This commercial law newsletter provides a brief summary of the latest developments and updates in the month of March 2023 through judgments, notifications, circulars, and other updates in the commercial sector in India including Arbitration, Taxation, Insolvency & Bankruptcy, etc.
Once a decision is made in a Section 34 application, the Court has no power to remit the arbitration matter to the Arbitrator
The High Court of Telangana has held that once a decision is made in an application filed under Section 34 of the Arbitration and Conciliation Act, 1996, (“A&C Act”) the Court cannot remit the matter back to the arbitrator. As per Section 34(4) of the A&C Act, if the Court deems it appropriate and it is so requested by a party, the Court may adjourn the proceedings in the case to give Arbitral Tribunal the opportunity to resume the arbitral proceedings. This course is available only upon a written application made by a party and not suo moto.
[M/s. Sri Rama Constructions v. M/s. Max Infra(l) Ltd. COM.C.A. NO.48 OF 2020 - decided on 02.03.2023]
Power of the Prevention of Money Laundering Act (PMLA) to attach the property of the Corporate Debtor would come to an end once the order of liquidation has been passed
National Company Law Tribunal (NCLT) Jaipur Bench ruled that the power of PMLA to attach the property of the Corporate Debtor would come to an end once the order of liquidation has been passed under Section 32A of Insolvency and Bankruptcy Code, 2016 (“IBC”). Thus, IBC creates a specific bar with respect to proceedings that may be initiated under the PMLA by virtue of the provisions contained in Section 32A.
[M/s Packwell (India) Ltd. v M/s Emgee Cables and Communication Ltd. IA No. 15/JPR/2022 in CP No. (IB)- 601/ND/2018]
Notices under Section 148 issued after six years from the end of relevant assessment year - time barred
Gujarat High Court considered the issue of limitation for issuance of notices under Section 148 of the Income-tax Act, 1961 (‘Act’) for assessment years 2013-14 and 2014-15. The High Court while allowing the petitions observed that the notices issued between the period 01.04.2021 to 30.06.2021 wherein six years had lapsed from the end of relevant assessment year were time-barred.
[Keenara Industries Private Limited v. The Income Tax Officer, Special Civil Application No. 17321 of 2022]
Supreme Court upholds the validity of Assessment orders without its direct service on the assessee if the assessee had knowledge about them otherwise
The Supreme Court of India recently held that attachment orders issued by the revenue for tax arrears will still be valid even if the assessment orders were not served on the assessee, as long as the assessee had knowledge of those assessment orders.
[Commercial Tax Officer vs. Neeraja Pipes Pvt. Ltd. Civil Appeal No. 760 of 2023 - decided on 15.03.2023]
Insolvency & Bankruptcy Code (“IBC”) proceedings cannot bar Negotiable Instruments Act (“NI Act”) proceedings against the director
The Supreme Court of India held that the directors of a company cannot evade their responsibility under Section 138 of the NI Act by using the insolvency of their company as a shield. According to the Supreme Court, the directors’ liability is independent of that of the company, and the directors cannot escape their responsibility under the NI Act just because IBC proceedings are going on against the company.
[Ajay Kumar Radheshyam Goenka vs. Tourism Finance Corporation of India Ltd. Crl. A.No.172/2023 - decided on 15.03.2023]
Supreme Court rules that an Arbitrator can award pendente lite interest if there is no specific bar under contract
The Supreme Court of India held that in view of Section 31(7)(a) of the Arbitration and Conciliation Act, 1996 (“A&C Act”), it is always open to the Arbitrator to award pendente lite interest unless there is a specific bar under the contract.
[Indian Railway Construction Company Limited vs. M/s National buildings Construction Corporation Ltd. Civil Appeal No. 8460/2022 - decided on 17.03.2023]
No modification is permissible once the Resolution Plan is approved by the Committee of Creditors (“CoC”)
The Supreme Court of India has ruled that once a resolution plan is approved by the CoC, it cannot be modified or altered by the Adjudicating Authority (NCLT) unless it is found to be not in conformity with the mandate of the IBC. It was held that any right or ownership claimed by the Corporate Debtor after the approval of the Resolution Plan by the CoC stands extinguished.
[Srei Multiple Asset Investment Trust Vision India vs. Deccan Chronicle Marketeers & Ors. Civil Appeal 1706/2023 - decided on 17.03.2023]
Insolvency And Bankruptcy Board Of India (“IBBI”) revised the format in which a copy of petition under IBC is to be served to the IBBI
The IBBI issued a circular dated 04.03.2023 revising the format for serving of copy of applications to the Board, as mandated under Rules 4, 6 and 7 of the Insolvency and Bankruptcy (Application to Adjudicating Authority) Rules, 2016 (“IBC Rules”). Under the IBC Rules, it is mandatory to serve a copy of the Application to the IBBI before filing it with the Adjudicating Authority for initiating the Corporate Insolvency Resolution Process (“CIRP”). Annexure-A of the said circular provides the revised format whereas Annexure-B provides a step-by-step guide for submission of the application.
The Circular can be accessed here.
Karnataka Government Proposes Changes to Karnataka Tax on Profession, Trades, Callings and Employments Act, 1976 (“Karnataka Professional Tax Act”) to Provide Relief to Lower-Income Earners
The Karnataka Government put forth a proposal to modify the Karnataka Professional Tax Act. During the announcement of the state's budget for the fiscal year 2023-24, the Chief Minister of Karnataka, Basavaraj Bommai, revealed that the exemption limit for professional tax has been raised from Rs 15,000 to Rs 25,000 to alleviate the burden on individuals with lower incomes, whether they are salaried or wage-earning employees. According to the professional tax rates set by the state of Karnataka, individuals who earn a gross monthly income of less than Rs 15,000 are presently not required to pay any taxes.
The proposal can be accessed here.
49th GST Council Meeting held on February 18, 2023
The GST Council has made several recommendations relating to GST compensation, GST Appellate Tribunal, approval of the Report of Group of Ministers (GoM) on Capacity Based Taxation and Special Composition Scheme in certain Sectors on GST, recommendations relating to GST rates on Goods and Services and other measures for facilitation of trade.
Recommendations can be accessed here.
This newsletter was authored by Kushank Sindhu (Counsel), Anmol Singh (Associate Counsel) & Gazal Ghai (Associate Counsel). The authors may be contacted at office@sigmachambers.in.
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