Insolvency and Bankruptcy Code, 2016 – Resolution Plan – Extinguishment of Claims – Clean Slate Principle – Arbitration – Set-off as Defence – Appellant-corporate debtor admitted into CIRP in 2020 – Arbitration invoked by resolution professional – Respondent filed counterclaim before Tribunal but failed to raise its claim before the Resolution Professional during CIRP – Resolution plan approved by NCLT on 13/10/2023 – Tribunal allowed appellant's application under Section 31(6) of A&C Act and rejected counterclaim vide interim award – Single Judge upheld – Division Bench set aside and directed Tribunal to continue proceedings including counterclaim – Held: On approval of resolution plan, all claims not forming part thereof stand extinguished; respondent cannot pursue counterclaim independently or seek affirmative relief – However, respondent permitted to raise plea of set-off as a defence, to the limited extent of defending against appellant's claim, and not to recover any surplus – Appeal partly allowed – Impugned order of Division Bench modified [Paras 8-27].

Clean Slate Principle – Section 31(1), IBC – Effect of Approval of Resolution Plan – Once resolution plan is approved by adjudicating authority, it is binding on all stakeholders and all claims not forming part of resolution plan stand extinguished – Respondent's counterclaim, raised before Tribunal but not lodged before Resolution Professional and not included in resolution plan, held extinguished – Respondent cannot seek any affirmative or independent relief from Tribunal on the basis of such counterclaim [Paras 10-13].

Set-off – Plea of Defence – Paragraph 12.4.1 of Resolution Plan – Resolution plan bars all "payments/settlements" in respect of claims not raised before Resolution Professional, including counterclaims in pending arbitration – However, plain language of Paragraph 12.4.1 does not expressly bar a plea of set-off raised purely as a defence – Applying maxim expressio unius est exclusio alterius, intention to exclude defensive plea of set-off cannot be inferred where it is neither expressly included nor expressly barred – Respondent permitted to raise set-off as defence only; no affirmative or surplus recovery permissible – If arbitration withdrawn by appellant, counterclaim/defence of respondent also fails [Paras 20-27].

Clarifications – (a) If amount in counterclaim found due and exceeds amount awarded to appellant, surplus not recoverable by respondent – (b) If any amount remains payable to appellant after adjustment, same recoverable by appellant – (c) Judgment limited to facts and terms of Paragraph 12.4.1 of the resolution plan [Paras 27-28].

Decision: Appeal partly allowed – Impugned order of Division Bench of Calcutta High Court modified – Respondent not entitled to independently pursue counterclaim but permitted to raise plea of set-off as defence before Arbitral Tribunal on terms specified – Parties to bear their own costs [Paras 30-32].

Service Law – Disciplinary Proceedings – Post-Retirement Punishment – Validity – Reduction of Pay Scale – Appellant, a Punjab & Sind Bank officer, was served a charge sheet on 30.09.2011, the same date he superannuated – Charge No. 2 (failure to ensure end-use of loan) found partly proved – Punishment of reduction by three stages in pay scale on permanent basis imposed vide order dated 15.06.2013 – Appellate Authority dismissed appeal – Single Judge of High Court set aside punishment holding post-retirement penalties under Service Regulations impermissible – Division Bench reversed, relying on Regulation 20(3)(iii) and Mahanadi Coalfields Ltd. – Held: Where extant Service Regulations permit continuance of disciplinary proceedings initiated before superannuation, such proceedings can be continued and concluded post-retirement, and appropriate punishment including reduction of pay scale is permissible – Appeal dismissed [Paras 3–39].

Misconduct – Bank Officer – Failure to Ensure End-Use of Loan – Charge Proved – Appellant allowed cash withdrawals of several lacs without supporting bills, resulting in account turning NPA – Inquiry Officer found Charge No. 2 partly proved – Appellant's comments to Inquiry Report did not challenge the finding regarding absence of bills – Held: A bank officer holds a position of trust dealing with public funds; failure to ensure end-use of loan constitutes financial irregularity exposing the Bank to risk; penal action on proof of such charge cannot be questioned merely because no loss was suffered – Finding neither perverse nor disproportionate [Paras 14–22].

Disciplinary Proceedings – Post-Superannuation – Regulation 20(3)(iii) – Deeming Fiction – Regulation 20(3)(iii) of the Service Regulations provides that an officer against whom disciplinary proceedings have been initiated shall cease to be in service on the date of superannuation but proceedings will continue as if he was in service until conclusion and final order – Held: This deeming fiction permits the proceedings to be continued and brought to logical conclusion; where penalty imposed results in reduction of pay scale, pension can be computed accordingly and such punishment is implementable post-retirement [Paras 25–38].

Distinction Between Penalties – Dismissal vs. Reduction of Pay – Pension Regulations – Where ultimate penalty is dismissal, it may result in forfeiture of pension and retiral dues under Regulation 22 of Pension Regulations, raising no technical difficulty – Where punishment results in mere reduction or adjustment of pension rather than forfeiture in entirety, Court must examine implementability – In present case, reduction in pay scale relates back to date of superannuation and pension is computable accordingly – Held: Punishment is implementable [Paras 36–37].

Precedents Reconciled – Prabhakar Sadashiv Karvade Distinguished – Ramesh Chandra Sharma and Mahanadi Coalfields Ltd. Followed – In Prabhakar Sadashiv Karvade, charge sheet was served after retirement; hence substantive penalties under Service Regulations held impermissible – Distinguished on facts as in the present case charge sheet was served while appellant was in service – Ramesh Chandra Sharma approved; Mahanadi Coalfields Ltd. (three-Judge Bench) followed – Jaswant Singh Gill not followed as overruled by Mahanadi Coalfields Ltd. [Paras 27–34].

Decision: Appeal dismissed – Punishment of reduction of three stages in pay scale on permanent basis upheld – Division Bench order affirmed – No order as to costs.

Criminal Law – Cheating – Section 420 IPC – Movie Investment – Quashing of Proceedings – Appellant, a movie producer, borrowed money from de-facto complainant on promise of 30% share in profits, later 47%, and issued two post-dated cheques of Rs. 24 lacs each towards principal repayment, which were dishonoured – High Court quashed proceedings under Section 406 IPC but declined to quash under Section 420 IPC – Held: Movie was completed and released; initial promise to make the movie was not false; no allegation that movie earned profits; nature of transaction was a high-risk investment with inherent uncertainty; dishonest intention from inception not established – Criminal proceedings under Section 420 IPC quashed – Appeal allowed [Paras 3–21].

Cheating – Ingredients – Dishonest Intention at Inception – Section 415 IPC – Deception as Necessary Ingredient – Section 415 IPC has two parts, both requiring deception – The complainant must show that inducement to part with property was caused by deception of the accused – Mere failure to keep a promise subsequently cannot be the sole basis to presume dishonest intention existed from the very beginning – Where fulfilment of the promise is not entirely in the control of the promisor or there is an inherent risk, the High Court may, in exercise of inherent powers or under Article 226, examine whether dishonest intention existed at the time of making the promise and may quash proceedings accordingly [Paras 12–15].

Movie Production – High-Risk Business – Civil vs. Criminal Liability – Investment on Profit-Sharing Basis – Where money is advanced for a movie project on promise of a share in profits, and the movie is in fact made and released, and there are no allegations that it earned profits, the failure to share profits does not disclose dishonest intention – Movie making is a high-risk business where no certainty of profit exists – An investor who agrees to share profits takes the risk of a possible zero return – The dispute in such circumstances discloses only a civil cause of action [Paras 16–17, 20].

Post-Dated Cheques – Dishonour – Section 138 NI Act – No Presumption of Cheating – Post-dated cheques issued not as inducement to obtain money but to discharge an existing obligation at a future date do not constitute inducement for the purpose of Section 420 IPC – Dishonour of such cheques may give rise to proceedings under Section 138 of the NI Act but does not ipso facto amount to cheating – At the time of issuance, the drawer may have reason to believe sufficient funds would be available by the due date; dishonour of a post-dated cheque by itself is insufficient to presume dishonest intention [Paras 18–20].

Criminal Breach of Trust – Section 406 IPC – No Entrustment – High Court rightly quashed proceedings under Section 406 IPC as there was no entrustment of property by the complainant to the accused [Para 10].

Decision: Appeal allowed – Impugned judgment of the High Court set aside to the extent it declined to quash proceedings under Section 420 IPC – Criminal proceedings under Section 420 IPC quashed.

Consumer Law – Definition of 'Consumer' – Body Corporate – Fixed Deposit – Commercial Purpose – Dominant Object Test – Appellant, a State undertaking, deposited Rs. 9 crores as FDR with respondent-bank; bank subsequently adjusted FDR proceeds against overdraft allegedly sanctioned fraudulently without appellant's sanction – NCDRC dismissed complaint holding deposit was for commercial purpose – Held: Merely because a fixed deposit earns interest does not mean banking service was availed for a commercial purpose; the identity or status of the depositor (individual or body corporate) is not the determining factor; the dominant object and purpose of the transaction must be examined – NCDRC's blanket holding that the deposit was for commercial purpose is not entirely correct – However, in the present case, serious disputed questions of fact regarding alleged fraud and pledge exist which cannot be adjudicated in summary consumer proceedings – Appeal dismissed [Paras 1–33].

Consumer – 'Commercial Purpose' – Test of Dominant Intention – Principles Summarised – No straitjacket formula exists; commercial purpose ordinarily includes manufacturing/industrial activity or business-to-business transactions – Purchase of goods or services must have close and direct nexus with profit-generating activity – Identity of purchaser or value of transaction not conclusive – Dominant intention or purpose must be to facilitate profit generation – Parking of surplus funds by a body corporate with a bank for safe custody or statutory compliance is not per se reflective of a commercial purpose – Deposit made to leverage credit facility for business use, however, may amount to availing banking service for commercial purpose [Paras 14–26].

Consumer Complaint – Maintainability – Fraud and Forgery – Summary Proceedings – Allegations of fraudulent hypothecation and forged FDR – Complaint alleged that FDR was pledged without appellant's consent for overdraft of Rs. 8.10 crores and maturity proceeds were adjusted against overdraft dues; bank claimed original FDR was with it and the document in appellant's possession was forged – Held: Where complaint allegations involve highly disputed questions of fact pertaining to criminal or tortious liability such as fraud or forgery, the same cannot be adjudicated in summary proceedings under the 1986 Act and must be addressed before an appropriate civil or criminal court – Deficiency in service is distinct from criminal or tortious acts of the service provider [Paras 28–32].

Burden of Proof – Deficiency in Service vs. Commercial Purpose – Burden of proving that goods purchased or services availed were for a commercial purpose lies on the respondent and not the complainant – Burden of proving deficiency in service lies on the complainant [Para 19].

Decision: Appeal dismissed – NCDRC order of dismissal affirmed, though not entirely for the same reasons – Dismissal shall not bar the appellant from pursuing appropriate proceedings before a civil or criminal court – No order as to costs.

Remission of Sentence – Life Convict – Applicable Policy – Governing Date – Petitioner, a life convict sentenced under Section 302 IPC, sought remission of sentence – State rejected the representation relying on G.O.Ms. No. 71 dated 17.04.2025, which bars life convicts convicted for kidnapping and related offences under Sections 363-A, 364, 364-A, 366–369, 372 and 373 IPC from grant of special remission – Held: The relevant date for determining the applicable remission policy is the date on which the court holds the convict guilty, subject to a more beneficial regime in a subsequent policy – Since the Trial Court convicted the petitioner in 2005 (affirmed by the Supreme Court in 2008), the 2004 policy of the State Government shall govern the plea for remission – The 2004 policy contained no bar against the petitioner's category – State directed to re-examine the remission plea under the G.O. dated 07.08.2004 and pass fresh orders [Paras 13–21].

Remission Policy – Exclusionary Clauses – Retrospective Application – State contended that the 2013 and subsequent policies, which excluded kidnapping-related convicts from remission, justified rejection of the petitioner's representation – Court found that the 2013 policy revision cannot be applied retrospectively to a convict whose guilt was determined in 2005 – Held: Application of a harsher subsequent policy to an earlier convict, in the absence of a beneficial provision, would be impermissible – State bound by the policy in force at the time of conviction [Paras 16–18].

Parole – Humanitarian Grounds – Ramadan Eid – Petitioner's counsel made a fervent appeal for release on parole for 15 days on account of the approaching Ramadan Eid – Court noted petitioner's good jail conduct and his continued engagement at a petrol pump outside the jail premises under authority permission – Held: Petitioner permitted to prefer an application for parole before the competent authority, which shall pass appropriate orders on the very same day of receipt of the application [Paras 25–27].

Decision: Writ petition kept pending – State Government directed to reconsider remission representation under the 2004 policy and place fresh order on record – Petitioner permitted to seek parole forthwith – Matter listed for further hearing on 06.04.2026.

Motor Accident Compensation – Functional Disability vs Physical Disability – Determination of loss of earning capacity – Medical Board assessed 63% permanent disability – High Court reduced functional disability to 30% without proper reasoning – Held: Functional disability must reflect actual impact on earning capacity considering nature of work – Reduction without cogent reasons unsustainable [Paras 21–22]

Appellate Interference – Reappreciation of Evidence – Duty of High Court – High Court modified MACT findings without detailed analysis of medical and neuropsychological evidence – Held: Appellate court must assign clear and cogent reasons while reversing factual findings – Failure renders judgment unsustainable [Paras 22–23, 35]

Functional Disability – Neurological Impairment – Cognitive deficits – Appellant suffered head injury leading to memory loss, frontal lobe impairment and IQ of 65 – Held: Injuries had severe impact on managerial functions requiring cognitive ability – Functional disability assessed at 100% [Paras 26–30]

Principles for Assessment – Raj Kumar v. Ajay Kumar – Physical disability not equivalent to economic loss – Tribunal must assess real impact on earning capacity based on profession and abilities – Held: Structured approach required; in appropriate cases functional disability may equal or exceed physical disability [Paras 27–28]

Compensation – Enhancement – Multiplier Method – MACT awarded Rs.65,53,811/- – High Court reduced to Rs.35,61,000/- – Supreme Court reassessed compensation considering 100% functional disability – Enhanced to Rs.97,73,011/- with interest @ 7.5% [Paras 31–32]

Just Compensation – Beneficial Legislation – Motor Vehicles Act – Courts must ensure fair and reasonable compensation considering long litigation and victim’s condition – Remand avoided to prevent delay – Supreme Court itself determined compensation [Paras 24, 35]

Decision: Appeal allowed – High Court judgment set aside – Functional disability assessed at 100% – Compensation enhanced to Rs.97,73,011/- with 7.5% interest – Insurer directed to pay with right of recovery – Directions issued for deposit within six weeks

Gratuity – Withholding and Adjustment – Non-vacation of company quarters – SAIL withheld gratuity of retired employees who continued in occupation – High Court directed release relying on Ram Naresh Singh – Held: Rule 3.2.1(c) permits withholding of gratuity for non-compliance including failure to vacate – Management entitled to adjust dues including penal rent – Action valid [Paras 11, 19]

Precedent – Binding nature – Whether order constitutes precedent – High Court relied on order dated 31.03.2017 in Ram Naresh Singh – Held: Said order passed on facts and equitable considerations – Not a binding precedent under Article 141 – Reliance misplaced [Paras 16–18]

Penal Rent – Adjustment against gratuity – Validity – Three-Judge Bench order dated 15.12.2020 clarifies law – Unauthorized retention attracts penal rent – Such rent can be adjusted against gratuity and other dues – Supported by ONGC v. V.U. Warrier – Held: Adjustment permissible [Paras 8, 17]

Reciprocal Obligations – Employer and employee – Vacation of quarters and payment of gratuity – Held: Obligations are mutual and simultaneous – Employee must vacate accommodation – Employer to release gratuity after deductions – Neither enforceable independently [Para 19]

Interest on Gratuity – Withheld amount – Unauthorized occupation – Held: No interest payable for period of unauthorized occupation as per Rules – Employees having retained quarters cannot claim interest – Grant of interest would reward wrongful occupation [Paras 20, 22]

Equitable Relief – Fixation of penal rent – Supreme Court exercised equitable jurisdiction – Considering hardship, penal rent fixed at Rs. 1,000 per month – Balance struck between employer rights and employee hardship – Clarified: Not a precedent [Para 21]

Decision: Civil Appeals allowed – Impugned High Court orders set aside – Withholding and adjustment of gratuity upheld – Interest denied – Penal rent fixed at Rs. 1,000 per month (case-specific) – Directions issued for simultaneous discharge of obligations – Judgment not to be treated as precedent

Service Law – Recruitment – Law Officer – Multiple Choice Examination – Ambiguous Question – Ninth Schedule and Judicial Review – Both Candidates to be Accommodated – Question No. 73 in the recruitment test asked which Schedule of the Constitution is immune from judicial review on grounds of violation of fundamental rights – The recruiting body treated Option 'B' (Ninth Schedule) as the correct answer; the third respondent answered Option 'D' (None of the above) and was penalised 1.25 marks by way of negative marking – Single Judge upheld the recruiting body's answer key relying on Article 31B and the continued validity of Ninth Schedule immunity as affirmed in I.R. Coelho – Division Bench held Option 'D' to be legally correct on the ground that Ninth Schedule immunity is not absolute and is subject to the basic structure test – Held: When Judges of the High Court are themselves at variance on the correct answer, it cannot be expected of mere law graduates to arrive at a definitive answer by interpreting constitutional provisions across several decades of judicial pronouncements – Both answers may be treated as correct; both candidates deserve to be accommodated – Municipal Corporation directed to create a supernumerary post and appoint the third respondent; the appellant already in service to be treated as senior [Paras 10–11].

Decision: Appeal disposed of – Municipal Corporation, Chandigarh directed to accommodate both the appellant and the third respondent by creating a supernumerary post – Upon appointment of the third respondent, the appellant to be treated as senior.

Criminal Law – Murder – Conviction under Sections 302 and 498A IPC – Dying Declaration – Eyewitness Testimony – Conviction Upheld – Appellant-husband convicted for pouring kerosene on his wife and setting her on fire, causing 80–90% burn injuries resulting in death after three days – Trial Court acquitted the appellant on the ground that the bathroom was too small for the incident, family witnesses were inconsistent, and the dying declaration was unreliable given the extent of injuries – High Court reversed the acquittal and convicted the appellant – Held: High Court justified in reversing the acquittal; appeal dismissed [Paras 1–25].

Dying Declaration – Reliability – Medical Certification – Fit State of Mind – Deceased recorded statement (Exhibit P-12) at 2:00–2:30 a.m. with medical endorsement certifying fitness to make a statement – Attending doctor (PW-11) examined the deceased and permitted police to record her statement after satisfying himself that she was conscious – Though OPD slip mentioned self-inflicted burns, PW-11 could not identify who recorded that entry – Contrary oral evidence of PW-7 and PW-16 suggesting unconsciousness held unreliable – Held: Burn injuries being superficial though extensive, the deceased was conscious most of the time and capable of making the dying declaration; absence of nurse at the time of recording does not invalidate it [Paras 13–19].

Eyewitness Testimony – Daughter as Eyewitness – PW-3, the sixteen-year-old daughter of the appellant and the deceased, deposed that she witnessed her father bring kerosene, pour it on her mother and set her on fire – Her testimony was consistent and unrebutted – No material on record to suggest why she would falsely depose against her own father – Held: Testimony of PW-3 clinchingly proves the commission of the offence by the appellant [Paras 10–11].

Circumstantial and Medical Evidence – Recovery of Kerosene Tin and Matchbox – Post-Mortem – PW-4 (post-mortem doctor) confirmed death due to septicaemia resulting from 85–90% superficial burn injuries – Recovery of kerosene tin, matchbox and burnt cloth from the scene of incident proved through Recovery Memo (Exhibit P-1) and neighbour PW-6 – Cumulative evidence of eyewitness PW-3, dying declaration, medical evidence of PW-4, PW-10 and PW-11, and physical recovery unequivocally establish the appellant's guilt – Held: Trial Court erred in acquitting on slight discrepancies; conviction by High Court confirmed [Paras 20–24].

Decision: Appeal dismissed – Conviction and sentence under Sections 302 and 498A IPC affirmed – Appellant directed to surrender forthwith to undergo the remaining part of the sentence.