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JSA Successfully represented Resolution Professional of Smaaash Entertainment (Corporate Debtor) in obtaining an Order related to Fraudulent & Wrongful Trading

JSA successfully represented Mr. Bhrugesh Amin (“RP”), Resolution Professional of Smaaash Entertainment Private Limited (“Corporate Debtor”), before the Hon’ble National Company Law Tribunal, Mumbai (“NCLT”), in obtaining an order of fraudulent and wrongful trading under the Insolvency and Bankruptcy Code, 2016 (“IBC”).

The application was filed against a transaction wherein the suspended directors of the Corporate Debtor sold fixed assets of the Corporate Debtor to its alter-ego Fun Gateway Arena Private Limited (“FGAPL”) and further provided consultancy services to FGAPL for Rs. 10.38 crores but only received Rs. 1.96 crores. The RP filed an application under Section 66 of the IBC seeking declaration that the transaction was fraudulent and sought a direction against the respondents, including FGAPL and the suspended directors of the Corporate Debtor, to contribute Rs. 8.42 crores to the assets of the Corporate Debtor.

The NCLT, after considering the submissions advanced, declared the transaction as fraudulent and wrongful under Section 66(1) & (2) of the IBC, and also held that:

The timelines provided under Regulation 35A of the Insolvency and Bankruptcy Board of India (Insolvency Resolution Process for Corporate Persons) Regulations, 2016 for filing applications under Section 66 of the IBC are directory and only procedural in nature and non-compliance of the same does not render an application to be invalid.
The suspended directors were well aware of the financial position of both Respondent No.1 as well as the Corporate Debtor. The transaction had been entered into between the Corporate Debtor and FGAPL at a time when the Corporate Debtor was already undergoing financial hardships.
The suspended directors of the Corporate Debtor have disposed of the assets of the Corporate Debtor despite being aware about the possibility of initiation of insolvency process against the Corporate Debtor and also have failed to exercise due diligence while carrying out the impugned transaction. Furthermore, there has been no attempt by the directors to recover the outstanding dues from Respondent No.1.
The transaction was carried out by FGAPL and the suspended directors of the Corporate Debtor, with a fraudulent intent to take away the valuable assets of the Corporate Debtor and transfer the same to FGAPL, which is an alter-ego of the suspended directors of the Corporate Debtor.
FGAPL, being the beneficiary of the transaction, and the suspended directors of the Corporate Debtor who carried out the impugned transaction, are liable to make contribution to the assets of the Corporate Debtor; and therefore, directed the respondents, including FGAPL and the suspended directors of the Corporate Debtor, to contribute Rs. 8.42 crores to the assets of the Corporate Debtor.

Our disputes team comprised: Lead Partner – Varghese Thomas, Partners – Kunal Kaul and Fatema Kachwalla, and Associate – Virgil Braganza.

Tags Arbitration, Dispute Resolution, JSA, Leading Law Firm, Leading Lawyers, Legal Updates

From Bias to Balance: Indian Supreme Court’s Stand on Unilateral Arbitrator Appointments

A five-judge Bench (“Constitution Bench”) of the Supreme Court of India (“SC”) recently delivered a landmark judgment in Central Organisation for Railway Electrification v. ECI-SPIC-SMO-MCML (JV) (“CORE-II”), on the validity of unilateral appointment clauses. The SC held that such clauses cast justifiable doubts on the independence and impartiality of arbitral tribunals.

Please click here to read the full article by Partner – Anjali Anchayil published in Kluwer Arbitration Blog.

Tags Arbitration Law, Articles, Constitution, Dispute Resolution, JSA, Leading Law Firm, Leading Lawyers, Legal Updates, Supreme Court

JSA successfully represented Tata Power Delhi Distribution Ltd. seeking recovery of capital cost of Rithala Combined Cycle Power Plant by way of depreciation over its useful life

JSA successfully represented Tata Power Delhi Distribution Ltd. (“TPDDL”) in Appeal before Hon’ble Appellate Tribunal for Electricity (“Hon’ble APTEL”) against DERC’s Order dated 11.11.2019 in Petition No. 51 of 2017, which had restricted the recovery of depreciation of Rithala CCPP to six (6) years when the useful life of the Plant was fifteen (15) years.

In the backdrop of power shortage scenario persisting in Delhi, Rithala CCPP was set up in 2011 as a temporary measure to meet peak demand of the distribution utilities of Delhi till availability of adequate and stable electricity for Delhi in 5 – 6 years’ time. The limited issue before the Hon’ble APTEL was that:

DERC by its earlier Order dated 31.08.2017 had inter alia determined the useful life of Rithala CCPP as fifteen (15) years and approved the terms and conditions for purchase and sale of power between TPDDL- D and Rithala CCPP till March 2018.
However, DERC by Order dated 11.11.2019 had erroneously restricted the depreciation claimed by TPDDL only for six (6) years i.e., till FY 2017-18 while the useful life of Rithala CCPP was admittedly fifteen (15) years. Hon’ble APTEL by Judgment dated 10.02.2025 has:

1. observed that Regulation 6.32 of DERC (Terms and Conditions for Determination of Generation Tariff) Regulations, 2011 provides that depreciation shall be calculated annually based on straight line method, over the useful life of the asset.
2. held that since, by Order dated 31.08.2017, DERC determined the capital cost of Rithala CCPP considering the useful life of the plant as fifteen (15) years, therefore recovery of the capital cost by way of depreciation should also be spread over for a period of fifteen (15) years.
3. set aside Order dated 11.11.2019 passed by DERC in Petition No. 51 of 2017.
4. remanded the matter to DERC with directions to allow the recovery of entire capital cost of the Appellant’s power plant at Rithala by way of depreciation over its useful life of fifteen (15) years.

Our disputes team comprised: Lead Partner & Joint Managing Partner – Amit Kapur, Partner – Rahul Kinra, Principal Associate – Aditya Gupta, and Associate – Girdhar Gopal Khattar.

Tags APTEL, Energy Sector, JSA, Leading Law Firm, Leading Lawyers, Legal Updates, Power Distribution, Renewable Energy

JSA Brief | January 2025

This edition of the JSA Brief showcases JSA authored articles, updates & newsletters and achievements such as deals and events in all practice area over the preceding month (January 2025).

To read further details, click here or refer to the below document.

For more details, please contact [email protected]

*In case the document is not visible on the device you are using, please click the link above.

Tags Articles, Deal Making, Events, JSA, JSA Prism, Legal Updates, Newsletters, Publications, Recognitions

Legal Pathway: The MOF memorandum and its impact on infrastructure disputes

The Indian construction industry plays an important role in the country’s economic growth. It often presents complex disputes arising from large-scale infrastructure projects. These disputes usually involve time and cost overruns and breaches of contractual obligations, demanding a specialised resolution mechanism. To date, arbitration has been the preferred mechanism for resolving such disputes.

Please click here to read the full article by Partners – Poonam Verma Sengupta and Ananya Kumar, published in Indian Infrastructure.

Tags Arbitration, Articles, Disputes, Infrastructure, JSA, Leading Law Firm, Leading Lawyers, Legal Updates

JSA Prism | Dispute Resolution | February 2025

Please click here to download the Prism as PDF.

High Courts do not have the power to condone the delay in filing an appeal beyond the period stipulated under Section 42 of the Prevention of Money Laundering Act, 2002

A Division Bench of the Bombay High Court (“Bombay HC”) has, in The Assistant Director, Directorate of Enforcement vs. The Branch Manager, The Goa State Co-op Bank Limited[1] held that the proviso to Section 42 of the Prevention of Money Laundering Act, 2002 (“PMLA”) expressly excludes the applicability of Section 5 of the Limitation Act, 1963 (“Limitation Act”) such that a High Court cannot condone the delay in filing an appeal beyond the stipulated period of 120 (one hundred and twenty) days under Section 42 of the PMLA.

Brief facts

The Assistant Director, Directorate of Enforcement, Surat (“Appellant”) filed a complaint under Section 5(5) of the PMLA before the Adjudicating Authority (“AA”) in respect of a provisional attachment order dated July 17, 2017 (“PAO”) passed under Section 5(1) of the PMLA attaching the property of the Goa State Co-op Bank Limited (“Respondent”). By its order dated December 28, 2018, the AA confirmed the PAO under Section 8 of the PMLA (“AA Order”). Being aggrieved by the AA Order, the Respondent preferred an appeal before the Appellate Tribunal under Section 26 of the PMLA. By an order dated July 4, 2018, the Appellant Tribunal allowed the appeal and set aside the PAO as well as the AA Order (“AT Order”).

Thereafter, the Appellant challenged the AT Order under Section 42 of the PMLA before the Gujarat High Court (“Gujarat HC”) and filed an application seeking condonation of delay of 5 (five) days in filing the appeal. While the delay was condoned by the Gujarat HC, it was realised that by virtue of the explanation (ii) of Section 42 of PMLA, the appeal would lie before the Bombay HC. Accordingly, the appeal filed before the Gujarat HC was withdrawn, and a first appeal was filed by the Appellant before the Bombay HC after a delay of 132 (one hundred and thirty-two) days from the date of withdrawal. In these circumstances, the Appellant filed the present interim application seeking condonation of delay of 132 (one hundred and thirty-two) days (“Interim Application”).

Before the Bombay HC, the Appellant inter alia contended that: (a) the High Court would have the power to condone the delay even beyond the period of 120 (one hundred and twenty) days prescribed under the PMLA since the provisions of Section 42 of the PMLA do not preclude or expressly exclude the application of Section 5 of the Limitation Act; and (b) as per Section 29 (2) of the Limitation Act, where any special or local law inter alia prescribes a period of limitation different from the period prescribed by the Schedule of the Limitation Act, the provisions contained in Sections 4 to 24 of the Limitation Act will apply only when the same are not expressly excluded by such special or local law; (c) In Faizal Hasamali Mirza alias Kasib vs. State of Maharashtra & Anr[2] (“Faizal Mirza”), the Bombay HC considered the provisions of Section 21 of the National Investigation Agency Act, 2008 (“NIA Act”) which are similar to the provisions of Section 42 of the PMLA and held that the court has the power to condone the delay beyond the period stipulated therein.

Issue

Whether the High Court has the power to condone the delay in filing an appeal beyond the period prescribed under section 42 of the PMLA?

Findings and analysis

The Bombay HC dismissed the Appellant’s Interim Application and inter alia held as follows:

under Section 42 of the PMLA, an appeal is required to be filed within a period of 60 (sixty) days (initial period). However, pursuant to the proviso to Section 42 of the PMLA, the High Court may, upon sufficient cause being shown, condone the delay for a further period not exceeding 60 (sixty) days (extended period). To hold that the High Court can entertain an appeal even beyond the extended period stipulated in the proviso to Section 42 would render the words ‘not exceeding sixty days’ otiose.
Section 42 of the PMLA need not expressly exclude Section 5 of the Limitation Act to render it inapplicable to Section 42 of the PMLA. It would suffice if the language of the statue clearly indicates that Section 5 of the Limitation Act has been excluded. The words “within a further period not exceeding sixty days” used in the proviso to Section 42 of the PMLA expressly excludes the applicability of Section 5 of the Limitation Act to an appeal filed thereunder.
In Faizal Mirza, the court came to the finding that it has the power to condone the delay beyond the stipulated period since an appeal filed by an accused under Section 21 of the NIA Act would be a part of the right to life and liberty as enshrined in Article 21 of the Constitution of India. Accordingly, the word ‘shall’ in Section 21(5) is required to be read as ‘may’ and is directory in nature. Thus, the language of Section 21 of the NIA Act and Section 42 of the PMLA are materially different.

Conclusion

This judgment holds that High Courts do not have the power to condone the delay in filing an appeal beyond the stipulated period of 120 (one hundred and twenty) days prescribed under Section 42 of the PMLA. This judgment also clarifies that the extension provision prescribed in Section 5 of the Limitation Act (including for any appeals) would not apply to appeals under Section 42 of the PMLA since the language of Section 42 of the PMLA itself clearly reflects the legislature’s intent to restrict any extension of the limitation period. Consequently, parties seeking to challenge an order under Section 42 of the PMLA must mandatorily comply within the statutory period envisaged therein.

This Prism has been prepared by:

Farhad Sorabjee
Partner

Pratik Pawar
Partner

Shanaya Cyrus Irani
Partner

Meher Mistri
Associate

Jatin Asrani
Junior Associate

For more details, please contact [email protected].

[1] 2025 SCC OnLine Bom 77

[2] 2023 SCC OnLine Bom 1936

Tags Bombay HC, Bombay High Court, Dispute Resolution, Disputes, JSA, JSA Prism, Leading Law Firm, Leading Lawyer, Leading Lawyers, Legal Updates

JSA Prism | Dispute Resolution | January 2025

Please click here to download the document.

Supreme Court clarifies applicability of Limitation Act, 1963 to petitions challenging arbitral awards

On January 10, 2025, the Supreme Court of India (“Supreme Court”) delivered a landmark judgment in My Preferred Transformation & Hospitality Pvt. Ltd. & Anr. vs. M/s Faridabad Implements Pvt. Ltd[1]., addressing the issue of limitation for filing applications to set aside arbitral awards under Section 34 of the Arbitration and Conciliation Act, 1996 (“Arbitration Act”). The Court examined the interplay between the Limitation Act, 1963 (“Limitation Act”) and Section 34(3) of the Arbitration Act, with a particular focus on whether the additional 30 (thirty) day condonable period provided under Section 34(3) of the Arbitration Act can be extended if it expires during court vacations. This decision has significant implications for arbitration in India, clarifying the scope of judicial discretion in condoning delays under the Arbitration Act.

Brief facts

The dispute arose from lease agreements between the appellants (My Preferred Transformation & Hospitality Pvt. Ltd.) and the respondent (M/s Faridabad Implements Pvt. Ltd.). Following such dispute, the respondent invoked arbitration, resulting in an arbitral award dated February 4, 2022, in its favour.

Under Section 34(3) of the Arbitration Act, the appellants were required to challenge the arbitral award before the High Court within 3 (three) months (by May 14, 2022), with a possible condonable extension of 30 (thirty) days. However, pursuant to the Supreme Court’s earlier COVID-19 orders, the limitation period was automatically extended to May 29, 2022. The additional 30 (thirty) day condonable period expired on June 28, 2022, i.e. during the High Court’s summer vacation. The appellants filed their application on July 4, 2022, i.e. the first day after the High Court reopened. The High Court dismissed the challenge to the award being barred by limitation, which the Division Bench affirmed. In view thereof, the appellants then approached the Supreme Court.

Issues

The Supreme Court addressed the following issues in the judgment:

do the provisions of the Limitation Act apply to proceedings under Section 34 of the Arbitration Act, and to what extent?
does Section 4 of the Limitation Act apply to Section 34(3) of the Arbitration Act as per an analysis of the statutory scheme as well as precedents of this Supreme Court on the issue? If Section 4 of the Limitation Act applies, does it apply only to the 3 (three) month limitation period or also the 30 (thirty) day condonable period? and
in light of the answer to Issue 2, will Section 10 of the General Clauses Act apply to Section 34(3) of the Arbitration Act, and if so, in what manner?

Brief contentions of the parties

The appellants contended that Section 4 of the Limitation Act, which allows filing on the next working day if the limitation period expires on a court holiday, should apply to the aforesaid 30 (thirty) days condonable period. Alternatively, they argued that Section 10 of the General Clauses Act, 1897 (“General Clauses Act”), which similarly addresses the expiration of statutory periods on court holidays, should apply to the proceedings under Section 34(3) of the Arbitration Act. The respondent on the other hand, relied on Union of India vs. Popular Construction Co.[2] and Assam Urban Water Supply and Sewerage Board vs. Subhash Projects[3], to contend that the aforesaid provisions do not apply to the 30 (thirty) days condonable period under Section 34(3) of the Arbitration Act.

Findings and analysis

The Supreme Court analysed the provisions of Section 34(3) of the Arbitration Act alongside the Limitation Act and the General Clauses Act, focusing on the applicability of Sections 4 and 10 of the respective statutes, to arrive at the following findings:

Applicability of Section 4 of the Limitation Act: By relying on the language of Section 4 of the Limitation Act, which uses the words ‘prescribed period’, as well as upon the decisions of the Supreme Court in Assam Urban Water Supply (supra) and Bhimashankar Sahakari Sakkare Karkhane Niyamita vs. Walchandnagar Industries Limited[4], it was held that Section 4 of the Limitation Act applies only to the ‘prescribed period’ under Section 34(3) of the Arbitration Act i.e. the initial 3 (three) month limitation period. The additional 30 (thirty) day condonable period under the proviso to Section 34(3) of the Arbitration Act is not the ‘prescribed period’ but a discretionary period, and hence, Section 4 of the Limitation Act does not apply to it.
Applicability of other provisions of the Limitation Act: The Court also analysed the applicability of other provisions of the Limitation Act to the Arbitration Act, based on past judgments. Section 12 of the Limitation Act, permitting exclusion of time spent obtaining certified copies, was held to be applicable to proceedings under Section 34 of the Arbitration Act[5]. The Supreme Court clarified that such time can be excluded from the 3 (three) month limitation period under Section 34 of the Arbitration Act. It was also held that Section 14 of the Limitation Act, which excludes time spent in pursuing remedies before the wrong forum in good faith, also applies to Section 34 of the Arbitration Act[6]. Section 17 of the Limitation Act, which delays the start of limitation in cases of fraud or mistake, does not apply to Section 34 of the Arbitration Act. The Supreme Court held that the limitation under the Arbitration Act begins strictly on the date of receiving the arbitral award, cannot be extended by alleging fraud or mistake.[7]
Express and implied exclusion of provisions: The Court emphasised that the specific timelines for challenging arbitral awards under the Arbitration Act reflects the legislature’s intention to ensure the finality of awards and restrict judicial interference. In this regard, the Supreme Court reaffirmed the decisions in Bhimashankar (supra) and Assam Urban Water Supply (supra) to hold that while the provisions of the Limitation Act generally apply to arbitrations vide Section 43(1) of the Arbitration Act, the stringent language of Section 34(3) ‘but not thereafter’ impliedly excludes application of Section 4 of the Limitation Act to the 30 (thirty) days condonable period under Section 34(3) of the Arbitration Act.
Applicability of Section 10 of the General Clauses Act: Section 10 of the General Clauses Act would not apply to the Arbitration Act as the proviso to Section 10 explicitly excludes the application of the same to acts or proceedings governed by the Limitation Act, including Section 34(3) proceedings under the Arbitration Act.

Concerns expressed with the current legal framework

The Supreme Court addressed the restrictive interpretation of limitation provisions under Section 34(3) of the Arbitration Act, which significantly curtails the ability of parties to challenge arbitral awards. It reaffirmed that Section 29(2) of the Limitation Act incorporates Sections 4 to 24 unless expressly excluded and noted that Section 34(3) of the Arbitration Act does not explicitly exclude Section 4 of the Limitation Act. However, the judicial precedent set by earlier decisions, such as Popular Construction Co. (supra) and Assam Urban Water Supply (supra), equated the ‘prescribed period’ to only the 3 (three) month limitation, thereby impliedly excluding the additional 30 (thirty)day condonable period from the ambit of Section 4 of the Limitation Act. This interpretation has created a rigid framework, leaving limited scope for equitable relief. The Supreme Court acknowledged the inconsistency between the legislative intent and the current legal position, suggesting that these precedents effectively deny remedies on procedural grounds. It urged legislative reform to address this imbalance and ensure a fairer application of limitation laws, balancing procedural rules with the need to preserve substantive rights.

With the above concerns, the Supreme Court, being bound by its earlier decisions, dismissed the appeal, affirming that the petition filed under Section 34 was filed beyond the permissible limitation period.

Conclusion

The Supreme Court rightly expressed anguish at the restrictive interpretation adopted by previous judgments and the implied exclusion of Section 4 of the Limitation Act in the context of Section 34(3) of the Arbitration Act. It emphasised that the Limitation Act and its provisions should not be left to judicial interpretation alone but should be clear and objective enough to be understood and applied by litigants themselves. Legislative intervention is essential to address the ambiguities in the interplay between these statutes, ensuring that procedural rules do not disproportionately hinder substantive justice. Such clarity will foster greater confidence in arbitration as an effective and equitable dispute resolution mechanism.

This Prism is prepared by:

Dheeraj Nair
Partner

Padmaja Kaul
Partner

Yugank Goel
Principal Associate

Vansh Bhutani
Associate

For more details, please contact [email protected]

[1] Civil Appeal No. 336 of 2025 (Arising out of SLP (C) No. 9996 of 2024)

[2] (2001) Supp. (3) S.C.R. 619

[3] Civil Appeal No. 2014 Of 2006

[4] (2023) 8 SCC 453

[5] State of Himachal Pradesh vs. Himachal Techno Engineers, (2010) 12 SCC 210

[6] Coal India Limited vs. Ujjal Transport Agency, (2011) 1 SCC 117; Commissioner, Madhya Pradesh Housing

Board vs. Mohanlal and Company, (2016) 14 SCC 199

[7] P. Radha Bai vs. P. Ashok Kumar, (2019) 13 SCC 445

Tags Dispute Resolution, JSA, JSA Prism, Leading Law Firm, Leading Lawyers, Legal Updates, RERA

Dispute Resolution | Semi-Annual Compendium 2024

This Compendium consolidates the key decisions passed by the Supreme Court of India, High Courts and the National Company Law Tribunal, during the calendar period from July 2024 till December 2024.

To read further details, click here or refer to the below document.

For more details, please contact [email protected]

*In case the document is not visible on the device you are using, please click the link above.

Tags Arbitration Law, Dispute Resolution, High Court, JSA, Leading Law Firm, Leading Lawyers, Legal Updates, NCLT, Newsletters, Supreme Court of India

Home Buyer’s Remedies for Delayed Projects

An estimated 2,000 housing projects across 42 Indian cities have stalled, totaling 5.08

lakh units as of 2024, leaving thousands of homebuyers in limbo. The legal experts share the legal remedies available to the homebuyers in case of a delayed project

Please click here to read the full article by Farid Karachiwala published in Realty+.

Tags Articles, Corporate, Disputes, JSA, Leading Law Firm, Leading Lawyers, Legal Updates, Real Estate

Episode 5: Reimagining Dispute Resolution for Developed India

In this episode of Transforming India: The Road to 2047, hosted by Anil Padmanabhan and presented by Mint in collaboration with JSA Advocates and Solicitors, the focus is on the pivotal role of Alternative Dispute Resolution (ADR) in shaping India’s economic future.

JSA Partners Amar Gupta and Dheeraj Nair explore the challenges and potential of ADR tools like arbitration and Online Dispute Resolution (ODR) in tackling the growing case backlog and boosting investor confidence. They highlight the importance of promoting institutional arbitration, implementing legislative reforms, enhancing judicial training, and utilising technology to streamline dispute resolution, especially for small businesses in Tier 2 and 3 cities.

Watch the video podcast for expert insights on how India can revamp its arbitration system to meet global standards and help realise its ambition of becoming a $30 trillion economy by 2047.