Legal Updates (Feb 09 – Feb 14 , 2026)
A bank’s internal classification of a loan as a non-performing asset for accounting or provisioning purposes does not by itself determine the commencement of limitation under the Insolvency and Bankruptcy Code, especially where the debt has subsequently been restructured and acknowledged through fresh agreements
The Supreme Court in the case of B Prashanth Hegde v. State Bank of India [Civil Appeal No. 477 of 2022] dated February 12, 2026, has held that a bank’s internal classification of a loan as a non-performing asset for accounting or provisioning purposes does not by itself determine the commencement of limitation under the Insolvency and Bankruptcy Code, especially where the debt has subsequently been restructured and acknowledged through fresh agreements.
The Court observed that the manner in which a bank reflects a debt in its balance sheet is not decisive for computing limitation. Where restructuring takes place and fresh working capital consortium agreements are executed acknowledging subsisting liabilities, such agreements effectively give the debt a “fresh lease of life”. In such circumstances, the later Non-Performing Asset (NPA) dates arising from restructuring become relevant for calculating limitation.
The Court noted that the restructuring exercise involved execution of fresh agreements acknowledging existing dues, and that these acknowledgments revived the enforceability of the debt for limitation purposes. Disclosure of subsequent NPA dates, along with written acknowledgment in the balance sheets, sufficiently demonstrated that the claim was within limitation when the application was filed on April 25, 2018. On the evidentiary value of balance sheets, the Court reiterated that a written acknowledgment of liability signed by the party against whom the right is claimed attracts Section 18 of the Limitation Act and gives rise to a fresh period of limitation. It held that a director acts as an agent of the company for the purposes of Section 18, and therefore a balance sheet signed by a director can amount to a valid acknowledgment.
The Court observed that since the balance sheets were signed by a director and were relied upon by the company itself in proceedings before the Debt Recovery Tribunal, they were sufficient to extend limitation. The Court also reaffirmed that once the Adjudicating Authority is satisfied that a financial debt exists and that default above the statutory threshold has occurred, there is little discretion to refuse admission of a Section 7 application under the IBC.
State-appointed authorities under the Payment of Gratuity Act, 1972 lack jurisdiction to adjudicate gratuity claims where the establishment has branches in more than one State, as in such cases the Central Government is the “appropriate government” under the Act
The Delhi High Court in the case of M/S CSAT System (P) Ltd v. Appellant Authority Under The Payment Of Gratuity Act [W.P.(C) 11251/2015] dated February 10, 2026, has held that State-appointed authorities under the Payment of Gratuity Act, 1972 lack jurisdiction to adjudicate gratuity claims where the establishment has branches in more than one State, as in such cases the Central Government is the “appropriate government” under the Act. The Court held so, while dealing with an employer’s plea questioning the jurisdiction of the Controlling Authority (CA) appointed by the Delhi government under Payment of Gratuity Act, 1972, to decide its employee’s claim for gratuity.
The Court referred to Section 2(a) which defines ‘appropriate Government’ and held that it vests such authority in the Central Government in cases where the establishment or factory belongs to or is under its control, where an establishment has branches in more than one State, or where the undertaking relates to specified sectors such as major ports, mines, oilfields, or railway companies. In all remaining cases, where none of these conditions are attracted, the State Government is designated as the appropriate Government to exercise jurisdiction under the Act.
While executing a decree passed by a foreign court in a reciprocating territory under Section 44A of the Code of Civil Procedure, 1908, it is not mandatory for the District Court to frame issues and direct the parties to lead evidence while examining whether the decree falls within any of the exceptions under clauses (a) to (f) of Section 13 CPC
The Bombay High Court in the case of Elis Jane Quinlan v. Naveen Kumar Seth [Writ Petition No. 14283 of 2023] dated February 10, 2026, has held that while executing a decree passed by a foreign court in a reciprocating territory under Section 44A of the Code of Civil Procedure, 1908, it is not mandatory for the District Court to frame issues and direct the parties to lead evidence while examining whether the decree falls within any of the exceptions under clauses (a) to (f) of Section 13 CPC. The Court clarified that the inquiry contemplated under Section 44A(3) read with Section 13 is ordinarily summary in nature and not equivalent to a full-fledged trial as in a suit filed on a foreign judgment from a non-reciprocating territory.
In this case, a writ petition was filed by foreign decree holders challenging the order of the District Judge, who had allowed an application by the judgment debtor for framing issues and granting liberty to lead evidence in execution proceedings arising out of a decree passed by the Fujairah Civil Court, UAE. After the UAE was notified as a reciprocating territory under Section 44A CPC, the decree holders had filed execution proceedings in India. The executing court framed multiple issues concerning fraud, natural justice, suppression of material facts, limitation and maintainability, and permitted evidence to be led on those issues.
The High Court examined the scheme of Sections 13, 14 and 44A CPC and observed the fundamental distinction between decrees from reciprocating and non-reciprocating territories. In the former case, the decree is executable as if it were a domestic decree, subject only to the limited exceptions under Section 13. The burden to establish that the decree falls within any of the exceptions under clauses (a) to (f) lies on the judgment debtor. The Court held that if framing of issues and leading of oral evidence were to be treated as mandatory in every case, the special legislative object behind Section 44A, swift and effective execution, would be defeated.
The Court observed that it is not necessary in every case that issues are framed and evidence is led for conduct of inquiry into circumstances enumerated under clauses (a) to (f) of Section 13 of the Code. This is because the legislative object is to ensure swifter and faster execution of the decree passed by the foreign court in reciprocating territory. The Court also held that the existence of exceptions under Section 13 must ordinarily be gathered from the pleadings, the foreign judgment, and the proceedings before the foreign court. It is not necessary to conduct a de novo trial. The Court further observed that recording of evidence in execution proceedings should be permitted only in exceptional and rare cases where the factual controversy cannot be resolved through other expeditious methods.
Dropping the cheque signatory from the array of accused does not invalidate prosecution against the company and its directors under the Negotiable Instruments Act
The Delhi High Court in the case of GBL Chemicals Limited v. State of NCT of Delhi [CRL.M.C. 2155/2025] dated January 29, 2026, has refused to quash criminal proceedings in a cheque dishonour case, holding that dropping the cheque signatory from the array of accused does not invalidate prosecution against the company and its directors under the Negotiable Instruments Act, 1881. The Court explained that dropping of the signatory of Cheques from proceedings, does not result in the automatic collapse of the Complaint against the Petitioner Companies and the other Directors. The statutory presumptions and the principles of corporate vicarious liability necessitate that the matter proceed to trial.
The Court dismissed a batch of petitions challenging summoning orders passed in multiple complaints involving dishonour of cheques amounting to over ₹21 crore, observing that the company is the principal offender under Section 138 of the NI Act, and the liability of directors under Section 141 is vicarious but independent of the continuance of proceedings against the cheque signatory.
The Court further observed that the liability under Section 138 is not restricted to the moment of signing. The offence under Section 138 is a “composite offence” that is completed only when the drawer fails to make payment within 15 days of the receipt of the legal demand Notice of the amount of dishonored Cheque. If a Director, who is the signatory, resigns before the cheque is presented, the Trial Court may, in its discretion, find that he was no longer “in charge of the affairs” at the time the offence (dishonor and nonpayment) was committed. However, this resignation does not grant amnesty to the Company or the Continuing Directors. The debt remains a corporate liability.
The Court further held that at the summoning stage, the Magistrate is not required to conduct a roving inquiry into the internal dynamics of the Board or the individual knowledge of each Director. If the Complaint contains the basic factual foundation that the Directors were in charge of the business, and the Company is also arrayed as an accused, the requirement of Section 141 is satisfied.
A transferee who purchases property from a judgment-debtor during the pendency of proceedings has no locus to resist or object to the decree passed in favour of the judgment-creditor
The Supreme Court in the case of R. Savithri vs Cotton Corporation of India [Special Leave Petition (Civil) No. 19779 of 2024] dated February 12, 2026, has held that a transferee who purchases property from a judgment-debtor during the pendency of proceedings has no locus to resist or object to the decree passed in favour of the judgment-creditor. In this case, the Court held so, after finding that the appellant, having purchased the property from Respondent No. 2 (the judgment-debtor) after an arbitral award had been passed in favour of Respondent No. 1, sought to resist the enforcement of that award.
The issue before the Court was whether a post-award purchaser could resist execution of a money decree, and whether the doctrines of lis pendens and Order XXI Rule 102 CPC apply only to property-specific decrees or also to money decrees. Thus, disposing off the issue, the Court said that if the argument of the appellant is accepted allowing pendente lite purchasers or third parties to bypass these strict procedural safeguards and institute separate suits or raise belated objections long after the execution processes (like attachment and sale) have advanced, it would completely derail the statutory machinery. Judgment-debtors would be incentivized to systematically defeat decrees by transferring properties or planting surrogate objectors to initiate endless collateral litigation.
The Court observed that the appellant was bound by the doctrine of lis pendens embodied in Section 52 of the Transfer of Property Act, 1882. Consequently, the property purchased by the appellant from Respondent No. 2 after the arbitral award had been passed against the latter was squarely hit by Section 52, preventing the appellant from acquiring absolute ownership so as to justify her attempt to resist the attachment of the property.
The Court further observed that the Appellant is a purchaser post-arbitral award for recovery of the amount. The execution proceeding was pending when the sale deed was entered into between Respondent No. 2 and the Appellant. Moreover, the Appellant failed to discharge the onus on the sale being without notice of the existing claim. The arbitral award remains unrealised till date. Accordingly, the appeal was dismissed.
Recognition of spectrum licensing rights as an intangible asset in the balance sheet is not determinative of recognition/transfer of ownership of the spectrum to Telecom Service Providers. Hence, the ownership and control of telecom spectrum cannot be determined by the Insolvency and Bankruptcy Code (IBC)
The Supreme Court in the case of State Bank of India v. Union of India [Civil Appeal No. 1810/2021] dated February 13, 2026, has held that the ownership and control of telecom spectrum cannot be determined by the Insolvency and Bankruptcy Code (IBC), since it is a common good. The Court explained that the spectrum is a material resource of the community in the Constitutional sense. Hence, the spectrum must benefit the common good, so its control has to be secured for the citizens.
The issue before the Court was whether telecom service providers, called upon to pay license dues by the Department of Telecommunications, can invoke a moratorium on the basis of a voluntary corporate insolvency resolution process under the IBC. Hence, while disposing the issue, the Court observed that IBC cannot be the guiding principle for restructuring the ownership and control of spectrum.
The Court went on to observe that Spectrum allocated to Telecom Service Providers (TSPs) and shown in their books of account as an “asset” cannot be subjected to proceedings under Insolvency and Bankruptcy Code, 2016. Interpreting Section 4 of the Indian Telegraph Act, 1885, the Court held that the Central Government has exclusive privilege to establish, maintain and work telegraphs and may grant licences on such terms and consideration as it thinks fit. It observed that a licence granted under Section 4 is contractual in form but emanates from sovereign statutory power and remains subject to constitutional limitations.
The Court noted that the grant of a telecom licence does not transfer ownership of spectrum. It confers only a limited, conditional and revocable right to use spectrum for a defined purpose and duration. The licence remains subject to strict compliance with statutory requirements, licence conditions and public interest considerations. The Court held that the insolvency framework cannot be used to rewrite the statutory regime governing natural resources.
As far as the argument that spectrum is treated as an intangible asset in company balance sheets, the Court observed that accounting recognition under Indian Accounting Standards is based on control over economic benefits and reliable measurement of cost. This recognition does not determine legal ownership of Spectrum. Essentially, recognition of spectrum licensing rights as an intangible asset in the balance sheet is not determinative of recognition/transfer of ownership of the spectrum to Telecom Service Providers. It only indicates control over the future economic benefits flowing from the grant of the right to use the spectrum.
The Court further held that the resolution professional cannot assume control or custody over spectrum under Section 18 of the IBC, as spectrum is neither owned by the corporate debtor nor transferable as property. It rejected the contention that spectrum usage rights can be treated as a security interest in favour of lenders in view of the Tripartite Agreement and the statutory framework. The Court noted that while the agreement facilitates conditional transfer or assignment in the event of default, such transfer remains subject to the licensor’s approval and regulatory control. It emphasised that the licence remains a regulated privilege rather than freely alienable asset.