Contract of Guarantee – Corporate Guarantee – Section 126 of the Indian Contract Act, 1872 – Liability of Guarantor – Ship Repair Charges – Defendant No. 1, a granite exporter, executed a corporate guarantee dated 25.04.1998 undertaking to pay US $1,00,000 to the plaintiff-ship repair company out of freight payable to the vessel owner – Defendant No. 1 contended that the document was merely a freight-payment arrangement and not a guarantee – Held: A conjoint reading of the letter dated 22.04.1998 and the corporate guarantee dated 25.04.1998 clearly establishes an independent undertaking satisfying the requirements of Sections 126 to 128 of the Contract Act – Defendant No. 1 had expressly assured payment and its own witness acknowledged the document as a conditional guarantee letter – Defendant No. 1 liable to pay the suit amount [Paras 14–25].

Essentials of Contract of Guarantee – Section 126, Indian Contract Act, 1872 – A contract of guarantee is an undertaking to perform the promise or discharge the liability of a third person in case of his default – The surety's liability is co-extensive with that of the principal debtor and the creditor may proceed against either without exhausting remedies against the other – Past consideration and forbearance to sue the principal debtor constitute valid consideration for a guarantee – A guarantee is a separate and independently enforceable contract [Paras 15–21].

Estoppel by Conduct – Charter Party Conditions – Defendant No. 1 contended that the guarantee was subject to Charter Party conditions requiring freight to be paid to the vessel owner and that no amendment was made thereunder – Held: Defendant No. 1 itself had acted upon the arrangement by processing RBI approval and issuing remittance instructions to the Bank without insisting on amendment – Having acted upon the letter dated 25.04.1998, Defendant No. 1 is estopped by conduct from pleading that Clause 30 of the Charter Party was unamended [Para 26].

Dominus Litis – Non-Impleadment of Vessel Owner – Necessary and Proper Party – Order I Rule 10(2) CPC – Defendant No. 1 urged that the vessel owner ought to have been impleaded – Held: The plaintiff being dominus litis is entitled to choose the parties against whom relief is sought and cannot be compelled to implead a party against whom no relief is claimed unless such party is a necessary party without whose presence an effective decree cannot be passed – The failure of defendants to implead other potentially liable parties cannot defeat the plaintiff's claim [Paras 27–32].

Banking Law – Erroneous Remittance – Third-Party Procedure – Order VIII-A CPC – Bank's Liability – Canara Bank, despite receiving clear written instructions and Form A-2 from Defendant No. 1 to remit US $1,00,000 to the plaintiff, erroneously transferred the amount to the vessel owner – Bank could not rely on the Charter Party Agreement, to which it was not a party, to justify the erroneous remittance – Held: Once clear instructions were issued by its customer, the Bank was duty-bound either to comply or seek clarification and could not unilaterally remit funds contrary to the mandate – Bank liable to indemnify Defendant No. 1 under the third-party procedure – Third-party decree against the Bank affirmed [Paras 34–36].

Pleadings – Evidence Beyond Pleadings – RBI Approval Plea – The Bank's contention that remittance required prior RBI approval was not raised in the pleadings – Held: No amount of evidence can be looked into in the absence of proper pleadings – The plea does not merit acceptance; moreover, Defendant No. 1's own communication (Exhibit P13) showed that RBI processing was being undertaken – Bank ought to have withheld the amount and awaited further instructions rather than remitting to the vessel owner [Para 33].

Decision: Both appeals dismissed – No order as to costs – Concurrent findings of the Single Judge and Division Bench of the Madras High Court affirmed – Defendant No. 1 liable to the plaintiff; Defendant No. 2 Bank liable to indemnify Defendant No. 1 under the third-party decree.

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 – Quashing of FIR – Premature Exercise of Inherent Powers – Section 482 CrPC – Forgery and Cheating – FIR alleged criminal conspiracy by respondents-accused to grab ancestral property and misappropriate bank deposits of the complainant's father by forging his signatures on nomination documents and sale deeds – High Court quashed the FIR holding that ingredients of fraud, misrepresentation and forgery were not made out and that the allegations were speculative – Held: High Court prematurely quashed the FIR when investigation was in full swing and the questioned documents had already been forwarded to the State Forensic Science Laboratory for handwriting examination – Impugned order set aside [Paras 14–18, 24].

Inherent Powers – Quashing of FIR – Handwriting Expert Report Pending – Section 482 CrPC – Where allegations of forgery are set out in the FIR and the Investigating Agency has forwarded disputed documents to a handwriting expert, an order quashing the FIR without awaiting the expert's report is wholly unjustified – Once the Court was apprised that analysis of the signatures on questioned documents was ongoing at SFSL, there was no justification to exercise jurisdiction under Section 482 CrPC – Proof of forgery would evidently depend upon the outcome of the comparison to be conducted by the handwriting expert [Paras 16–17, 20].

Forensic Evidence – SFSL Report – Forged Signatures Established – SFSL reports dated 27th June, 2024 and 31st August, 2024 established that the signatures on nomination documents and bank closure documents were facsimile stamps and did not match the admitted specimen signatures of the complainant's father – Investigation further disclosed that respondent No. 1 undervalued the property using false circle-rate documents, paying Rs. 32,04,000 as stamp duty instead of the legally payable Rs. 67,91,241, causing a loss of Rs. 35,87,242 to the Government exchequer [Paras 11, 21].

Precedent – Applicability – Mir Nagvi Askari v. CBI – High Court's reliance on the said judgment to quash the FIR was neither relevant nor applicable to the facts of the present case – Since the handwriting expert's report had not yet been received at the time of quashing, it was premature to record any finding on falsification of documents and forgery – Prosecution of the accused persons could not be stifled at the threshold [Paras 19, 22].

Prima Facie Case – Criminal Misappropriation – Allegations that respondents fraudulently posed as nominees of the complainant's father and usurped deposits from his and his deceased wife's bank accounts constitute, prima facie, the offences of fraud and criminal misappropriation – Material collected by the Investigating Officer was amply sufficient to proceed against the accused [Para 23].

Decision: Appeals allowed – Impugned judgment and order dated 8th January, 2024 passed by the High Court of Himachal Pradesh in Cr. MMO No. 50 of 2023 set aside – Investigating Officer directed to conclude investigation and file report under Section 173(2) CrPC / Section 193(3) BNSS before the Court concerned at the earliest – If report already filed, trial Court to proceed as per law – Observations restricted to disposal of present appeals and shall not bear upon rights and defences of parties at appropriate stage.

Insurance Law – Fraudulent Claim – Fire in Godown – Arson – Respondent raised a claim of Rs. 28.20 crores attributing fire in its godown on 25.03.2011 to a short circuit — Insurance coverage enhanced shortly before the incident from Rs. 15 crores to Rs. 19 crores and an additional policy for Rs. 17 crores obtained — Truth Labs forensic report established presence of kerosene, a known fire accelerant, at the seat of fire through GC-MS analysis, ruling out accidental cause — Forensic examination of electrical infrastructure found no evidence of short circuit or electrical malfunction — Held: Fire was the result of deliberate human intervention engineered for unlawful gain [Paras 4, 5, 13, 14, 18].

Fraudulent Claim – Fabricated Supplier Invoices – Surveyor's Report – Surveyor's report disclosed material discrepancies between VAT returns submitted by alleged suppliers and those filed with the Commercial Taxes Department — Alleged suppliers found to be non-existent or unrelated to claimed transactions — Invoices produced found to be fabricated — Accounts and records manipulated to inflate the claim — Respondent failed to rebut these findings with credible material — Held: Policy conditions violated — Repudiation warranted [Paras 6, 16, 17].

Fraud – Principle that Fraud Vitiates All Solemn Acts – No Partial Relief – Fraud vitiates all judicial and solemn acts — Once a claim is founded on fraud, the entire edifice of the claim collapses and no relief can be granted — There is no concept of partial or equitable relief in cases tainted by fraud — Quantification of loss cannot override the foundational requirement of a genuine and bona fide claim — Insurance contract cannot be used as an instrument of unjust enrichment — Held: NCDRC fell into error in awarding Rs. 3.33 crores merely because some loss was shown to have occurred [Paras 20, 21, 22, 23].

SIT – Directions for Criminal Investigation – Fraudulent insurance claims involving staged incidents have serious ramifications on the integrity of the insurance system and public confidence — Commissioner of Police, Ahmedabad, directed to constitute a Special Investigation Team (SIT) headed by an officer not below the rank of Deputy Commissioner of Police — SIT to conduct comprehensive investigation into the incident and persons involved — Investigation to be completed within three months — Report to be submitted before this Court in a sealed cover [Paras 25, 26, 27].

Decision: Civil Appeal No. 6100 of 2024 allowed — Impugned order of NCDRC set aside — Claim of respondent repudiated in toto — Appellant-Insurance Company absolved of all liability — Amount deposited before the Registry to be refunded with accrued interest within two weeks — SIT directed to be constituted by Commissioner of Police, Ahmedabad — Matter listed on 21.07.2026 — Civil Appeal No. 10019 of 2024 dismissed.

Criminal Law – Section 319 CrPC – Summoning Additional Accused – Standard of Evidence – "Strong and Cogent" Standard – Complainant (PW-1) sought summoning of two additional persons, Rajendra and Mausam, as accused on the basis of alleged conspiracy – Trial Court rejected the application holding that evidence of PW-1, PW-6 and PW-7 was materially inconsistent and did not meet the standard for summoning under Section 319 CrPC – High Court affirmed the rejection – Held: The power under Section 319 CrPC is extraordinary and to be exercised sparingly, but the standard is "strong and cogent evidence" and not proof beyond reasonable doubt – Trial Court misdirected itself by applying a higher-than-necessary standard, conducting a virtual mini trial, and fragmenting the evidence rather than assessing its cumulative weight – Appeals allowed [Paras 6–12].

Evidentiary Threshold – Three Stages of Judicial Scrutiny – Section 319 CrPC – Court explained three distinct levels of evidentiary threshold applicable at different stages of criminal proceedings – Prima facie standard at the charge-framing stage requires only reasonable ground to believe involvement – "Strong and cogent" standard at the Section 319 stage requires reliable and reasonably persuasive evidence without demanding proof beyond reasonable doubt – Proof beyond reasonable doubt is the highest standard applicable only at the conviction stage – Held: At the Section 319 stage, minor inconsistencies in witness accounts do not automatically negate the overall reliability of evidence; the court assesses only whether a reasonable inference of involvement exists [Paras 6–7].

Section 319 CrPC – Scope of Pre-Trial Scrutiny – Limits on Trial Court Discretion – Trial Court erred in relying on absence of jail records and minor discrepancies in hospital admission details and FIR as grounds to reject the Section 319 application – Such issues go to credibility at trial and cannot be examined threadbare at the pre-summoning stage – Trial Court further erred by treating each inconsistency in isolation rather than assessing the cumulative weight of all testimonies – Oral evidence alone, if credible, may suffice; insistence on documentary corroboration at this stage is unwarranted – Held: Court overstepped the intended scope of pre-trial scrutiny; testimony on oath by three witnesses including the complainant is sufficient to meet the strong and cogent evidence standard on the facts of this case [Paras 9–11].

Decision: Appeals allowed – Orders of the Trial Court and High Court set aside – Rajendra and Mausam directed to be produced as additional accused and proceeded against in accordance with law – Copy of order directed to be sent to the Trial Court through the Registrar General, High Court of Allahabad.

Securities Law – Preferential Allotment – Diversion of Proceeds – PFUTP Regulations – Fraud – SAT Order Set Aside – Respondent-company raised Rs. 15,87,50,000/- through preferential allotment to 42 entities disclosing objects including capital expenditure, working capital, marketing and setting up offices abroad – From the very next day of receipt of funds, proceeds were diverted to purchase shares of other companies and extend loans and advances to various entities – Adjudicating Officer imposed penalties of Rs. 70 lakhs on the company and Rs. 25 lakhs each on the Managing Director and Director for violations of Regulations 3(a), 3(b), 3(c), 3(d), 4(1), 4(2)(f), 4(2)(k) and 4(2)(r) of the PFUTP Regulations and Section 21 of SCRA read with Clause 43 of the Listing Agreement – SAT set aside the penalties holding that a shareholder resolution dated 29.09.2017 ratifying the diversion was valid – Held: SAT order unsustainable; AO order restored [Paras 1–2, 16–22, 79].

Fraud under PFUTP Regulations – Expanded Definition – Diversion of Preferential Allotment Proceeds – Regulations 3 and 4 of PFUTP Regulations – Under the PFUTP Regulations, fraud is broadly defined and is not confined to its ordinary meaning – Fraud includes any act, expression or concealment committed whether in a deceitful manner or not, to induce any person to deal in securities, and includes a promise made without any intention of performing it – Diversion of funds raised through preferential allotment to objects not disclosed in the EoGM notice, immediately upon receipt, clearly constitutes violation of Regulations 3 and 4(2)(f), 4(2)(k) and 4(2)(r) – The speed of diversion establishes that from inception the respondents had no intention to use the funds for the stated objects – Held: Diversion of preferential allotment proceeds to undisclosed objects constitutes fraud under the PFUTP Regulations [Paras 33–51].

Ratification – Illegality Cannot Be Ratified – Section 27 of the Companies Act – PFUTP Regulations – Public Interest – SAT had exonerated respondents solely on the ground that a shareholder resolution dated 29.09.2017 ratified the variation in utilization of proceeds – Held: Section 27 of the Companies Act applies only to variation of objects in a prospectus and has no application to preferential allotment made through private placement – Even if Section 27 read with Section 62(1)(c) were applied analogously, ratification could only operate where there are unutilised funds, whereas here the entire amount stood diverted – SEBI regulations protect multiple stakeholders and have public law dimensions; liability crystallized under such regulations cannot be wiped off by a shareholder resolution – Illegality cannot be ratified; only an irregularity can be – A private resolution cannot condone acts contrary to public policy [Paras 52–66].

Disclosure Obligations – Objects of Preferential Issue – Regulatory Significance – Regulation 73 of ICDR Regulations, Clause 43 of Listing Agreement – Objects stated in the explanatory statement appended to the EoGM notice are statutorily mandated disclosures under Regulation 73 of the ICDR Regulations – Investors and stakeholders adjust their conduct based on such disclosures, whether or not they subscribe to the shares – Clause 43 of the Listing Agreement requires quarterly reporting of variations between projected and actual utilisation of funds – LODR Regulations 32 and 35 further mandate reporting of deviations – A conspectus of the SEBI Act, PFUTP Regulations, SCRA, ICDR Regulations and the Listing Agreement shows that stated objects of a preferential issue are of utmost significance and cannot be casually compromised [Paras 33–49].

Parallel Jurisdiction – WTM and Adjudicating Officer – Section 11B and Section 15HA of SEBI Act – Validity of Separate Proceedings – Amicus contended that the AO proceedings were impermissible since the WTM had already adjudicated the same facts – Held: The two proceedings operate in separate fields – The WTM exercises powers under Sections 11(1), 11(4)(b) and 11B to restrain market access and order disgorgement, whereas the AO exercises power under Section 15(I) to impose monetary penalties under Section 15HA – Prior to the Finance Act 2018, the WTM had no power to levy penalty under Section 15HA – Having imposed only market restraint, the WTM left the field of penalty open for the AO – Two authorities vested with different powers operating in separate fields can exercise jurisdiction on the same underlying facts without conflict – Judgments in Ram Kishori Gupta and Nirmal N. Kotecha distinguished [Paras 67–77].

Decision: Appeals allowed – Order of the Securities Appellate Tribunal in Appeal Nos. 116, 114 and 115 of 2021 set aside – Order of the Adjudicating Officer dated 29.04.2020 imposing monetary penalties on the respondent-company and the individual directors restored.

Criminal Law – Murder – Section 302 IPC altered to Section 304 Part II IPC – Remand Ordered – Appellant convicted for murder committed on 28.10.2000 – Sessions court awarded life imprisonment – High Court on appeal, after 21 years, altered conviction to Section 304 Part II IPC with 5 years rigorous imprisonment through amicus curiae appointed in the absence of appellant's counsel – Supreme Court finds that appellant was not informed of appointment of amicus or listing of appeal for final hearing – Held: Impugned order set aside; appeal remanded to High Court for hearing de novo; all points on merits kept open [Paras 13-18].

Fair Trial – Appointment of Amicus Curiae – Duty to Inform Convict – Appellant's counsel did not appear; Division Bench appointed amicus after 20 years of pendency – Amicus urged a ground not raised in the memorandum of appeal and did not press grounds actually raised – High Court issued no notice to appellant of counsel's absence or appointment of amicus – Held: While the High Court was under no obligation to inform the appellant, it would have been a desirable precaution to do so; legal aid must be real and meaningful and not a token gesture; justice would have been better served had a notice been sent to the convict [Paras 13-15].

Convict on Bail – Duty to Pursue Appeal – Appellants Neglecting Proceedings – Appellant was on bail for 20 years without pursuing his appeal and did not keep track of proceedings – Held: Appellant while on bail has himself to blame for not keeping track of his appeal; he cannot urge before the Supreme Court grounds that were never pressed before the High Court; the tendency of convicts to misuse bail concessions must be dealt with firm hands [Para 13].

Guidelines – Procedure When Amicus Appointed for Absent Convict – Henceforth, when an appellate court appoints an amicus for an absent convict, the court should also consider issuing a notice to the convict through the jurisdictional police station to the address in the memorandum of appeal, informing the convict to contact the amicus and provide instructions – If the convict desires his own counsel, the court may hear both; if the convict remains dormant after service or refusal of notice, the High Court may proceed to decide the appeal; if notice cannot be served, pasting on the outer wall of the premises shall be sufficient compliance [Para 23].

Decision: Appeal partly allowed – Impugned order of the High Court dated 02.12.2024 set aside – Appeal revived on the file of the High Court for hearing de novo – Appellant released on bail forthwith on terms and conditions imposed by the trial court – High Court directed to decide the appeal as early as possible; preferably by the same Division Bench; not to be influenced by observations in the impugned order.

Motor Vehicles Act – Compensation – Group Insurance Deduction – Whether employer-provided group insurance benefits constitute "pecuniary advantage" deductible from motor accident compensation – Two sets of appeals involving separate accidents where tribunals deducted group insurance amounts from compensation – High Courts in both cases set aside the deductions – Supreme Court affirms High Court orders holding that such benefits arise from independent contractual relationships and cannot be deducted from statutory compensation – Appeals dismissed [Paras 1-18].

Motor Accident Compensation – Deduction of Collateral Benefits – Employer Group Insurance – Principle that a claimant should not gain twice from the same accident examined – Held: Employer-provided group insurance benefits are earned by the deceased through contractual relations entered into during his lifetime and do not accrue to dependants solely by reason of the accident – Such amounts lack the requisite nexus with accidental death to qualify as deductible "pecuniary advantages" under the Motor Vehicles Act – Principle of balancing loss and gain cannot be invoked to diminish statutory entitlement to just compensation [Paras 10-16].

Procedural Objection – Non-joinder of Driver – In Civil Appeal Nos. 5492-5493, appellant raised procedural objection regarding non-joinder of driver as party – Both Tribunal and High Court rightly rejected the objection – Motor Vehicles Act compensation provisions are beneficial in nature and rigours of procedure cannot be allowed to defeat their purpose as trial is summary in nature [Paras 11-12].

Decision: Appeals dismissed – High Court judgments in MFA No. 2593 of 2020 c/w MFA No. 3299 of 2020 and MFA No. 9538 of 2017 affirmed – Appellants directed to deposit awarded compensation within six weeks if not already deposited – No order as to costs.

NDPS Act – Section 50 – Personal Search – Third Option – Non-Compliance – Accused apprehended carrying bag containing 11 kg 50 grams of charas – Trial Court convicted and sentenced accused to 10 years rigorous imprisonment with fine of Rs. 1,00,000 – High Court acquitted accused holding that Investigating Officer offered accused a third option of being searched before a police officer, which is impermissible under Section 50 – Section 50 mandates only two options: search before a Magistrate or a Gazetted Officer – Offering a third option vitiated the entire trial – Held: High Court committed no error – Appeal dismissed [Paras 1-19].

NDPS Act – Section 50 – Mandatory Compliance – Strict Construction – Where both a bag and the person of the accused are searched, Section 50 is attracted – Failure to apprise accused of his right to be searched before a Gazetted Officer or Magistrate renders recovery suspect and conviction unsustainable – Concept of substantial compliance not acceptable – Compliance with Section 50(1) is mandatory and requires strict observance [Paras 16-18].

Prosecution Case – Credibility – Recovery by Chance – PW-8's testimony that only a traditional weighing scale was available at his shop directly contradicted prosecution's claim that an electronic weighing scale was used for weighing the contraband – This additional infirmity rendered the prosecution case doubtful and untrustworthy – Prosecution failed to establish recovery beyond reasonable doubt [Paras 15, 18].

Decision: Appeal dismissed – Acquittal of respondent-accused upheld.