AKP Dispute Resolution Digest August 31, 2026
We are delighted to share this month's AKP Dispute Resolution Monthly Digest. Please feel free to write to us with your feedback at info@akandpartners.in.
1. Banking and Finance
1.1. Manufacturing Industry
1.1.1. The Supreme Court rules that the exemption for a residential house under the CPC is personal to the judgment-debtor, not his legal heirs
The Hon’ble Supreme Court has held that the exemption available to a judgment-debtor for one residential house under Section 60(1)(ccc) of the Code of Civil Procedure, 1908 (“CPC”) is personal to the judgment-debtor and cannot be claimed by his legal representatives, while also ruling that transfer of execution proceedings from a civil court to a Debts Recovery Tribunal (“DRT”) does not require a fresh notice under Order XXI Rule 22 of the CPC. This ruling came in a batch of appeals arising from a decades-old recovery suit filed by Punjab & Sind Bank (“Bank”) against M/S. Sterling Malt & Foods Pvt. Ltd., whose loans were personally guaranteed by its director, the late Mr Hardayal Singh. After the company was revived through a compromise decree with an incoming trust, the trust later defaulted, prompting the Bank to execute the decree against the guarantor's Delhi residence after his death, naming his widow, Mohini Hardayal Singh, and her children as judgment-debtors The High Court of Madhya Pradesh had set aside the auction of the Delhi property and remanded the matter, holding that the execution suffered from non-service of notices and that the exemption for a residential house could be examined afresh. The issue was whether transfer of the execution proceedings to the DRT vitiated the sale for want of fresh notice, whether non-service of a demand notice under the Income Tax recovery procedure rendered the sale void, and whether the statutory exemption for a residential house survived in favour of the judgment-debtor's legal heirs The Court held that the widow and her children had actual knowledge of the execution proceedings and suffered no substantial injury from non-service of notice, and that the protection for a residential house under Section 60(1)(ccc) of the CPC is confined to the judgment-debtor personally and does not extend to his legal representatives occupying the property. Accordingly, the auction sale of the Delhi property was upheld, reinforcing that procedural lapses which cause no prejudice cannot be used to unsettle bona fide auction sales conducted decades earlier.
1.2. Infrastructure and Engineering
1.2.1. Supreme Court rules minor shortfall in earnest money deposit does not invalidate SARFAESI auction
The Hon’ble Supreme Court has held that a shortfall in the earnest money deposit (“EMD”) furnished along with a bid at a SARFAESI auction does not invalidate the sale where the successful bidder promptly deposits twenty-five per cent of the sale price as mandated under Rule 9(3) of the Security Interest (Enforcement) Rules, 2002 (“Rules”). No prejudice is caused to any other bidder or the borrower. This ruling came in a batch of appeals filed by the auction purchasers, M/S. Airtech Projects Engineers Pvt. Ltd. (the borrower), and the successor bank, United Bank of India (now merged with Punjab National Bank), arising out of the sale of a secured asset in Chennai after the borrower defaulted on a cash-credit facility. Although the auction-purchasers had deposited INR 21,15,000/- (Rupees Twenty-One Lakhs Fifteen Thousand only) against the stipulated EMD of INR 21,50,000/- (Rupees Twenty-One Lakhs Fifty Thousand only), a shortfall of INR 35,000/- (Rupees Thirty-Five Thousand only), the Debts Recovery Appellate Tribunal (“DRAT”) had held the auction to be vitiated for non-compliance with Rule 8(5) of the Rules and directed restoration of possession to the borrower, a view which the High Court of Judicature at Madras upheld. The issue was whether the EMD requirement constituted an essential eligibility condition, non-compliance with which was fatal to the bid, or a mere ancillary condition capable of being waived without vitiating the sale. The Court held that the EMD clause was intended only to filter out non-serious bidders. Since the auction-purchasers had cured any shortfall by depositing 25% of the sale price on the very day of the auction, the minor non-conformity caused no prejudice to the other similarly-placed bidder or the borrower. The Court further directed the bank to refund the surplus sale proceeds to the borrower with interest, since the bank had failed to keep the excess amount in an interest-bearing account. The ruling reaffirms that immaterial deviations from tender conditions, which cause no substantial prejudice, cannot be permitted to unsettle a SARFAESI auction sale.
Read More[1]
2. Taxation Law
2.1. Manufacturing Industry
2.1.1. Supreme Court rules GST notice invoking extended limitation must disclose foundational facts of fraud or suppression
The Hon’ble Supreme Court has held that a show cause notice invoking the extended five-year period of limitation under Section 74 of the Central Goods and Services Tax Act, 2017 (“CGST Act”) cannot be sustained unless the notice itself discloses the foundational facts establishing fraud, wilful misstatement or suppression of facts, and that a mere mechanical recitation of these words does not indicate application of mind. This ruling came in an appeal filed by M/S Tata Steel Limited, challenging a show cause notice issued for three financial years (2018-19 to 2020-21) pursuant to an audit objection raised by the office of the Comptroller and Auditor General regarding a mismatch in input tax credit and short payment of tax. The Department had initially kept the notice “in call book”, i.e., in abeyance, but later revived it as a “protective” measure once the normal three-year limitation period under Section 73 of the CGST Act was found to have expired, seeking instead to justify the notice under the extended period available under Section 74. The issue was whether the extended limitation period under Section 74 could be invoked in the absence of any foundational facts in the notice establishing fraud, wilful misrepresentation, or suppression, and whether a “protective” demand, a concept alien to the GST regime, could keep the notice alive. The Court held that the satisfaction of the Assessing Officer regarding fraud or suppression must be evident from the notice itself, and that a bland allegation of availing input tax credit “without documentary evidence” could not, by itself, justify recourse to the extended period. Accordingly, the Commission set aside both the show cause notice and the consequential Order-in-Original. Still, it granted the Department liberty to initiate fresh proceedings under Section 74, with proper foundational facts, before the extended period expires on 28.02.2027. The ruling underscores that tax authorities cannot bypass the ordinary limitation period unless the statutory ingredients of fraud or suppression are demonstrably made out on the face of the notice.
3. Prevention of Money Laundering
3.1. Hospitality Sector
3.1.1. Chhattisgarh High Court declines to interfere with PMLA attachment of hotel where statutory adjudication is already underway
The High Court of Chhattisgarh has held that a writ petition challenging a provisional attachment order passed under Section 5(1) of the Prevention of Money Laundering Act, 2002 (“PMLA”) is not maintainable where a complete and efficacious statutory mechanism for adjudication of the attachment already exists and has been set in motion before the Adjudicating Authority. This ruling came in a petition filed by Dr Rahul Agrawal and M/s Pacifica Hotels India Pvt. Ltd., challenging the attachment of the Westin Hotel in Goa by the Enforcement Directorate (“ED”), which alleged that the hotel was acquired using proceeds of crime amounting to INR 110 Crores (Indian Rupees One Hundred and Ten Crore only) generated through an alleged liquor scam in Chhattisgarh. The petitioners contended that they had never been named as accused in the underlying FIR, charge-sheets or prosecution complaints, that the Income Tax authorities had already accepted the cash component used for the hotel's acquisition as legitimate business income, and that the ED's case rested merely on statements of co-accused persons and a numerical coincidence between the alleged proceeds and the acquisition cost. The issue was whether the writ court could, at the threshold, quash the provisional attachment on these grounds, notwithstanding the pendency of proceedings before the Adjudicating Authority under Section 8 of the PMLA. The Court held that judicial review at this stage is confined to examining whether relevant material existed before the authorised officer and whether the statutory conditions were considered, and does not extend to weighing the sufficiency or truthfulness of that material as if the Court were sitting in appeal. It further held that income tax proceedings and proceedings under the PMLA operate in distinct statutory fields, so that an assessee's cash being accepted as legitimate for income tax purposes does not, by itself, immunise the same funds from scrutiny as proceeds of crime under the PMLA. The writ petition was accordingly dismissed, with liberty granted to the petitioners to raise all their contentions, including the source of funds and the family settlement relied upon, before the Adjudicating Authority.
Read More[2]
4. Insurance Law
4.1. Agricultural Commodities Trading
4.1.1. Supreme Court rules insurer not liable for loss occurring after insured turnover exceeded the sum insured
The Hon’ble Supreme Court has held that an insurer cannot be held liable for a loss occurring at a time when the insured's turnover had already exceeded the sum insured under a Marine Cargo Annual Turnover Policy, since Section 64VB of the Insurance Act, 1938 statutorily bars an insurer from assuming risk in excess of the premium actually received in advance. This ruling came in appeals filed by The New India Assurance Company Limited against a decision of the National Consumer Disputes Redressal Commission (“NCDRC”), which had allowed a complaint filed by M/s Louis Dreyfus Commodities India Pvt. Ltd. for a fire loss of over INR 20 Crores to cotton bales stored at a Container Freight Station. The insured's turnover, initially covered up to INR 1200 Crores (Indian Rupees Twelve Hundred Crore only), had crossed that limit well before the date of the fire, and the additional premium to enhance coverage was paid only six weeks after the loss occurred. The NCDRC had relied on an email from the insurer's Divisional Manager assuring that coverage would continue irrespective of the turnover exceeding the insured amount, so long as premium instalments were paid on time. The issue was whether such an assurance by the Divisional Manager could bind the insurer despite the statutory embargo under Section 64VB, and whether the insurer was estopped from denying coverage after having accepted the additional premium. The Court held that the Divisional Manager's implied or apparent authority did not extend to creating a new risk or enlarging the insurer's liability contrary to an internal company directive restricting premium adjustments to downward revisions only, and that the doctrine of estoppel cannot be invoked to defeat a clear statutory bar such as Section 64VB. The Hon’ble Court accordingly held that the insurer's acceptance of additional premium, and the corresponding endorsement, took effect only from the date of payment and not retrospectively, thereby excluding the loss from coverage. The judgment reaffirms that statutory preconditions to the assumption of insurance risk cannot be circumvented through the conduct or representations of an agent, however senior.
[1] Special Leave to Appeal (C) No(s). 1441-1446/2014
[2] WPCR No. 473 of 2026
Disclaimer
The note is prepared for knowledge dissemination and does not constitute legal, financial or commercial advice. AK & Partners or its associates are not responsible for any action taken based on its contents.
For further queries or details, you may contact:
Mr. Anuroop Omkar
Partner, AK & Partners
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