Legal Updates (Feb 23 – Feb 28, 2026)
A contract, such as a Debenture Trust Deed (DTD), cannot be considered novated or modified through informal communications with only one of several parties, especially when the contract itself prescribes a strict and formal procedure for amendment that has not been followed
The Supreme Court in the case of Catalyst Trusteeship Ltd vs Ecstasy Realty Pvt Ltd [Civil Appeal No. 7424 of 2025] dated February 24, 2026, has held that for an application under Section 7 of the Insolvency and Bankruptcy Code, 2016 (IBC) to be admitted, the adjudicating authority (NCLT) is only required to ascertain the existence of a financial debt and a default in its payment. The concept of a pre-existing dispute, which is a defence against an application by an operational creditor under Section 9, is not applicable to an application by a financial creditor under Section 7 of the IBC.
The Apex Court held that a contract, such as a Debenture Trust Deed (DTD), cannot be considered novated or modified through informal communications with only one of several parties, especially when the contract itself prescribes a strict and formal procedure for amendment that has not been followed. For a novation under Section 62 of the Contract Act, 1872, consensus among all original parties is essential.
Further, the Court emphasised that a waiver of rights under a contract cannot be implied when the agreement explicitly requires such waiver to be in writing. The duty of a debenture trustee is to the debenture holders, and acting to protect their interests as per the governing deed does not amount to collusion or unfairness.
The Court observed that the NCLT and NCLAT erred by proceeding on the assumption that a moratorium was in place. The Court noted that the restructuring discussions were held with only one debenture holder, ECLF, and there was no evidence that ECLF was authorized to act on behalf of all other debenture holders, who were separate legal entities.
The Court also observed that the DTD contained specific provisions for its modification (Clause 33), which required the prior written consent of the debenture trustee and a ‘Special Resolution’ passed by a three-fourths majority of the debenture holders, which procedure was admittedly not followed. Thus, any waiver of the DTD’s terms had to be express and in writing, as stipulated in Clause 37, and no such written waiver existed.
The NCLT and NCLAT had also casually brushed aside an order from the Bombay High Court, which had refused to grant an interim injunction in a commercial suit filed by the respondent because the DTD modification procedure had not been complied with, added the Court.
Thus, the Court concluded that the concurrent findings of the NCLT and NCLAT were perverse, based on surmises and conjectures, and warranted interference.
Whether the cheque was issued by way of security or in discharge of a legally enforceable debt is a matter of evidence that cannot be adjudicated in proceedings under Section 482 CrPC
The Jammu & Kashmir & Ladakh High Court in the case of Deepak Bawa Sharma vs Asif Iqbal [CRM(M) No. 323/2023] dated February 13, 2026, has held that whether the check was issued by way of security or in discharge of a legally enforceable debt is a matter of evidence that cannot be adjudicated in proceedings under Section 482 CrPC, and hence, dismissed the petition seeking quashing of proceedings under Section 138 of the Negotiable Instruments Act, 1881 (NI Act).
The case arose from a petition filed for the quashing of a complaint pending before the Trial Court under Section 138 of the NI Act. The complaint alleged the dishonour of a cheque for Rs. 35 lakhs issued by the petitioner. The record indicates that the petitioner had already appeared before the Trial Court, participated in the proceedings, and cross-examined the complainant’s witnesses. It was also noted that upon being put on notice under Section 251 CrPC, the petitioner did not raise any specific plea that the cheque had been issued merely as security or that the liability had already been discharged.
The High Court rejected the petitioner’s contention that the cheque was issued only as a security instrument and that no subsisting liability existed, and observed that proceedings under section 138 of the NI Act are governed by the statutory presumption contained in sections 118 and 139 of the NI Act. The Court held that disputed questions such as the nature of the cheque and existence of liability fall within the domain of trial and cannot be examined under inherent jurisdiction.
Since the complaint disclosed the ingredients constituting an offense under Section 138 of the NI Act and that no abuse of process was made out, the High Court declined interference and directed the trial court to proceed in accordance with law.
A contractual prohibition on the payment of interest does not bar the grant of post-award (future) interest, as the entitlement to such interest is statutory under Section 31(7)(b) of the Arbitration and Conciliation Act, 1996, and is not subject to party autonomy
The Delhi High Court in the case of Ircon International Ltd vs Cannon Engineering Construction Cannon Cottage [FAO(OS) (COMM) 16/2022] dated February 24, 2026, has held that the scope of judicial interference in an appeal under Section 37 of the Arbitration and Conciliation Act, 1996, is limited to examining whether the court exercising jurisdiction under Section 34 has acted within its prescribed legal limits, and it does not permit a re-appreciation of evidence or merits of the arbitral findings. The Court emphasised that the determination of factual issues, such as the classification of excavated material or the necessity of specific construction methods, and the interpretation of contractual terms are within the exclusive domain of the Arbitral Tribunal.
The Court, therefore, ruled that a contractual prohibition on the payment of interest does not bar the grant of post-award (future) interest, as the entitlement to such interest is statutory under Section 31(7)(b) of the 1996 Act and is not subject to party autonomy. Further, the Court stated that a party that knowingly accepts the benefit of extra work executed by a contractor without raising any objection cannot subsequently refuse payment by citing a lack of formal prior approval, as a party cannot be permitted to profit from its own inaction.
The Court observed that its appellate jurisdiction under Section 37 of the 1996 Act is extremely circumscribed and not a plenary appellate power to reappreciate evidence or reassess the merits of arbitral findings. Essentially, the interference is warranted only where the Section 34 court has failed to exercise its jurisdiction or has exceeded its bounds.
On the grant of future interest, the Court observed that the issue was no longer res integra, as the Supreme Court has settled that post-award interest under Section 31(7)(b) of the Act is statutory and cannot be contracted out, unlike pre-award interest. Finally, the Court concluded that the discretion to award costs lies with the Arbitrator under Section 31A of the Act, and since the majority of claims were allowed, the award of costs was not perverse or arbitrary.
When an efficacious statutory remedy is available before the Securities Appellate Tribunal under Section 15T of the SEBI Act, 1992, and Section 23L of the Securities Contract (Regulation) Act, 1956, a writ petition under Article 226 of the Constitution is not maintainable
The Delhi High Court in the case of KC Aggarwal vs SEBI [W.P.(C) 2167/2026] dated February 16, 2026, has held that when an efficacious statutory remedy is available before the Securities Appellate Tribunal under Section 15T of the SEBI Act, 1992, and Section 23L of the Securities Contract (Regulation) Act, 1956, a writ petition under Article 226 of the Constitution is not maintainable.
The High Court observed that the present petition appeared to have been filed solely to interdict the IPO of Respondent No. 2, and noted that if the petitioner was aggrieved by any inaction on the part of SEBI, the efficacious remedy available was to approach the Securities Appellate Tribunal (SAT) under Section 15T of the SEBI Act, 1992, and Section 23L of the Securities Contract (Regulation) Act, 1956.
The Court clarified that any person aggrieved by the NOC granted by SEBI is entitled to approach the SAT. Further, the Court observed that both Respondent Nos. 1 and 2 are based in Mumbai, the NOC was granted in Mumbai, and therefore, the Delhi High Court lacked territorial jurisdiction to entertain the petition. The Court also noted that the transactions regarding wrongful debits from the petitioner’s account were already the subject matter of three separate proceedings initiated by the petitioner.
The liability to pay the penalty imposed under Section 4A(3)(b) of the Employees’ Compensation Act, 1923, for default in paying compensation within the stipulated period, is the exclusive responsibility of the employer and cannot be fastened upon the Insurance Company
The Supreme Court in the case of New India Assurance vs Rekha Chaudhary [Civil Appeal No. 174 of 2026] dated February 23, 2026, has ruled that the liability to pay the penalty imposed under Section 4A(3)(b) of the Employees’ Compensation Act, 1923, for default in paying compensation within the stipulated period, is the exclusive responsibility of the employer and cannot be fastened upon the Insurance Company.
The Court clarified that the penalty is levied on account of the employer’s personal fault and negligence for not providing a justifiable cause for the delay, and therefore, while the insurer is contractually and statutorily bound to indemnify the employer for the principal compensation amount and interest thereon under Section 4A(3)(a), the liability for the penalty under Section 4A(3)(b) must be borne by the employer alone.
The Court observed that the EC Act, 1923, is a social welfare legislation intended to provide expeditious compensation to employees and their families, and its provisions must be given a liberal and purposive interpretation. The Court traced the legislative history of Section 4A of the EC Act, noting it was inserted in 1959 and subsequently substituted by an amendment in 1995.
The Court noted that the 1995 amendment deliberately severed the penalty component from the compensation and interest components. The substituted Section 4A(3) now deals with compensation and interest under clause (a), and the penalty for unjustified delay under a separate clause (b). The legislative intent behind this separation was to place the burden of the penalty, which arises from the employer’s default, directly on the employer to act as a deterrent.
Further, the Court observed that the statutory obligation on the employer to pay compensation within one month, as mandated by Section 4A(3), cannot be overridden by any contractual arrangement, such as an insurance policy. Thus, the Court reaffirmed the legal principle that while an insurer is liable for compensation and interest, the penalty imposed under Section 4A(3)(b) is due to the ‘personal fault’ of the insured employer and cannot be passed on to the insurer.
Insolvency and Bankruptcy Code, 2016 has an overriding effect over any inconsistent provisions in other laws, including the Companies Act, by virtue of Section 238 of the IBC. The corporate restructuring under the IBC must be prioritized over stalled and ineffective proceedings under the Companies Act to protect public funds and the larger economic interest
The Supreme Court in the case of Omkara Assets Reconstruction Private Limited vs Amit Chaturvedi [Civil Appeal No.11417 of 2025] dated February 24, 2026, has held that the Insolvency and Bankruptcy Code, 2016 (IBC), is a special statute whose provisions have an overriding effect over any inconsistent provisions in other laws, including the Companies Act, by virtue of Section 238 of the IBC. The Court emphasised that the corporate restructuring under the IBC must be prioritized over stalled and ineffective proceedings under the Companies Act to protect public funds and the larger economic interest.
Essentially, the Apex Court held that an independent proceeding initiated under Section 7 of the IBC for the revival of a corporate debtor is not affected by and shall prevail over pending proceedings under the Companies Act, such as a Scheme of Arrangement, especially when the latter has been rendered defunct and inoperable due to gross, unexplained delays and non-compliance with statutory timelines.
The Court observed that the respondent company had failed to comply with the procedural and statutory timelines mandated under the Companies Act, 1956, and the Companies (Court) Rules, 1959, for the SOA. The delay of almost ten years in getting the scheme sanctioned, which was based on dues as of 2008, rendered it redundant, inoperable, and unenforceable by 2019, especially as the debt had grown astronomically in the interim.
The Court noted that upon the coming into force of The Companies (Transfer of Pending Proceedings) Rules, 2016, the proceedings for the SOA should have been transferred to the National Company Law Tribunal (NCLT). Thus, the exception for matters ‘reserved for orders’ did not apply here, as the second motion was merely pending and had not been reserved for orders when the 2016 Rules became effective.
The Court also held that judicial discipline cannot be invoked by tardy litigators to stall proceedings under the IBC, particularly in cases with significant economic implications involving public funds and the rehabilitation of an industry. It observed that the primary goal of the IBC is the resuscitation of the corporate debtor in the larger public interest, which includes creditors, workmen, and the economy at large. The Court also clarified that a compromise or arrangement under Section 230 of the Companies Act, 2013, can be entered into even during an IBC proceeding.
The incorporation of oppressive and one-sided clauses in a standard form agreement, where the homebuyer has no option but to sign, constitutes an unfair trade practice. Hence, jurisdiction of NCDRC to award reasonable compensation for deficiency in service cannot be curtailed by unfair terms in a builder-buyer agreement
The Supreme Court in the case of Parsvnath Developers vs Mohit Khirbat [Civil Appeal No. 5289 of 2022] dated February 20, 2026, has held that the jurisdiction of consumer fora to award just and reasonable compensation for deficiency in service is statutory and cannot be curtailed or defeated by one-sided and unfair terms in a builder-buyer agreement. The Court clarified that the incorporation of oppressive and one-sided clauses in a standard form agreement, where the homebuyer has no option but to sign, constitutes an unfair trade practice. Accordingly, the Consumer fora are not bound to mechanically enforce a contractual term that stipulates nominal compensation for delay, especially when it results in manifest injustice to the consumer.
Offering possession of a flat without obtaining the mandatory Occupancy Certificate is not a valid offer of possession and amounts to a deficiency in service, asserted the Court, while emphasising that a developer cannot compel a homebuyer to take possession under such circumstances, as the Occupancy Certificate is a statutory pre-condition for lawful delivery.
The Supreme Court observed that the jurisdiction of consumer fora is statutory, not contractual, and is derived from the Consumer Protection Act, 1986. Thus, the power to adjudicate complaints and grant relief for “deficiency in service” under Sections 12, 14, and 22 of the 1986 Act is not limited by the terms of an agreement between the parties.
The Court further observed that housing construction is a “service”, and the failure to deliver possession within the stipulated period constitutes a “deficiency” under the Consumer Protection Act, and noted that the term “compensation” is of wide amplitude and includes redress for mental agony and harassment, not just pecuniary loss. The Court held that the incorporation of such one-sided and unreasonable clauses in a standard form contract, where the purchaser has little to no bargaining power, constitutes an “unfair trade practice” under Section 2(1)(r) of the 1986 Act.
Further, the Court observed that offering possession without a valid Occupancy Certificate is not a lawful offer of possession and constitutes a continuing deficiency in service. A homebuyer cannot be compelled to accept possession in such circumstances, as obtaining the certificate is a statutory pre-condition for lawful delivery. The Court took note of the appellant’s persistent non-compliance and failure to secure the Occupancy Certificate despite repeated undertakings given before the Court.
The National Company Law Tribunal (NCLT) lacks jurisdiction to entertain challenges to provisional attachment orders passed by authorities under the Benami Act, and the remedy for such challenges lies exclusively before the competent forum constituted under the Benami Act itself
The Supreme Court in the case of S. Rajendran vs Deputy Commissioner of Income Tax (Benami Prohibition) [Civil Appeal No. 7140 of 2022] dated February 24, 2026, has ruled that orders passed under the Prohibition of Benami Property Transactions Act, 1988 (Benami Act) cannot be questioned before authorities under the Insolvency and Bankruptcy Code, 2016 (IBC). The Court clarified that the National Company Law Tribunal (NCLT) lacks jurisdiction to entertain challenges to provisional attachment orders passed by authorities under the Benami Act, and the remedy for such challenges lies exclusively before the competent forum constituted under the Benami Act itself.
The Apex Court emphasised that the adjudicatory fora under the IBC must yield to the specialised mechanism created by the Benami Act for disputes pertaining to the exercise of sovereign statutory power, particularly in relation to the determination of legality of title, attachment, or confiscation of property.
The Court observed that both the Benami Act and the IBC are special legislations operating in distinct fields. The Benami Act is a complete and self-contained code for the identification, attachment, adjudication, and confiscation of benami property, with a distinct adjudicatory and appellate hierarchy. On the other hand, the IBC is an exhaustive code governing insolvency resolution and liquidation of corporate persons.
The Court explained that the jurisdiction of authorities under the IBC cannot be expansively construed to trench upon fields founded in the public law domain, as proceedings under the Benami Act are a sovereign exercise aimed at identifying and extinguishing benami transactions and fall squarely within the public law domain. Hence, permitting the NCLT to examine the correctness of an attachment under the Benami Act via Section 60(5) of the IBC would elevate it to a forum for judicial review over sovereign action, which is impermissible.
Section 36 of the IBC specifies that the liquidation estate comprises only assets beneficially owned by the corporate debtor, whereas, the property held benami is, by definition, held in a fiduciary capacity for the real owner and is excluded from the liquidation estate under Section 36(4)(a)(i), added the Court, and pointed out that once the Adjudicating Authority under the Benami Act concludes that the corporate debtor is a benamidar, the beneficial ownership is negated, and such property cannot be administered in liquidation.
The Court went on to observe that the moratorium under Section 14 of the IBC is intended to preserve the debtor’s estate from creditor actions aimed at debt recovery. It does not interdict sovereign proceedings in rem for attachment or confiscation under penal statutes like the Benami Act, which are distinct from creditor enforcement actions.
The Court also explained that the immunity provided under Section 32A of the IBC is event-based and is triggered only upon the approval of a resolution plan or the completion of a liquidation sale. This provision does not retrospectively validate a defective title or convert benami property into the assets of the corporate debtor.
Lastly, the Court concluded that in the event of a conflict between two special acts, the dominant purpose of both statutes must be analysed to ascertain which should prevail, and the primary effort must be to harmonise the statutes. The IBC, which deals with insolvency, cannot be used to dilute or override statutory proceedings undertaken in the public law sphere for the confiscation of tainted property under the Benami Act.
Where Law Officers are engaged by the State on a full-time basis, are prohibited from private practice, and their service conditions substantially mirror those of regular employees, they cannot be denied essential service benefits like Leave Travel Concession (LTC), medical reimbursement, and earned leave solely on the ground that their engagement is “contractual”
The Punjab & Haryana High Court in the case of Shruti Jain vs State of Haryana [CWP-16828-2021 (O&M)] dated February 20, 2026, has held that where Law Officers are engaged by the State on a full-time basis, are prohibited from private practice, and their service conditions substantially mirror those of regular employees, they cannot be denied essential service benefits like Leave Travel Concession (LTC), medical reimbursement, and earned leave solely on the ground that their engagement is “contractual”.
To do so without a rational basis constitutes arbitrary and selective discrimination, which is impermissible under constitutional principles of equality, fairness, and legitimate expectation, added the Court, while emphasising that the substance of the employment relationship must prevail over its form.
The Court observed that the legal profession is sui generis (unique in nature), service-oriented, and cannot be equated with any other traditional profession or commercial venture. It recognized the indispensable role of advocates in the justice delivery system, upholding the rule of law, and preserving the independence of the judiciary.
The Court said that the engagement of lawyers by the State as Law Officers acquires a constitutional dimension, and their role is not transient or ornamental but is structural to constitutional governance, and they occupy a position of trust and responsibility. It observed that the engagement cannot be dismissed as merely “contractual” to deny fair and equitable service benefits.
The Court observed to look beyond the label of “contractual engagement” to the reality of the service relationship, especially where it involves exclusivity, continuity, and institutional integration. The Court also found that the petitioners were appointed against sanctioned posts, received salaries in regular pay scales from the Consolidated Fund, and were prohibited from private practice, making their role institutional and continuous.
Moving further, the Court held that any classification of employees must be based on an intelligible differentia with a nexus to the object sought to be achieved. Since the State failed to provide any rational basis for denying benefits like LTC, earned leave, and medical reimbursement to full-time Law Officers while granting them every other attribute of regular service, the Bench termed such denial as a ‘residual relic of terminology’.
The Court pointed out that by consistently extending pay scale revisions and other allowances in line with regular government employees, the State created a legitimate expectation that the petitioners would not be selectively excluded from core service benefits. Hence, any deviation from this established practice must be reasonable, which the State failed to demonstrate.
A civil court’s jurisdiction to entertain a suit for partition and injunction is not ousted by Section 34 of the SARFAESI Act, 2002, when the suit is filed by a third party (such as a coparcener who is not a borrower or guarantor) asserting an independent civil right in the secured property
The Bombay High Court in the case of Tourism Finance Corporation of India Limited vs Aishwarya Chetan Khedkar [Writ Petition No. 3272 of 2025] dated January 24, 2026, has held that a civil court’s jurisdiction to entertain a suit for partition and injunction is not ousted by Section 34 of the SARFAESI Act, 2002, when the suit is filed by a third party (such as a coparcener who is not a borrower or guarantor) asserting an independent civil right in the secured property, as the relief of partition is beyond the statutory jurisdiction of the Debt Recovery Tribunal.
The Court observed that the jurisdiction of a civil court is plenary and its exclusion cannot be readily inferred. A Tribunal, being a creature of statute, has limited jurisdiction and cannot transgress its statutory limits. The Court rejected the Petitioner’s argument that Section 34 of the SARFAESI Act ousts the civil court’s jurisdiction.
The Court explained that the jurisdiction of the Civil Court is not barred where the civil rights of persons other than the borrower or guarantor are involved, especially when the relief claimed (such as partition) is incapable of being decided by the Debt Recovery Tribunal (DRT). Thus, a suit for partition and injunction by a coparcener falls squarely within the jurisdiction of the civil court.