1|Page Economic Laws

CA FINAL NEW SYLLABUS

ELECTIVE PAPER 6D
ECONOMIC LAWS

Summary of Significant Case Laws

(Relevant for May,2021 Examinations & Onwards)

Summary of Significant Case Laws Compiled by CA Sanidhya Saraf

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Competition Act,2002
Case Law 1: Mahindra Electric Mobility Limited & Ors vs. CCI & Another
Key takeaway: It is about the violation of section 3 and 4 of the Act and whether CCI can
expand its scope of inquiry or not. The answer is yes, it can expand. the Delhi HC held that
CCI is well within its power to expand the scope of inquiry to include other issues and
parties.

Case Law 2: Competition Commission of India vs M/s Fast Way

Transmission
Key takeaway: Once dominance is made out; it becomes irrelevant whether the
parties are competitors or not. The Supreme Court observed that Section 4(2)(c) of the
Competition Act would be applicable for the simple reason that the Broadcasters were
denied market access due to an unlawful termination of the agreement between the
Broadcasters and MSOs.
Since the reasons for termination provided by the MSOs were justified, and therefore it
rejected the penalty imposed by CCI.

Case Law 3: Rajasthan Cylinders and Containers Limited vs UOI

Key takeaway: CCI held that LPG Cylinder manufacturers had entered into anti-
competitive agreements by rigging bids in IOCL tender and accordingly imposed penalty.
COMPAT upheld decision of CCI. The Supreme Court held that there need not be direct
evidence of cartelization. The Supreme Court held that it was up to the CCI to inquire
further in the case, which it failed to do. The Supreme Court also took note of the fact that
the CCI had failed to summon the IOCL before it, despite the IOCL having “full control
over the tendering process”.
Accordingly, the Supreme Court held that there was not “sufficient evidence” to hold
the LPG cylinder manufacturers in violation of the Competition Act and set aside the
COMPAT orders.

Case Law 4: Re: Umar Javeed and Google LLC

Key takeaway: The CCI held that Google appears to be dominant in the relevant market
as Android accounted for 80% of India’s mobile OS market. While reading Section 4
with Section 32 of the Act, it is important to note that the conduct of Google to tie or
bundle applications and services is an attempt to eliminate effective competition from
the market. There exists an element of coercion as the device manufacturers are coerced
to purchase the GMS suite altogether which results in consumer harm through reduction
in choice of products. It was a violation of Section 4 of the Act.

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Competition Act,2002
Case Law 5: Re: House of Diagnostics LLP and Esaote Asia Pacific
Diagnostic Pvt. Ltd (IMPORTANT)
Key takeaway: CCI found the relevant market to be the ‘market for dedicated
standing/tilting MRI machines in India’ (‘Relevant Market’). Although CCI passes an
order by a majority of two out of three members and imposed penalty on Esaote but there is
a dissenting opinion of CCI Chairperson .The opinion is based on how the term “Relevant
Market is defined” as it was important to decide whether Esaote has abused its dominance
in market or not.
Dissenting Opinion: The CCI Chairperson wholly disagreed with the majority’s view on
the delineation of the Relevant Market. The dissent note observes that the market
cannot be narrowed to standing/ tilting MRI machines alone as any market
delineation would have to necessarily include all MRI machines. Once the market is
defined in this manner, the behavior of Esaote stands constrained by the presence of many
other players as Esaote is a small player in the market of all MRI machines. Therefore,
there was no question of dominance or abuse of dominance.

Case Law 6: In Re: Anticompetitive conduct in the Dry-Cell Batteries

Market in India
Key takeaway: Panasonic entered a price fixing arrangement with its competitors i.e.,
Eveready Industries India Ltd. (‘Eveready’) and Indo National Limited (‘Nippo’) during the
period between May 2009 and August 2016. Panasonic filed a leniency application before
CCI disclosing this conduct and CCI found Panasonic, Eveready and Nippo guilty of a cartel
conduct.CCI found Panasonic, Eveready and Nippo guilty of a cartel conduct.

Case Law 7: In Re: Fx Enterprise Solutions India Pvt. Ltd. and Hyundai
Motor India Limited
Key takeaway: It was alleged that Hyundai forces its customers to purchase passenger cars
tied with CNG Kits, Lubricants and Oils, and Insurance Services from specified vendors.
(Tie-in arrangements). Exclusive supply and refusal to deal: The CCI observed that
merely because the requirement of prior consent before entering a dealership for a
competitor brand, did not amount to exclusivity.
While the CCI delineated the upstream market as the market of sale of passenger cars, the
downstream market was delineated as the market for dealership of Hyundai cars alone.
As such it is not clear from the analysis on the relevant market by the CCI, the reasons
behind not considering the substitutability of different passenger cars by the dealers.
The NCLAT has set aside the order of CCI as the ‘Commission’ has failed to appreciate
the evidence and the impugned order not based on any specific evidence and has been
passed merely on the basis of opinion of ‘DG’.

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Competition Act,2002
Case Law 8: In Re: Samsher Kataria v. Honda Siel Cars India Ltd. & Ors
Key takeaway: The complaint was filed against various automobile manufacturers or original
equipment manufacturers (OEMs) – concerns were restriction of availability of genuine spare
parts of automobiles manufactured by them in open market. It was found that the relevant
market would be market for spares of automobiles,each automobile manufacturer was
dominant in respect of its respective spares and a customer who purchases a car, cannot
substitute spares of a different manufacturer, are ‘locked into’ certain aftermarket suppliers.
OEMs were abusing their dominant position. Each OEM is directed to file an individual
undertaking, within 60 days of the receipt of their order, about compliance to cease and
discontinue from the present anti-competitive conduct, and initiation of action in compliance
of the other directions.

Case Law 9: CCI vs Bharti Airtel Ltd (IMPORTANT)

Key takeaway: The Supreme Court clarified that the jurisdiction of the CCI is not
ousted by the TRAI Act. The TRAI, being the expert regulatory body governing the
telecom sector, has, in the first instance, powers to decide contractual issues. The
Supreme Court has recognised that CCI’s jurisdiction is not excluded by presence of
sectoral regulators and to that end, the CCI enjoys primacy with respect to issues of
competition law. The Supreme Court grants to the CCI a ‘follow- on’ jurisdiction.
CCI could exercise jurisdiction only after proceedings under the TRAI Act had
concluded/attained finality.

CASE LAWS ADDITIONS FOR MAY 21 AND ONWARDS

Case Law 10: Harshita Chawla v. WhatsApp (IMPORTANT)

CCI, Case No 15 of 2020, dated 18.08.2020
Key takeaway:
i)Issue - Facebook-owned WhatsApp is leveraging its dominance in the internet-based
instant messaging apps, by bundling its messaging app with the payment system, i.e.
WhatsApp Pay in contravention of Section 4(2)(a)(i) of the Act.
ii) Important Key Points- The first relevant market would be ‘market for Over-The-Top
(OTT) messaging apps through smartphones in India’ and the second relevant market for the
purposes of assessment of antitrust allegations would be ‘market for UPI enabled Digital
Payments Apps in India’.
The following necessary conditions need to be fulfilled for a tying case to be made
out:
(a) The tying and tied products are two separate products;
(b) The entity concerned is dominant in the market for tying products;

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(c) The consumer has no choice to buy one of the products: tying or tied;
(d) The tying is capable of restricting/foreclosing in the market.
Tested on these parameters, the CCI observed that the first two conditions along with the
dominance of the entity were met, especially when WhatsApp Messenger and WhatsApp
Pay are distinct products offering different services to the users. However, with regard to the
other two conditions, the CCI ruled in favour of WhatsApp.
Due to the voluntary installation of WhatsApp messenger (stated by WhatsApp)
coupled with (i) no explicit coercion on the user to use WhatsApp Pay exclusively or
(ii) influencing the consumer choice implicitly in any other manner, the third condition
was not met.
iii) Conclusion : CCI ruled out the unwarranted and implausible apprehensions of the
Informant on WhatsApp using its dominant position in the first relevant market to gain
leverage in the second relevant market. CCI did not find any contravention of the provisions
of Section 4 of the Act against WhatsApp or Facebook and directed closure under Section
26(2) of the Act.

Case Law 11: Samir Agrawal v. CCI & Ors.

NCLAT, Competition Appeal (AT) No.11 OF 2019 dated 29.05.2020
Key takeaway:
i)Issue – Violation of Section 3 of the Act i.e Anti-competitive agreements

ii) Important Key Points- Mr. Samir Agrawal (“Appellant/Informant”), an independent law
practitioner filed information with the Commission alleging contravention of Section 3 of the
Act by a “hub and spoke cartel” formed between the cab aggregator brands (being the hub),
namely; Ola and Uber and the drivers (being the spokes) using these cab aggregators’ mobile
application and sought investigation. The Commission, vide its order dated 06.11.2018,
observed that no agreement, understanding or arrangement appeared to exist either
between the cab aggregators and their respective drivers or between the drivers inter se
regarding the price-fixing.

iii) Conclusion: The locus standi (right to move to court) to approach Competition
Commission of India under the Competition Act, 2002 lies only with a person “who is either
a consumer of the goods/services in question or a beneficiary of healthy competitive practices
in a given market”. Moreover, NCLAT confirmed opinion of the Commission in regard to
non-existence of a prima facie case warranting closure of the information cannot be
faulted on any ground. There being no merit in this appeal, it is accordingly dismissed.

Case Law 12: Monsanto Holdings Pvt. Ltd. and Ors. vs.CCI
Delhi HC, W.P.(C) 3556/2017 and CM Nos. 15578/2017, 15579/2017 &35943/2017 dated
20.05.2020
Key takeaway:
i)Issue – Violation of Section 3 and 4 of the Act and jurisdiction of CCI

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ii) Important Key Points- The Informants had accused the Petitioner of abusing its role as the
dominant participant inside the marketplace of Bt Cotton Seeds by means of charging
unreasonably high trait (liecnese) fees.Monsanto is the enterprise here.Section 3(5) says
Nothing contained in this section shall restrict-
(i) the right of any person to restrain any infringement of, or to impose reasonable conditions,
as may be necessary for protecting any of his rights which have been or may be conferred upon
him under Patents ,copyrights etc.
It means that Monsanto can charge fees from agencies and CCI has follow-on jurisdiction.Refer
Bharti Airtel Case Law 9 .
 Sections 60 and 62 of Competition Act give the Competition Act an overriding
effect and provide the Act to be in addition to and not in derogation of other Acts.
This Court in Telefonaktiebolaget L.M. Ericsson v Competition Commission of
India & Another provided that Section 60 would not reduce the weight of the
Patents Act and Section 62 makes it clear that Competition Act is in addition to
other laws.

iii) Conclusion: The Hon’ble Judge upholding the jurisdiction of CCI and disregarding the
writ petition of the Petitioners, held that an order surpassed by using the CCI below Section
26(1) of the Competition Act is an administrative order and, consequently, unless its
unreasonable ,the court won’t interfere.

Real Estate (Regulation & Development) Act,2016

Case Law 1: M/s M3M India Pvt. Ltd. & Anr. v. Dr. Dinesh Sharma & Anr
(IMPORTANT)
Key takeaway: The court concluded that "remedies available to the respondents herein
under Consumer Protection Act,1986 and RERA are concurrent, and there is no ground
for interference with the view taken by the National Commission in these matters.
“Concurrent here means simultaneous or joint. It means that home buyers can
commence proceedings under CPA,1986 against developers even after
commencement of RERA.

Case Law 2: Jatin Mavani vs Rare Township Pvt. Ltd.

Key takeaway: Whether multiple Proceedings on same issue are Permissible under
RERA 2016? In the said complaint, after hearing arguments of both sides, the MahaRERA has
already given verdict directing the respondent promoter to execute the registered agreements
for sale with the members of the Rising City Ghatkopar Association. Since the complainant is
also a party, to the said proceeding, he cannot separately agitate this complaint before the
MahaRERA, as it will amount to multiple proceedings on the same issue, which is not
permissible in the RERA Act, 2016.”(MahaRERA) has held that multiple proceedings on
the same issue cannot be allowed under the Real Estate (Regulation & Development) Act,
2016.

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Real Estate (Regulation & Development) Act,2016

Case Law 3: Lavasa Corporation Limited vs Jitendra Jagdish Tulsiani

Key takeaway: Whether the provisions of the RERA would apply in case of an 'Agreement
to Lease' and whether the definition of the term “Promoter”, in the RERA, would include
a 'Lessor', and 'whether the remedy provided to the 'Allottees' under Section 18 of the
RERA can be available only against the 'Promoter', or, in that sense, also against a 'Lessor'?
Mere nomenclature of the document as 'Agreement of Lease' will not in any way take
away the rights given to them by the statute.“If the entire 'Agreement' is perused as
such, then it becomes apparent on the face of it also, that it cannot be termed or treated as
an 'Agreement of Lease', but, in its real purport, it is an 'Agreement of Sale'. The very fact
that more than 80% of the entire consideration amount is already paid by the Respondents
to the Appellant and the lease premium agreed is only of `1/- per annum, including the
period of lease of 999 years, are self-speaking to prove that, in reality, the transaction
entered into by the parties is an 'Agreement of Sale' and not an 'Agreement of Lease'.

Case Law 4: Neelkamal Realtors Suburban Pvt. Ltd. and anr vs UOI
Key takeaway: “RERA is not a law relating to only regulating concerns of the
promoters, but its object is to develop the real estate sector, particularly the
incomplete projects, across the country.” The requirement to pay interest under section
18 is not a penalty as the payment of interest is compensatory in nature in the light of the
delay suffered by the allottee that has paid for his apartment but has not received possession
of it. The obligation imposed on the promoter to pay interest till such time as the apartment
is handed over to him is not unreasonable. The interest is merely compensation for use
of money.” Hence, all such provisions which were in question are held to be
constitutional, valid and legal.”

Case Law 5: Simmi Sikka v. M/s Emaar MGF Land Ltd. (IMPORTANT)
Key takeaway: The obligations of the promoter’s post expiry of the validity of the
registration provided in the Act are applicable to even the real estate projects exempted
from registration. The RERA Act, mentions nowhere that it is applicable only for the
registered projects. The RERA Act, provides certain categories of projects which are not
required to be registered but these are within the ambit of the Act. These projects
mentioned in section 3(2) have been taken out of the registration requirement but not out
of the purview of other provisions of the Act. All real estate projects are covered for
land title defect liability.

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CASE LAWS ADDITIONS FOR MAY 21 AND ONWARDS

Case Law 6 : Keystone Realtors Pvt. Ltd. vs. Anil V Tharthare & Ors.
Citation : SC, Civil Appeal No.2435 of 2019 dated 03.12.2019
Key takeaway:

i)Issue – The construction area of the Project was expanded from 32,395.17 square meters to
40,480.88 square meters, the Developer did not comply with the procedure under para 7(ii) of
the Environmental Impact Assessment (“EIA”) Notification but rather sought an amendment
to the earlier environmental clearance.

1. What is exact interpretation of the EIA Notification?

2. Is there need for Fresh Environmental clearance for expansion beyond limits
approved by prior EC?

ii) Important Key Points- . It was further noted that as on the date of the order construction
at the project site had already been completed. A core tenet underlying the entire scheme of the
EIA Notification is that construction should not be executed until ample scientific evidence
has been compiled so as to understand the true environmental impact (Pollution effects
on environment) of a project. The NGT had already directed the appellant to deposit Rupees
one crore and has set up an expert committee to evaluate the impact of the appellants project
and suggest remedial measures.

iii) Conclusion: The court confirmed the directions of the NGT and directed that the committee
continue its evaluation of the appellants project so as to bring its environmental impact as close
as possible to that contemplated in the EC dated 2 May 2013 and also suggest the compensatory
exaction to be imposed on the appellant.

Case Law 7 : Mumbai Grahak Panchayat V/s Magicbricks, 99acres.com,

Makkan.com, Housing .com and others (MUST READ)
Citation : MahaRera Order in the Suo Moto Enquiry No.17/2018 dated 03.10.2019
Key takeaway: The application was filed by Mumbai Grahak Panchayat before the
MahaRERA informing that the web portals dealing with real estate projects facilitating
sale/purchase of real estate plots, apartment act as ‘real estate agent’ under RERA and in order
to make them responsible, they should be RERA registered.

i)Issue –
1. Whether digital portals “introduce” seller with buyer in sale of real estate?
2. Whether digital portals negotiate in sale of real estate?
3. Whether digital portals “facilitate” sale of real estate sale?
4. Whether digital portals collect charges/ fees/ renumerations/ commission?
5. Whether digital portals can be exempted from the definition of real estate agent, they
being intermediary under the IT Act.

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ii) Important Key Points-

Issue 1:
Portals when they collect the details of the viewer and share them with advertiser/seller and
also disclose the information of promoters to buyers, they introduce the parties to the sale
transaction.
Issue 2:
If the portal simply provide the information about the real estate project, its offering for sale to
the public at large, then they are simply the agencies engaged for advertisement and when
an individual is targeted by contacting and persuading him by the portals for sale and purchase
of listed properties they come under the legal definition of negotiation.
Issue 3:
Web Portals introduce the buyer and seller with each other, they provide the information of the
project to the buyer, they arrange virtual tour of the project and also provide other
information useful for taking an informative decision. Hence, they facilitate the sale of the
real estate project.
Issue 4:
Once any monetory gain is derived for the purpose of performing any act of the real estate
agent by whichever name it amounts the receipt of the fees under the RERA.
Issue 5:
The Parliament has not carved out any exceptions to the applicability of the provisions of
RERA, Hence, we hold that RERA overrides section 79 (Exemption for liability in case
of intermediaries) of the IT Act.

iii) Conclusion:

1. Portals whose activities are simply confined to advertisement defined by section

2 (b) of RERA, need not register themselves as real estate agent, provided in
disclaimer they declare that they are simply advertising agencies and advise
the viewers to cross check the information from other sources including RERA
website.

2. Other portals which carry the function of real estate agent as explained above
need registration. Such portals are directed to register with MahaRera within two
months, if their activities are spread within the territorial jurisdiction of it.

3. Portals will have to register themselves with real estate regulatory authority of a
state where their activities are going on until the registration at national level is
made permissible.

Case Law 8 : Ravinder Kaur Grewal vs Manjit Kaur and others

(IMPORTANT)
Citation : SC, Civil Appeal No. 7764 of 2014, dated 07.08.2019
Key takeaway: It is a property dispute between brothers who are guided by family
settlement memorandum, but few are not ready to follow it ,hence filed a suit in court.

i)Issue –

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1. Whether a person claiming the title by virtue of adverse possession can

maintain a suit under Article 65 of Limitation Act for declaration and
permanent injunction.
2. Whether Article 65 of the Limitation Act only enables a person to set up a
plea of adverse possession as a defendant and cannot protect possession as a
plaintiff?

Note : Adverse possession means when someone acquires ownership of property of movable
or immovable property by continuous use of it and have intention to acquire it without
information to the real owner.

ii) Important Key Points-

A person in possession cannot be ousted by another person except by due procedure of law and
once 12 years’ period of adverse possession is over, even owner’s right to eject him is lost
and the possessory owner acquires right, title and interest possessed by the outgoing
person/owner as the case may be against whom he has prescribed. Once the right, title or
interest is acquired it can be used as a sword by the plaintiff as well as a shield by the defendant
within ken of Article 65 of the Act and any person who has perfected title by way of adverse
possession, can file a suit for restoration of possession in case of dispossession.

iii) Conclusion: Article 65 of Limitation Act, 1963 not only enables a person to set up a
plea of adverse possession as a shield as a defendant but also allows a plaintiff to use it as
a sword to protect the possession of immovable property or to recover it in case of
dispossession.

Case Law 9 : Bikram Chatterji & Ors. vs. Union of India &
Ors.(IMPORTANT)
Citation : SC, Writ Petition Civil No.940/2017, dated 23.07.2019
Key takeaway:

i)Issue – Amrapali Group of Companies proposed to construct 42,000 flats by assuring delivery of
possession in 36 months to the home buyers on the land which was given on lease by
Noida/Greater NOIDA Authority (“Authorities”). Later, Amarpali group were found in serious breach
of their obligation to deliver the projects and the payment due to the Authorities andthe Banks.
1. Whether the charges levied by officials, banks, home purchasers and development
agencies are valid?
2. Whether the Amrapali Group’s RERA registration be cancelled?

ii) Important Key Points-

The Supreme Court ordered a forensic audit to look into the affairs of the Amrapali Group. The
forensic report confirmed that
(i) there had been diversion of funds by the Group by incorporating shell/dummy companies;
(ii) the promoters had created a web of more than 150 companies for routing of funds and

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creating assets;
(iii) the homebuyer’s funds along with the loans from the banks were diverted to other
companies/directors, such funds were used by the promoters to acquire personal assets,
properties and applied towards other business ventures.

The RERA registrations of the various projects of the Group were cancelled and the
National Building Construction Corporation (NBCC) was assigned the task of
completing the projects. The Supreme Court further directed that the Authorities
and the banks will have to recover their dues from other properties and assets of the
Group which have been attached.

iii) Conclusion:
The charges levied by officials, banks, home purchasers and development agencies are
valid.RERA Amrapali Group registration under RERA Act shall be revoked and NBCC
(India) Ltd is finalizing various projects.
The separate lease agreements issued for projects under consideration in favour of Amrapali
Group Authorities are revoked and all the rights will now be vested in the Court Receiver who
has authority to alienate, lease out or take any decision to raise funds. The Court Receiver will
pay money raised to NBCC will complete the project with 8% profit margin (senior Adv.,
ShriR. Venkataramani).

Case Law 10: Sushil Ansal Vs. Ashok Tripathi (IMPORTANT)

Citation : NCLAT, Company Appeal (AT) (Insolvency) No. 452 of 2020 dated 14.08.2020
Key takeaway:

i)Issue –
1. Whether this is a fit case for invoking Rule 11 of the NCLAT Rules to allow the parties to
settle the dispute?
2. Whether the application filed by the homebuyers under Section 7 of the I&B Code was not
maintainable?

ii) Important Key Points- The application under CIRP can be withdrawn only before the
constitution of Committee of Creditors.The NCLAT refused to invoke Rule 11 and held that
while the committee of creditors had not been constituted, invoking such settlement would
be detrimental to the interests of the other claimants including the other allottees and would not
be in consonance with the object of the I&B Code. The NCLAT held that in a case where
interests of the majority of stakeholders are in serious dilemma, it would be inappropriate to
allow settlement with only two (2) creditors which may amount to perpetrating of injustice.

iii) Conclusion:
The NCLAT held that on their own showing, the homebuyers were decree holders (Recovery
Certificates they received from RERA ) seeking execution of money due under the recovery
certificate which is impermissible within the ambit of Section 7 of the I&B Code. Clearly the

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homebuyers application for triggering of CIRP would not be maintainable as allottees.

Further, in the present case, 'decree-holder' although included in the definition of 'creditor'
would not fall within the definition of 'financial creditor' and thus the homebuyers could
not seek initiation of CIRP on that basis. Accordingly, the NCLAT set aside all orders passed
by the NCLT on March 17, 2020 in relation to the insolvency proceedings initiated against
APIL.

Insolvency and Bankruptcy Code,2016

Case Law 1: Swiss Ribbons Pvt. Ltd. & Anr. V. Union of India & Ors.
Key takeaway: Whether IBC was discriminatory between Financial and operational
creditors and whether the code violates any constitutional provisions?
The resolution professional is really a facilitator of the resolution process, whose
administrative functions are overseen by the committee of creditors and by the
Adjudicating Authority."
Repayment of financial debts infuses capital into the economy in as much as banks and
financial institutions are able, with the money that has been paid back, to further lend such
money to other entrepreneurs for their businesses., In any case, workmen's dues, which are
also unsecured debts, have traditionally been placed above most other debts. Thus, it can
be seen that unsecured debts are of various kinds, and so long as there is some legitimate
interest sought to be protected, Article 14 (Right to equality) does not get infracted.

Case Law 2: Pioneer Urban Land and Infrastructure Ltd and Anr vs
Union of India
Key takeaway: The expression "borrow" is wide enough to include an advance given by
the home buyers to a real estate developer for "temporary use" i.e. for use in the
construction project so long as it is intended by the agreement to give "something
equivalent" to money back to the home buyers. It would be treated a financial lending.
Such advance amount would be subsumed within Section 5(8)(f) as the sale agreement
between developer and home buyer would have the "commercial effect" of a
borrowing, in that, money is paid in advance for temporary use so that a
flat/apartment is given back to the lender. Referring to Section 88 of the RERA Act,
the Court said that it was an additional remedy, which will not bar other remedies
available to a homebuyer.

Case Law 3: Macquarie Bank Limited vs Shilpi Cable Technologies Ltd

(IMPORTANT)
Key takeaway: A notice sent on behalf of an operational creditor by a lawyer would be in
order. “The expression “an operational creditor may on the occurrence of a default
deliver a demand notice” under Section 8 of the Code must be read as including an
operational creditor’s authorized agent and lawyer.”
Hence, the court concluded that a lawyer on behalf of the operational creditor can issue a
demand notice of an unpaid operational debt. The court also held that the provision

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contained in Section 9(3)(c) of the Code is not mandatory for initiating insolvency proceedings.
Section 9 (3) would have to be construed as being directory in nature. An
advocate/lawyer can issue a notice under Section 8 on behalf of the operational creditor.
Supreme Court set aside the view of NCLT.

Case Law 4: B.K. Educational Services Pvt. Ltd. vs. Parag Gupta
and Associates
Key takeaway: The Bench observed that since the Limitation Act is applicable to
applications filed under Sections 7 and 9 of the Code from the inception of the Code,
Article 137 of the Limitation Act gets attracted.
“The right to sue”, therefore, accrues when a default occurs. If the default has occurred
over three years prior to the date of filing of the application, the application would be barred
under Article 137 of the Limitation Act, save and except in those cases where, in the facts
of the case, Section 5 of the Limitation Act may be applied to condone the delay in filing
such application. “Hence, the Limitation Act is applicable to applications filed under
Section 7 and 9 of Insolvency and Bankruptcy Code from the inception of the Code.

Case Law 5: State Bank of India vs. V. Ramakrishnan(IMPORTANT)

Key takeaway: Whether section 14 moratorium would apply to a personal guarantor of
a corporate debtor?
Section 14 would apply in favour of the personal guarantor as well. This view was
upheld by National Company Law Appellate Tribunal. The Supreme court has set
aside this order.
Section 31(1), in fact, makes it clear that the guarantor cannot escape payment as the
Resolution Plan, which has been approved, may well include provisions as to payments to
be made by such guarantor. Section 31 is one more factor in favor of a personal
guarantor having to pay for debts due without any moratorium applying to save him.
Section 14 of the Insolvency and Bankruptcy Code, 2016, which provides for a
moratorium for the limited period, on admission of an insolvency petition, would not
apply to a personal guarantor of a corporate debtor.

Case Law 6: Mobilox Innovations Private Limited vs. Kirusa Software

Private Limited
Key takeaway: Whether and to what extent can the NCLT go into the question of “existence
of a dispute”?
The Supreme Court stated that the Adjudicating Authority must see is whether there is a
plausible (reasonable) contention which requires further investigation and that the
“dispute” is not a patently feeble (not having physical strength) argument or an assertion
of fact unsupported by evidence. The Supreme Court allowed the appeal and set aside
the order of the NCLAT i.e. (the notice of dispute does not reveal a genuine dispute
between the parties)

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Insolvency and Bankruptcy Code,2016

Case Law 7: K. Sashidhar vs. Indian Overseas Bank & Ors(IMPORTANT)
Key takeaway: What is the scope of NCLT jurisdiction to enquire into justness of
rejection of the resolution plan?
There is no indication either in the report of the Committee or in the Amendment Act of
2018 that the legislature intended to undo the decisions of the CoC already taken prior
to 6th day of June, 2018. It is not possible to fathom (understand) how the provisions of
the amendment Act 2018, reducing the threshold percent of voting share can be perceived
as declaratory or clarificatory in nature. In such a situation, the NCLAT could not have
examined the case on the basis of the amended provision. For the same reason, the
NCLT could not have adopted a different approach in these matters. Hence, no fault
can be found with the impugned (challenged) decision of the NCLAT."
It clearly means that amendment made by way of reducing the voting share to 66%
from 75 % while passing of a resolution plan by CoC is not applicable for the
decisions made by CoC earlier. (before the amendment came.)

CASE LAWS ADDITIONS FOR MAY 21 AND ONWARDS

Case Law 8 : M. Ravindranath Reddy vs. G. Kishan and Ors

Citation NCLAT, Company Appeal (AT) (Insolvency) No. 331 of 2019 dated 17.01.2020
Key takeaway:

i)Issue – 1.Whether a landlord by providing lease, will be treated as providing services to the
corporate debtor, and hence, an operational creditor within the meaning of Section 5(20) read
with Section 5(21) of the Insolvency and Bankruptcy Code, 2016?

2. Whether the petition filed under Section 9 of the Insolvency and Bankruptcy Code 2016
is not maintainable on account of ‘pre-existing dispute’?

ii) Important Key Points- It was stated that if there is a debt, other than a financial debt or
an operational debt, the creditor will not qualify to make an application under Section 7
or Section 9, as the case may be and therefore, the determination of nature of claim/type of
debt is an important step while considering the admission of an application under the Code.

The NCLAT noted that even though the Bankruptcy Law Reforms Committee recommended
the treatment of lessors/landlords as operational creditors, the same was not included in the
Code and only the claims in respect of goods and services had been retained in the definition
of operational creditor and operational debt under Sections 5(20) and 5(21) of the Code. The
NCLAT held that definition of operational creditor does not give scope to interpret rent
dues as operational debt.

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iii) Conclusion: Landlord being a lessor is not a operational creditor. The code does not define
gooods or services,the general meaning has to be checked.The NCLAT stated that for a debt to be
classified as an operational debt under Code, the following conditions should be satisfied:
I. The debt amount should fall within the definition of "claim" as defined under
Section 3(6) of the Code;
II. Such a claim should fall within the confines of the definition of a "debt" as defined
under Section 3(11) of the Code, meaning thereby that it should arise out of a
liability or an obligation due from any person; and
III. Such a "debt" should fall strictly within the scope of an "operational debt" as
defined under Section 5(21) of the Code, i.e. the claim should arise either in respect
of provision of goods or services including employment or in respect of the
repayment of dues arising under any law for the time being in force and payable
either to the Central Government, any State Government or local authority.

The petition filed under Section 9 of the Insolvency and Bankruptcy Code 2016 is not
maintainable on account of ‘pre-existing dispute’ as the lessor is not an operational
creditor.

Case Law 9 : Maharasthra Seamless Limited vs. Padmanabhan Venkatesh

& Ors
Citation :SC, Civil Appeal No. 4242 of 2019 dated 22.01.2020
Key takeaway:

i)Issue – 1.Whether the scheme of the Insolvency and Bankruptcy Code, 2016 ("Code")
contemplates that the sum forming part of the resolution plan should match the liquidation
value?
2. Whether Section 12-A is the applicable route through which a successful Resolution
Applicant can retreat (Move back)?

ii) Important Key Points-

It has been held that the Adjudicating Authority cannot interfere on merits with the commercial
decision taken by the Committee of Creditors. The COC should make sure that the corporate
debtor needs to keep going as a going concern. The court observed that resolution of the
corporate debtor should be given preference over liquidation of the corporate debtor.
The scope of interference by the Adjudicating Authority in limited judicial review.

iii) Conclusion: There is no provision in the Code, or regulations which prescribe that the bid
of any resolution applicant has to match the liquidation value arrived at, in the manner provided
in Clause 35 of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process
for Corporate Persons) Regulations, 2016.

The Supreme Court held that the exit route prescribed in Section 12A is not applicable to a
Resolution Applicant. The procedure envisaged in the said provision only applies to applicants
invoking Sections 7, 9 and 10 of the Code.

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Case Law 10 : Bijay Kumar Agarwal, Ex-Director of M/s Genegrow

Commercial Pvt. Ltd. vs. State Bank of India & Anr.
Citation : NCLAT, Company Appeal (AT) Insolvency No. 993 of 2019 dated 23.01.2020
Key takeaway:

i)Issue – Whether a financial creditor is permitted to initiate CIRP proceedings under Section 7 of the
IBC against the principal debtor as well as the guarantor, for the same set of claims?

ii) Important Key Points- There is no bar in the ‘I&B Code’ for filing simultaneously two
applications under Section 7 against the ‘Principal Borrower’ as well as the ‘Corporate
Guarantor(s)’ or against both the ‘Guarantors’. However, once for same set of claim
application under Section 7 filed by the ‘Financial Creditor’ is admitted against one of
the ‘Corporate Debtor’ (‘Principal Borrower’ or ‘Corporate Guarantor(s)’), a second
application by the same ‘Financial Creditor’ for same set of claim and default cannot be
admitted against the other ‘Corporate Debtor’ (the ‘Corporate Guarantor(s)’ or the
‘Principal Borrower’).

iii) Conclusion: It is clarified that a creditor cannot sue the principal borrower and claim
the guarantor’s insolvency at the same time.

Case Law 11 : Flat Buyers Association, Winter Hills – 77, Gurgaon vs.
Umang Realtech Pvt. Ltd. and Ors.
Citation NCLAT, Company Appeal (AT) Insolvency No. 926 of 2019 dated 04.02.2020
Key takeaway:

i)Issue – Whether CIRP proceedings initiated by a flat buyer in relation to one project
of a real estate company will affect the other group projects of the company?

ii) Important Key Points- A secured creditor such as ‘financial institutions/banks’ cannot be
provided with flats/apartments being the assets of the Corporate Debtor by preference over the
allottees (unsecured financial creditors) for whom the project has been approved.
The prayer of allottees asking for refund cannot be allowed by the NCLT or NCLAT. However,
after offering allotment, it is open to the allottee to request the IRP/RP/Promoter, whoever is
in-charge to find a third party to purchase the allotted flat/apartment and thus, receive back the
money invested by the said allottee.

iii) Conclusion: CIRP against a real estate company is limited to a project as per the resolution
plan approved by the competent authority, and not to other projects which are separate at other
places for which separate resolution plans have been approved. It was stated that if the same
real estate company has any other project, all such projects cannot be clubbed together.

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Case Law 12 : Savan Godiwala vs. Mr. Apalla Siva Kumar

Citation NCLAT, Company Appeal (AT) (Insolvency) No. 1229 of 2019 dated 11.02.2020
Key takeaway:

i)Issue – Whether a liquidator can be directed to make payment of gratuity to the

employees of the company, in case no fund is created by a company, in violation of the
statutory provision of the Payment of Gratuity Act, 1972.

ii) Important Key Points- The NCLAT held that the provident fund, the pension fund and the
gratuity fund, do not come within the purview of 'liquidation estate' for the purpose of
distribution of assets under Section 53 of the Code. The NCLAT stated that pension fund,
gratuity fund and provident fund cannot be utilised, attached or distributed by the liquidator, to
satisfy the claim of other creditors.
It has also held that the liquidator has no domain to deal with any other property of the
corporate debtor, which does not form a part of the liquidation estate.

iii) Conclusion: The PF, pension fund and the gratuity fund do not form part of the liquidation
estate and therefore, the liquidator, who holds liquidation estate in fiduciary(trust) capacity,
has no authority to deal with such funds.
The NCLAT opined that even in a case where no fund is created by a company, in violation of
the statutory provision of Section 4 of the Gratuity Act, the liquidator cannot be directed to
ensure payment of gratuity to the employees, since the liquidator does not have the power to
deal with properties of the corporate debtor, which do not form part of the liquidation estate.

Case Law 13 : JSW Steel Ltd. Vs. Mahender Kumar Khandelwal & Ors.
Citation NCLAT, Company Appeal (AT)(Insolvency) No. 957 of 2019, dated 17.02.2020
Key takeaway:

i)Issue – Whether after approval of a resolution plan under Section 31 of the Code, it is
open to the Directorate of Enforcement to attach the assets of a corporate debtor on the
alleged ground of money laundering by erstwhile promoters of the corporate debtor.

ii) Important Key Points- The NCLAT observed that a plain reading of Section 32A (1) and
(2) clearly suggests that the Directorate of Enforcement/ other investigating agencies do not
have the powers to attach assets of a corporate debtor, once the resolution plan stands approved
and the criminal investigations against the corporate debtor stands abated.
The NCLAT held that the intent and purpose behind insertion of Section 32A is to provide
certainty to the resolution applicant that the assets of the corporate debtor, as represented to
him, and for which he proposes to pay value/ consideration in terms of the resolution plan,
would be available to him in the same manner as at the time of submission of the resolution
plan.

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iii) Conclusion: Upon a perusal of Section 32A(1) (a) read with the definition of “Related
Party” Section 5(24) of the Code, it is an evident that JSW is not an associate company/ related
party of the Corporate Debtor. The Union of India had stated that after the completion of the
corporate insolvency resolution process, there cannot be any threat of criminal
proceedings against the Corporate Debtor or attachment or confiscation of its assets by
any investigating agency after approval of the resolution plan. NCLAT stayed the order
of attachment passed by the ED and also prohibited it from attaching property of
Corporate Debtor without seeking prior approval of the NCLAT. NCLAT also directed
the that the property already attached by the ED be realised in favour of the resolution
professional immediately.

Case Law 14 : Sagufa Ahmed Vs. Upper Assam Plywood Products Pvt.
Ltd.
Citation SC, Civil Appeal Nos.3007-3008 of 2020 dated 18.09.2020
Key takeaway:

i)Issue – 1. The counsel for the appellants, Mr Gunjan Singh, contended that the limitation
for filing an appeal ( 45 days) would only start from the day when a party receives the order of
a court.
2. Mr Gunjan Singh also contended that due to the COVID 19 pandemic and in accordance
with SC order 23.03.2020 which was “limitation prescribed under the general law or Special
Laws whether condonable or not shall stand extended w.e.f. 15th March 2020 till further order”
so their application for condonation of delay should be allowed.

ii) Important Key Points- The law of limitation finds its root in two latin maxims, one of
which is Vigilantibus Non Dormientibus Jura Subveniunt which means that the law will
assist only those who are vigilant about their rights and not those who sleep over them.
The expression “prescribed period” appearing in Section 4 of the Limitation Act, 1963 cannot
be construed to mean anything other than the period of limitation. Any period beyond the
prescribed period, during which the Court or Tribunal has the discretion to allow a person to
institute the proceedings, cannot be taken to be “prescribed period”.

From 19.12.2019, the date on which the counsel for the appellants received the copy of the
order, the appellants had a period of 45 days to file an appeal. This period expired on
02.02.2020. The appellants did not file the appeal on or before 18.03.2020, but filed it on
20.07.2020. To get over their failure to file an appeal on or before 18.03.2020, the appellants
relied upon SC order dated 23.03.2020.

iii) Conclusion: The Hon’ble SC held that the Appellate Tribunal did not err in computing the
period of limitation from the date of the order of NCLT and that it was the failure of
appellants themselves to file an appeal on or before the stipulated period of time got over.
With respect to the second contention, SC held that the order passed by the SC on 23.03.2020
was only for extension of period of limitation and not the extension of period upto which
delay can be condoned .

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Prevention of Money Laundering Act, 2002

Case Law 1: Directorate of Enforcement v. Deepak Mahajan

Key takeaway: In the instant case,whether the Directorate of Enforcement or Customs
Officer fall within the definition of ‘Police Officer’ under Section 167(2) of CrPC. Since
such important question of law has to be answered, hence the petition is validly brought
under Special Leave Appeal. Supreme Court state that the Enforcement Officer or
Custom Officer can be termed as ‘police officer’ for the purpose of arrest. Magistrate has
jurisdiction under Section 167(2) to authorize detention of a person arrested by any
authorized officer of the Enforcement under FERA and taken to the Magistrate in
compliance of Section 35(2) of FERA.”

Case Law 2: M/s. PMT Machines Ltd. vs The Deputy Director, Directorate
of Enforcement, Delhi (IMPORTANT)
Key takeaway: Before the provisional attachment order was passed by the ED, NCLT
Mumbai had already initiated Corporate Insolvency Resolution Process (CIRP) against
PMT Machines under the Insolvency and Bankruptcy Code, 2016 (IBC), which is still
under process. It was noted that the attachment order was passed in relation to mortgaged
properties in favour of banks, which were not purchased from "proceeds of crime", as they
were purchased and mortgaged with the banks prior to the crime period. ED is not
precluded to attach other private properties and all other assets of the alleged accused.
The Appellate Authority of the Prevention of Money Laundering Act, 2002 (PMLA)
has upheld the prevalence of the IBC over the provisions of PMLA.

Case Law 3: B.K. Singh vs Suraj Pal @ Chacha

Key takeaway: The three accused persons were apprehended by a joint team, on the basis
of information received on movement of wildlife offenders. After search and seizure, a
sack containing uncured trophies of tiger parts, tiger nails and total cash worth Rs.
52,60,000 were recovered from the accused persons.
The court also opined that physical production of the wildlife contraband during trial is
not essential to prove the recovery. It was also accepted by the court that the monies
recovered from the custody of the accused persons were the proceeds of crime under
PMLA. The court, under section 3 of PMLA, also ordered the recovered monies to be
confiscated by the Central Government under sections 8(5) and 8(7) of PMLA.

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Case Law 4: Chhagan Chandrakant Bhujbal vs. Union of India and Ors
(IMPORTANT)
Key takeaway: The Petitioner being former PWD Minister of Maharashtra was accused of
generating huge illicit funds to the tune of Rs.840.16 crores that were money laundered.
The Assistant Director's power to arrest under section 19 does not depend upon the
question as to whether offence is cognizable or non-cognizable. The only conditions,
which are laid down under Section 19 of the Act, pertain to the reasonable belief of the
authority, which is on the basis of the material in its possession. As far as Directors,
Deputy Directors and Assistant Directors are concerned, no authorization of the Central
Government is required; whereas, in respect of other officers, such authorization
may be necessary. The enlisted officers have also been authorised to arrest and initiate
proceedings for attachment of property and to launch prosecution in the designated Special
Court for the offence of money laundering.

Case Law 5: Dalmia Cement Bharat Ltd. Vs State of AP, Hyderabad

Key takeaway: Whether a Statement made before Enforcement Directorate (PMLA)
is binding on the Accused without proof/as Admission? Under PMLA, a person is
required to give truthful statement if such person is summoned by the Director. All such
summoned persons are bound to state the truth or make statements, and produce such
documents as may be required [(Section 50(3) of PMLA)].They must be specially
scrutinized to finding out if they were made under threat or promise from someone in
authority. If after such scrutiny they are considered to be voluntary, they may be
taken into consideration in the same way as confessions are received.

Case Law 6: Financial Intelligence Unit-IND vs Corporation Bank

Key takeaway: The Appellate Tribunal could modify the order passed by the Director, FIU by
reducing the penalty imposed under Section 13 of PMLA on the grounds of beneficial legislation. If
a punishment for an offence is reduced, "there is no reason why the accused should not have the
benefit of the reduced punishment". Hence, the rule that the enactment must be construed as
prospective is not applicable in cases of a . In such cases, the same must be construed
retrospectively.

Case Law 7: Smt. K. Sowbaghya vs Union of India

Key takeaway: The petitioners has challenged the validity of Sections 17, 18 and 19, of the
Act, which provide for Search and seizure, Search of persons and Arrest, respectively? Rule
of Law Section 24 and 44 of PMLA. Merely because the provisions contemplate measures
relating to search, seizure and arrest, the same cannot be considered draconian.
Section 24 as amended by the Amendment Act of 2013 is held to be constitutionally valid.
Section 44 of the Act is concerned it is sought to be contended that Section 44 mandates that
the offence under this Act shall be triable by a Special Court. The entire scheme of this section
is vague, violates the right to speedy trial and also is ambiguous, vague oppressive, arbitrary,

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discriminatory, unconstitutional and offending Articles, 14, 20, 21 and Article 300 of the
Constitution of India and is ultra-vires.The above challenge proceeds on several assumptions.
The petition lacks merit and therefore dismissed

Case Law 8: B. Rama Raju v. Union of India

Key takeaway: The property owned or in possession of a person, other than a person
charged of having committed scheduled offence was equally liable to attachment and
confiscation proceedings. Thus Section 5 (2) were applicable to property acquired
even prior to coming into force of this provision and even so were not invalid for
retrospective penalization.”
It was held that “where property is in ownership, control or possession of person not
accused of having committed an offence under Section 3 and where such property is
part of inter-connected transactions involved in money laundering, then and in such
event presumption enjoined in Section 23 comes into operation and not inherence of
burden of proof under Section 24 of the Act. Therefore, person other than one accused
of having committed offence under Section 3 is not imposed the burden of proof
enjoined by Section 24 but burden lies on person accused of offence under Section 3,
also for attachment and confiscation proceedings.”

Case Law 9: J. Sekar and others v. ED

Key takeaway: Constitutional validity of proviso to Section 5(1) of the PMLA
The second proviso to Section 5(1) of the PMLA is not violative of Article 14 of the
Constitution of India; the challenge in that regard in these petitions is hereby
rejected. If there is a violation of the legal requirements outlined hereinbefore, the order
of the provisional attachment would be rendered illegal. The learned counsel appearing for
the petitioner seeks to withdraw the present petition with liberty to urge all contentions
before the Adjudicating Authority. The petition is dismissed as withdrawn with the
aforesaid liberty. The pending application is disposed of .

Foreign Exchange Management Act, 1999

Case Law 1: IDBI Trusteeship Services Limited v. Hubtown Ltd
Key takeaway: A defendant may be granted leave to defend in a suit for summary judgment.
The summary suit is a unique legal procedure used for enforcing a right in an effective
manner as the courts pass judgement without hearing the defence. The defendant had to
apply for leave for defend, if they want to defend.
The court accordingly directed Hubtown to deposit the principal amount claimed
under the guarantee as a precondition to defend the suit.

Case Law 2: Cruz City I Mauritius Holdings v. Unitech Limited

Key takeaway: Violation of any regulation or any provision of FEMA would ipso jure

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( by the law itself) would not offend the public policy of India. Contravention of any
provision of an act is not equal to contravention of fundamental policy of Indian law.
Hence, foreign arbitral award (Foreign arbitral awards refer to the decision of an arbitral
tribunal of a foreign nation i.e. London here in the case ) can be enforced in India. It clearly
means that contravention of any provision of law in India wouldn’t amount to
contravention of public policy in India and defense party can’t use it to defer or cancel any
foreign award.
Case Law 3: NTT Docomo Inc. v. Tata Sons Ltd
Key takeaway: The primary issue in dispute before the Delhi High Court was the
legitimacy of RBI’s objections to the Award’s enforcement. The Court opined that there
were no provisions in FEMA that absolutely prohibited a contractual obligation from being
performed. If an arbitral tribunal has given an award, RBI is bound by it and it can’t
challenge it. The compromise was enforceable by law. The court also emphasized to give
due importance to contracts entered by Indian Parties as to attract international investors
and also to build goodwill in the global market.

Case Law 4: Venture Global v. Tech Mahindra

Key takeaway: The 2015 Amendment to the Arbitration Act which provided that the patent
illegality standard would not apply to international commercial arbitrations but since
proceedings commenced much before the Amendment (which applies only
prospectively). The patent illegality would be applicable to the foreign award in this case.
Patent illegality (illegal award; unacceptable) is just one ground to decide whether an award
is against public policy or not. If an award is patent illegal it is against public policy and
accordingly it would be set aside. The court relied on the judgement of Renusagar v. General
Electric wherein it was held that any FERA violation, however technical, would render an
international commercial arbitral award unenforceable on public policy grounds. The court
set aside the entire proceedings and arbitral award passed by the sole arbitrator as it is against
public policy.

Case Law 5: Mr. S. Bhaskar vs Enforcement Directorate FEMA

(IMPORTANT)
Key takeaway: The power of confiscation conferred under sub-Section 13 (2) is in
addition to the power to impose penalty under sub-Section 13(1). In other words, it is
open to the Adjudicating Authority to impose any penalty as provided under sub-
Section (1) as well as directing confiscation of currency/security/money or property
in respect of which the contravention has taken place.
Yes, the Appellate Tribunal was justified in law in modifying the order of the Deputy
Director as the Deputy Director was not right in exercising his discretion in ordering
release of the seized foreign currency. It is relevant to state that possession of the foreign
currency of US $20,000/- by the appellant was admittedly illegal; he had not traced his
possession of the foreign currency to any legitimate source of acquisition.

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Case Law 6: Union of India & Ors vs M/s Premier Limited

Key takeaway: Appellate Board constituted under FERA with the Appellate Tribunal
constituted under FEMA for disposal of the appeals filed under Section 52(2) of FERA against
an order passed under Section 51 of FERA which were pending before the Appellate Board as on
01.06.2000. Such appeals stood transferred from the Appellate Board to the Appellate
Tribunal for their disposal.
Special Director (Appeals) is subordinate in hierarchy to the Appellate Tribunal under
Section 49 (5)(b). It’s not possible to have two different appellate bodies for same orders.
Applying the principle of purposive interpretation, it is of the view that appellate forum for
deciding the appeals arising out of orders passed under Section 51 of FERA whether
filed prior to 01.06.2000 or file after 01.06.2000 must be same i.e. Appellate Tribunal
under FEMA.
Case Law 7: Vodafone International Holding (VIH) v. Union of India (UOI)
(IMPORTANT)
Key takeaway: CGP was already part of HTIL corporate structure and sale of CGP share
was a genuine business transaction and commercial decision taken interest of investors
and corporate entity and not a dubious (doubting) one. Site (place where shares are traded)
of shares and transfer of shares is situated in Cayman and shall not shift to India.
Hence, Sale of CGP share by HTIL to Vodafone or VIH does not amount to transfer of
capital assets within the meaning of Section 2 (14) of the Income Tax Act and share of
CGP do not attract capital gains tax .The Supreme court held that in Indian revenue
authorities do not have jurisdiction to impose tax on an offshore transaction between two
non-residents companies where in controlling interest in a (Indian) resident company is
acquired by the non-resident company in the transaction..

Case Law 8: Kanwar Natwar Singh vs Director Of Enforcement & Anr.

(IMPORTANT)
Key takeaway: Whether a noticee is entitled to demand to furnish all the documents in possession
of the Adjudicating Authority including those documents upon which no reliance has been placed?

The principles of natural justice do not require supply of documents upon which no
reliance has been placed by the Authority to set the law into motion. Hence, he is not
entitled to demand to furnish all the documents in possession of the Adjudicating
Authority including those documents upon which no reliance has been placed. Supply
of relied upon documents would serve the purpose of principles of natural justice.

Case Law 9: S.K. Sinha, Chief Enforcement Officer vs

Videocon International Ltd.
Key takeaway: 1973 (FERA) was repealed with effect from 01.06.2000 on coming into
force of the Foreign Exchange Management Act, 1999 (FEMA). Section 49(3) of FEMA
says that “notwithstanding in any other law…., no Court shall take cognizance of an

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offence under the repealed Act……after expiry of a period of two years from the date of
coming into force of FEMA.”
The Supreme Court held that “taking cognizance” does not involve any formal action of any
kind. It occurs as soon as a Magistrate applies his mind to the suspected commission of an
offence. Cognizance is taken prior to commencement of criminal proceedings. Taking of
cognizance is thus a sine qua non (an essential condition )for holding a valid trial. Although
in this case process was issued on Feb 3,2003 which is after 2 years the FERA was repealed
i.e. 01.06.2000 but cognizance of offence took place on May 24,2002 .Hence, the High court
was not right in equating the process and cognizance as same as cognizance is an essential
condition before issuing process under criminal law, therefore the complaint was not
barred by law and criminal proceedings were not liable to be rejected.

Prohibition of Benami Property Transactions Act, 1988

Case Law 1: Mangathai Ammal (Died) Through Lrs vs Rajeswari
Key takeaway: While considering a particular transaction as benami, the intention of the
person who contributed the purchase money is important to decide the nature of
transaction. . The intention of the person, who contributed the purchase money, has to be
decided on the basis of the surrounding circumstances; the relationship of the parties; the
motives governing their action in bringing about the transaction and their subsequent
conduct etc."
Furthermore, the court held that the Benami Transaction (Prohibition) Act would not be
applicable retrospectively.

Case Law 2: Smt. P.Leelavathi vs V. Shankarnarayana Rao

(IMPORTANT)
Key takeaway: In the case of Binapani Paul v. Pratima Ghosh the court had held that “the source
of money had never been the sole consideration, and is only merely one of the relevant
considerations but not determinative (deciding) in character.” "It is true that, at the time of
purchase of the suit properties, some financial assistance was given by Late G. Venkata Rao.
However, as observed by this Court in the aforesaid decisions, that cannot be the sole determinative
factor/circumstance to hold the transaction as benami in nature.
It is not a benami transaction. Only financial assistance by the father in purchasing of the property
will not confer it to be a benami transaction.

Case Law 3: G. Mahalingappa vs G.M. Savitha

Key takeaway: A father purchased a property in the name of her minor daughter.Will it
be considered as a benami transaction or not?
• The property should have been purchased by the benamidar for his own benefit - in
the case in hand the fact that the real owner, the father of the benamidar daughter,
bought the property for his own benefit supported the inference that the father was

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the real owner;

• The fact that the father and mortgaged the property to raise a loan also supported this
inference;That he had let out the property also shows that he was in control of the
same.
• Hence, the court concluded that the circumstances surrounding the transaction,
relationship of the parties, and subsequent conduct of the appellant tend to show
that the transaction was Benami in nature.
•

Case Law 4: Meenakshi Mills, Madurai v. CIT

Key takeaway: In this connection, it is necessary to note that the word 'benami' is used to denote
two classes of transactions which differ from each other in their legal character and incidents The
fundamental difference between these two classes of transactions is that whereas in the former there
is an operative transfer resulting in the vesting of title in the transferee, in the latter there is none
such, the transferor continuing to retain the title notwithstanding the execution of the transfer deed.

Case Law 5: Sh. Amar N. Gugnani Vs. Naresh Kumar Gugnani (Through
Legal Heirs)
Key takeaway: It bears note that benami transactions were very much legal within this
country before the passing of the Benami Act and the relationship of a Benamidar to the
owner was in the nature of a trust/fiduciary relationship because it was the Trusts Act
which contained the provisions of Sections 81, 8 2 and 94 giving statutory recognition
to the benami ownership of the properties being in the nature of trust."The expression
“fiduciary relationship” and a relationship of a trustee cannot be so interpreted so as to in
fact negate the Benami Act itself.

Case Law 6: Pawan Kumar Gupta Vs. Rochiram Nagdeo

Key takeaway: The word "provided" in Section 2(a) of Benami Act cannot be
understood in a different sense. Any other interpretation is likely to harm the interest of
persons involved in genuine transactions, e.g., a purchaser of land might have availed
himself of loan facilities from banks to make up purchase money.The Plantiff is the owner
of suit premises.
The court said “We are, therefore, not inclined to accept the narrow construction of
the word "provided" in Section 2(a) of the Benami Act. So even if appellant had
availed help rendered by his father Pyarelal for making up the sale consideration
that would not make the sale deed a benami transaction. If plantiff (Appelant) is the
owner ,then obviously the defendant will be his tenant and the tenant has paid all the
arrerars of rent ,hence the case was dismissed.

Summary of Significant Case Laws Compiled by CA Sanidhya Saraf

26 | P a g e Economic Laws

Case Law 7: Bhim Singh v. Kan Singh (MOST IMPORTANT)

Key takeaway: Two kinds of benami transactions are generally recognised in India.
Where a person buys a property with his own money but in the name of another person
without any intention to benefit such other person, the transaction is called benami. The
second case which is loosely termed as benami transaction is a case where a person who
is the owner of the property executes a conveyance in favour of another without the
intention of transferring the title to the property thereunder. In this case, the transferor
continues to be the real owner.
The question whether a transaction is a benami transaction or not mainly depends upon
the intention of the person who has contributed the purchase money in the former case and
upon the intention of the person who has executed the conveyance in the latter case.
An order is passed directing the defendant to deliver possession of the suit house to plaintiff
No. 2 (Bhim singh Son) as Bharat singh who purchased the property and handed the pattas
(title deeds) to Bhim Singh,his intentions were clear to give property to Bhim Singh’s Son
and to pay profits to him at the rate of Rs. 50/- per month from September 20, 1956 till
today .

Case Law 8: Valliammal (D) By Lrs vs Subramaniam & Ors

Key takeaway: There is a presumption in law that the person who purchases the property is
the owner of the same. It is well established that burden of proving that a particular sale
is benami lies on the person who alleges the transaction to be a benami.Since the original
plaintiff failed to prove that he had provided the money for the purchase of the land and the
reasons why he purchased the property benami in the name of his wife, the High Court has
come to the right conclusion that Ramayee Ammal did not hold the property as benami on
behalf of her husband Malaya Gounder.For the reasons stated above, we do not find any
merit in this appeal and dismiss the same with no order as to costs.

Case Law 9: Niharika Jain W/o Shri Andesh Jain Vs Union of India
(IMPORTANT)
Key takeaway: Whether amendments in section 3 of Prohibition of Benami
Transaction are “retrospective” or “prospective” in nature?
While holding the said sub-section (3) as prospective, the Rajasthan High Court observed that-
Unless a contrary intention is reflected, a legislation is presumed and intended to be
prospective;Where an amendment affects rights or imposes obligations or castes a new
duties or attached a new disability is to be treated as prospective; Accordingly, the
Rajasthan High Court threw the entire transactions entered by the petitioner before
amendment out of the purview of Benami Act.

Summary of Significant Case Laws Compiled by CA Sanidhya Saraf