Supreme Court Observer Law Reports (SCO.LR)

The Supreme Court enforced retroactive operation of the 2016 amendments to the Prohibition of Benami Property Transactions Act, 1988. It held that confiscatory proceedings under the Act are not merely punitive, but serve a larger public purpose of preserving the sanctity of lawful ownership.

The respondent instituted a suit seeking declaration for ownership of properties based on a 2018 Will. The deceased was employed in the company of the respondent’s father. The land was purchased in Raghunath’s name to circumvent statutory restrictions on land acquisitions. The appellants (the wife and children of the deceased) filed an application under Order VII Rule 11(d) of the Civil Procedure Code, 1908 seeking rejection of the claim on the grounds that it was barred under the Benami Act and the Hindu Succession Act, 1956, as the plaintiff was being investigated by the CBI for murder of the deceased. The respondent claimed that he had a “fiduciary relationship” with the deceased and was exempted under the Benami Act. The trial Court rejected the suit but it was restored by the High Court of Karnataka in 2024 for adjudication on merits. The appellants approached the Supreme Court.

The Supreme Court restored the trial Court’s rejection of the suit, emphasising that no person can profit from a wrong doing. It relied on the 2016 amendments to deny exemption, stating that there is no fiduciary relationship between a company and its employee. The Court further held that the appellants were not entitled to the land and that it was liable for confiscation.

The Supreme Court held that proceedings under the Insolvency and Bankruptcy Code, 2016 (IBC) cannot be used as a coercive recovery mechanism for individual contractual claims.

Emerald Mineral Exim Pvt. Ltd. (Corporate Debtor) entered into an agreement with Bengal Shrachi Housing Development (Builder) over sale of a unit. The Debtor secured a loan facility of Rs. 1.5 crores with Dhanlaxmi Bank, with the amount directly disbursed to the Builder. Following a default in repayment, the Bank initiated proceedings before the Debt Recovery Tribunal (DRT), which directed the Builder to deposit Rs. 1.5 crores as security. The Bank then initiated insolvency proceedings under Section 7 of the IBC against the debtor, leading the NCLT to admit the petition and commence Corporate Insolvency Resolution Process (CIRP). The NCLAT set aside the NCLT’s decision and held that because the Bank did not directly disburse the amount to the Debtor, it cannot be termed as “Financial Creditor” under Section 7. The Bank appealed to the Supreme Court.

The Supreme Court upheld the NCLAT order and dismissed the appeal. It held that the transaction was predominantly dependent on the contractual performance of the Builder. As the DRT was actively adjudicating the matter, the IBC proceedings were deemed impermissible as a recovery tactic. The Court held that the IBC’s purpose is to address financial distress and not resolve individual recovery claims.

The Supreme Court held that ex-post facto environmental clearance must be granted in strict conformity with applicable rules if a unit complies with pollution norms and the adverse consequences of denying clearance outweigh those of regularising the operation.

The National Green Tribunal had directed the closure of Formaldehyde units in Rajasthan and Haryana after holding that they were operating without prior environmental clearance. The units appealed to the Supreme Court arguing that the respective Pollution Control Board (PCB) had granted Consent to Establish and Consent to Operate. The Boards had belatedly applied for environmental clearance, which the units did within sixty days. The Order directing their closure was set aside in a separate judgement: Pahwa Plastics Private Limited v Dastak NGO (2022). The appeals from Rajasthan and Haryana remained pending.

The Supreme Court held that closure cannot be directed merely for procedural lapse where the regulator itself was mistaken about the requirement. The Court set aside the NGT’s closure orders and allowed the units to operate. It directed the Ministry of Environment, Forest and Climate Change to decide the pending clearance applications of the units within a month.

The Supreme Court held that writ jurisdiction of a High Court under Article 226 cannot be invoked to direct the registration of First Information Report (FIR) unless statutory remedies have been exhausted.

The appellant, a lease holder in the complainant-company, was accused of using forged documents, fabricated details and signatures to mislead revenue officials into completing measurement of the leased property, after an insolvency process was initiated. Subsequently, the complainant sought the registration of FIR with the Deputy Superintendent of Land Records Office, Tribakeshwar, which was declined. The Bombay High Court directed registration of the FIR after the complainant invoked its writ jurisdiction under Article 226. The appellants approached the Supreme Court in a criminal appeal.

The Supreme Court set aside the High Court order, noting that the complainants failed to show that statutory remedies were unavailable or were inefficacious. The Court held that barring special circumstances, the High Court cannot act as a forum of first instance, bypassing the statutory scheme in its entirety.