed by letters of awareness dated March 27, 2018, and March 28, 2018, respectively, is....
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....I) For exercise of jurisdiction under Sections 241 & 242 by the Tribunal, obtaining consent of the parties concerned is not condition precedent when the collapsing/winding of transaction is sought on the ground of fraudulent transactions/void transactions. Question No. (III) 34. The copy of the CA NO. 226/2025 has been brought on record as an (Annexure A-2) to the appeal. CA No. 226/2025 is accompanied by 48 annexures and to the applications, all details regarding 6 transactions in question have been narrated. It is useful to notice details as given in paragraphs 1P & 1Q of the application: "P. Through the Subject Transactions, on the basis of documents and records available, it appears that IFIN had provided loans to Srei Group entities and SIFL advanced corresponding loans to IL&FS Group entities on or around the same date, basis letters of awareness/assurance issued by SIFL.. Further, it is pertinent to note that the said amounts lent by IFIN to IL&FS Group entities (and ultimately to ITNL) through Attivo and other SREI group entities were backed by letters of assurance issued by ITNL to IFIN. Q. These transactions were undertaken by IFIN and SIFL to bypa....
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....ncluding inter alia instances where accounts of borrowers of IFIN and or Third Party Borrowers were used for onward lending to ITNL and or its subsidiaries. SFIO is also in the process of carrying out a supplementary investigation into IFIN. IFIN has not been issued any preliminary or final investigation report for the supplementary investigation. Since the IFIN SFIO Report and the IFIN Criminal Complaint are voluminous in nature, the Applicant craves leave to refer to and rely upon the same, if and when required/produced. (iii) The forensic audit report dated April 21, 2019 prepared by GT (commissioned by the New Board) relating to the external and internal lending practices of IFIN ("IFIN Forensic Audit Report"), also records that the loans disbursed by IFIN to various third-party borrowers in the SREI Group, were identified as circuitous transactions. Specifically, the IFIN Forensic Audit Report sets out that loans were advanced by IFIN inter alia to Stei Group entities, backed by letters of awareness issued by SIFL, which in turn transferred the loans to other IL&FS group companies, primarily ITNL. The relevant extracts of the IFIN Forensic Audit Report in relation to ....
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....inancial Year 2016 had advised that "the classification of group companies in order to arrive at the NOF and CRAR, needs to be done as specified in the RBI Act (Section 451A) "listed out group companies and pointed out the exposure in excess of 10% of Owned Funds to arrive at Net Owned Funds (NOF). It further advised that "the company should run down its exposure to group companies with no fresh lending to them". Subsequently, in its letter dated July 20, 2018 to IFIN signed by Ramesh Bawa, it has been stated that IFIN "has not undertaken any fresh exposure post November2017 to the IL&FS group entities which was also confirmed vide its response dated December 26, 2017". 4.56.1. Investigation revealed that IFIN, from November 2017 onwards, instead of directly lending to group companies, in a deceptive manner, lent loans to external parties which were transferred to the IFIN's Group companies, mainly II.&FS Transportation Networks Limited ('ITNL') in order to circumvent RBI Directions. The loans given in this manner are tabulated as below S. No. Name of the external parties to whom the loan was lent by IFIN Amount Disbursed (in Rs. crore) Name of the IFIN....
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....ndia Structures Private Limited 270 4 Vistar Vistar Financiers Private Limited 205 5 BCC Beigh Construction Company Private Limited 200 6 Empower Empower India Limited 170 7 Avance Avance Technologies Limited 150 8 Sangam Sangam Business Credit Limited 150 9 Others Giridhan Projects Private Limited 110 10 GHV GHV Hotels (India) Private Limited 100 11 Sangam Kalyan Sangam Infratech Limited 100 12 Dynamatic Wavell Investments Private Limited 100 13 SREI Bharat Road Networks Limited 70 14 PCL Prakash Constrowell Limited 20 Total 2,320" 42. The pleadings and materials which were brought on record by appellant in CA226/2025, clearly necessitated to unearth the true nature of transaction. The Reports indicate that amount which was initially lend to the group companies of the SREI was from IFIN and which amount was subsequently routed by the SIFL to the group companies of IL&FS. We, thus are satisfied that IL&FS in its CA226/2025 has made out sufficient pleading and materials which necessitated the NCLT to examine the allegatio....
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....ted and were adjourned on account of pendency of collapsing I.A. With regard to Vistar, Section 7 application was rejected which is pending consideration in this appeal. The present is not a case where IFIN has obtained any benefit out of the aforesaid proceedings. It is true that proceedings were initiated by IFIN against third-party borrowers, which were SIFL Group Entities. The new Board of the IL&FS after taking consideration of all relevant facts and sequence of the events in its Meeting held on 14.03.2023 and in the Meeting held on 30.05.2023, decided that the necessary application could be filed before the NCLT for collapse of the transaction. The Minutes of the Meeting of the Board of Directors of IL&FS dated 14.03.2023 are part of the record. In Board Meeting dated 30.05.2023 decision was taken to file collapse compile application with NCLAT. 45. The new Board of the IL&FS had every jurisdiction to take decision and take steps to take remedial action to combat the mismanagement which was done by the earlier management of the IL&FS and in the facts of the present case, we are of the view that filing of Section 7 application to protect interest of the IL&FS could not have....
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....apter III-B of the RBI Act provides a supervisory role for the RBI to oversee the functioning of NBFCs, from the time of their birth (by way of registration) till the time of their commercial death (by way of winding up), all activities of NBFCs automatically come under the scanner of RBI. As a consequence, the single aspect of taking care of the interest of the borrowers which is sought to be achieved by the State enactments gets subsumed in the provisions of Chapter III-B. Regulations/Master Circulars/Directions issued by RBI from time to time 50. Apart from the provisions of Chapter III-B, the Regulations, directions and Master Circulars issued by RBI from time to time, also bind the NBFCs. There is a long list of Regulations/directions or Master Circulars issued by RBI from 1977 onwards, which shows that even before the 1997 Amendment to the RBI Act, some kind of control was exercised by RBI over NBFCs. After the 1997 Amendment, every aspect of the business of NBFCs, including loans, is covered by Master Circulars/directions issued by RBI. In other words, the only field occupied by the State enactments stands appropriated by the Master Circulars/directions." ....
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....law to seek for its assistance and yet base his claim for the Court's assistance on the ground of his fraud. In this connection it would be relevant to remember that Respondent 1 can be said to be guilty of a double fraud; first he joined Respondent 2 in his fraudulent scheme and participated in the commission of fraud the object of which was to defeat the creditors of Respondent 2, and then he committed another fraud in suppressing from the Court the fraudulent character of the transfer when he made out the claim for the recovery of the properties conveyed to him. The conveyance in his favour is not supported by any consideration and is the result of fraud; as such it conveys no title to him. Yet, if the plea of fraud is not allowed to be raised in defence the Court would in substance be giving effect to a document which is void ab initio. Therefore, we are inclined to hold that the paramount consideration of public interest requires that the plea of fraud should be allowed to be raised and tried, and if it is upheld the estate should be allowed to remain where it rests. The adoption of this course, we think, is less injurious to public interest than the alternative course of ....
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....cipal of election, approbate and reprobate, which were not applicable in the facts of the present case. Hon'ble Supreme Court again in 'Waman Shriniwas Kini' Vs. 'Ratilal Bhagwandas & Co.' reported in [1959 SCC OnLine SC 120] has held that plea of waiver cannot be raised because as a result of giving effect to the plea, the Court would be enforcing an illegal agreement and thus contravene the statutory provisions and based on public policy. It was held that Court would not aid the appellant in enforcing the term of the Agreement which Section 15 of the Act declares to be illegal. In paragraph 13 of the judgement following was laid down: "13. The plea of waiver was taken for the first time in this Court in arguments. Waiver is not a pure question of law but it is a mixed question of law and fact. This plea was neither raised nor considered by the courts below and therefore ought not to be allowed to be taken at this stage of the proceedings. But it was argued on behalf of the appellant that according to the law of India the duty of a pleader is to set up the facts upon which he relied and not any legal inference to be drawn from them and as he had set up all the circumstanc....
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....as to waiver of an illegality as follows:- "Agreements which seek to waive an illegality are void on grounds of public policy. Whenever an illegality appears, whether from the evidence given by one side or the other, the disclosure is fatal to the case. A stipulation of the strongest form to waive the objection would be tainted with the vice of the original contract and void for the same reasons. Wherever the contamination reaches, it destroys." This, in our opinion, is a correct statement of the law and is supported by high authority. Field, J. in Oscanyan v. Winchester Arms Company [(1881) 103 US 261, 268 : 26 LEd 539] quoted with approval the observation of Swayne, J. in Hall v. Coppell [ Wallace 542] : "The principle is indispensable to the purity of its administration. It will not enforce what it has forbidden and denounced. The maxim Ex dolo malo non oritur actio, is limited by no such qualification. The proposition to the contrary strikes us as hardly worthy of serious refutation. Wherever the illegality appears, whether the evidence comes from one side or the other, the disclosure is fatal to the case. No consent of the defendant can neutralise it....