Negotiable Instruments Act, 1881 - Section 138 - Legally Enforceable Debt - Violation of Income Tax Act, 1961 - Section 269SS - Cash Transaction exceeding Rs. 20,000 - Effect on enforceability of debt - Presumption under Section 139 NI Act - Breach of Section 269SS does not render transaction unenforceable or rebut presumptions under NI Act - Penal provision only.

Negotiable Instruments Act, 1881 - Section 138 - Income Tax Act, 1961 - Section 269SS - The High Court acquitted the accused in a Section 138 NI Act case, holding that a debt of Rs. 9,00,000/- extended by cash transaction violated Section 269SS of the IT Act, 1961, and thus was not a 'legally enforceable debt' - This view was based on the High Court's own judgment in P.C. Hari vs. Shine Varghese & Anr. - The Supreme Court, relying on its earlier decision in Sanjabij Tari vs. Kishore S. Borcar & Anr., held that a breach of Section 269SS of the IT Act, 1961, is subject only to a penalty under Section 271D of the IT Act, 1961 - Neither Section 269SS nor Section 271D declares such transactions illegal, invalid, or statutorily void - Therefore, a violation of Section 269SS does not render the transaction unenforceable under Section 138 of the NI Act or rebut the presumptions under Sections 118 and 139 of the NI Act - The conclusion of law in P.C. Hari (supra) was set aside - Consequently, the very foundation of the impugned High Court judgment was deemed unsustainable - Paras 3, 5, 6, 7, 8.

Decision: Appeal allowed - Impugned judgment of the High Court set aside - Matter remitted back to the High Court for fresh consideration on merits - Parties directed to appear before the High Court on 17.02.2026 - Paras 9, 10, 11.

Criminal Law – Conviction under IPC and SC/ST Act – Acquittal – Appellants convicted by Special Court for offences under Sections 354, 323 IPC and Section 3(1)(xi) of the SC/ST Act based on victim’s complaint of assault and caste-based abuse – High Court affirmed conviction – Supreme Court finds inconsistencies in victim’s and her brother’s (PW-2) testimonies – Medical evidence not fully supporting prosecution version – Witnesses from locality not examined despite claim that many saw the incident – Held: Prosecution failed to prove guilt beyond reasonable doubt – Conviction unsustainable [Paras 7, 9, 14–18, 20–22]

Evidence Law – Hostile Witness – Admissibility of Testimony – Held: The evidence of a hostile witness cannot be totally rejected if it supports either the prosecution or the accused; it must be subjected to closer scrutiny. The High Court erred in ignoring the testimony of PW-4 (a relative of the victim) solely because he was declared hostile. PW-4’s deposition regarding a scuffle at a crowded Ganesh Puja pandal supported the defense theory of how injuries were sustained, offering a probable alternative to the prosecution's narrative. [Paras 19, 21]

SC/ST Act – Section 3(1)(xi) – Motive based on Caste – Held: A finding that an offence was committed simply because the victim belonged to a Scheduled Caste cannot be recorded abruptly without evidence. The High Court’s conclusion that the offence was committed "simply for reason that the complainant was belonging to scheduled caste" was termed perverse, as neither the victim nor the eyewitness (PW-2) deposed that the accused acted based on the victim's caste identity. [Para 20]

Criminal Law – Appreciation of Evidence – Medical vs. Ocular Evidence – Held: Significant discrepancies existed between the ocular version and medical evidence. The victim alleged nail marks on her back, and PW-2 alleged bleeding from the nose/mouth, but the medical officer (PW-5) found no such specific injuries, noting only simple scratches consistent with a fall or being dragged. This medical opinion corroborated the defense version of a scuffle/fall at a pandal rather than the assault described in the FIR. [Paras 10, 15-16]

Criminal Law – Non-examination of Independent Witnesses – Held: The prosecution failed to examine any independent witnesses from the locality despite the claim that "many people" had seen the incident. The failure to produce independent witnesses, coupled with the fact that no one intervened during the alleged assault, rendered the testimony of the interested witness (PW-2) unbelievable. [Paras 14, 18]

Decision: Appeal allowed. Conviction and sentence set aside. Appellants discharged from bail bonds. [Paras 23-24]

Arbitration Law – Termination of Proceedings – Arbitration and Conciliation Act, 1996, Sections 25, 30, 32, 38 – Interpretation of Tribunal's Power – The Supreme Court held that Section 32 of the Act is exhaustive and covers all cases of termination of arbitral proceedings. The power of the arbitral tribunal to terminate proceedings under the scheme of the Act lies only in Section 32(2). Sections 25, 30, and 38 merely denote the circumstances in which the tribunal would be empowered to take recourse to Section 32(2) and thereby terminate the proceedings. [Paras 209, 210, 211, 212, 213, 241, 242, 243, 244, 245, 246, 247, 248, 249, 250, 251, 252, 253, 254, 255, 256, 257, 258, 259, 260, 261, 262, 263, 264, 265, 266, 415(I), 415(II), 415(III), 415(IV), 415(V), 415(VI)].

Arbitration Law – Termination of Proceedings – Arbitration and Conciliation Act, 1996, Section 32 – Effect of Termination – The expression "the mandate of the Arbitral Tribunal shall terminate" in Section 32 and its omission in Sections 25, 30, and 38 cannot be construed to mean that the nature of termination under Section 32(2) is distinct from termination under the other provisions. The expression "mandate of the Arbitral Tribunal" is descriptive of the tribunal's function to adjudicate disputes. Irrespective of the reason for termination (final award, withdrawal of claims, default by claimant, or impossibility), the legal effect is the same: the arbitral tribunal is divested of authority to act in the reference. The common thread across Sections 25, 30, 32, and 38 is that termination, for varied reasons, concludes the arbitral reference and extinguishes the tribunal's authority. [Paras 209, 210, 211, 212, 213, 241, 242, 243, 244, 245, 246, 247, 248, 249, 250, 251, 252, 253, 254, 255, 256, 257, 258, 259, 260, 261, 262, 263, 264, 265, 266, 415(I), 415(II), 415(III), 415(IV), 415(V), 415(VI)].

Arbitration Law – Termination of Proceedings – Arbitration and Conciliation Act, 1996, Sections 25, 32(2), 38 – Consequences of Termination – Termination of proceedings under Sections 25 and 38 is not a trivial procedural formality but penalizes inertia and recalcitrance. Allowing re-initiation of arbitration after termination due to contumacious conduct would defeat procedural self-responsibility and lead to "Tribunal Hopping." Therefore, termination under Section 25 or 38 is an order under Section 32(2). [Paras 209, 210, 211, 212, 213, 241, 242, 243, 244, 245, 246, 247, 248, 249, 250, 251, 252, 253, 254, 255, 256, 257, 258, 259, 260, 261, 262, 263, 264, 265, 266, 415(I), 415(II), 415(III), 415(IV), 415(V), 415(VI)].

Arbitration Law – Arbitrator's Fees – Arbitration and Conciliation Act, 1996, Section 38, Fourth Schedule – Consent and Revision of Fees – The Sole Arbitrator initially determined fees based on the Fourth Schedule with parties' consent. Upon filing of counter-claims, the fees were revised based on the Fourth Schedule. The Court in Afcons (supra) held that the Fourth Schedule is a model fee schedule and binding, and parties cannot object to fees fixed in accordance with it if no consensus is reached. While the Sole Arbitrator should have sought consent for revised fees, the termination of proceedings due to non-payment was not bad in law, as the parties had initially agreed to the Fourth Schedule and refused to pay their share for their own claims. [Paras 317, 318, 319, 320, 321, 322, 323, 324, 325, 326, 327, 328, 329, 330, 331, 332, 333, 334, 335, 336, 337, 338, 339, 340, 341, 342, 343, 416, 417, 418, 419, 420, 421, 422, 423, 424].

Arbitration Law – Arbitrator's Fees – Arbitration and Conciliation Act, 1996, Section 38 – Payment Responsibility – Section 38 mandates equal sharing of fees, and if one party defaults, the other may pay; if both decline, the tribunal may suspend or terminate proceedings. A claimant is responsible for their own claims' fees, and a respondent for their counter-claims' fees, including the other party's share if the latter defaults. The arbitral tribunal had no alternative but to terminate proceedings when appellants refused to pay requisite fees for their claims. [Paras 317, 318, 319, 320, 321, 322, 323, 324, 325, 326, 327, 328, 329, 330, 331, 332, 333, 334, 335, 336, 337, 338, 339, 340, 341, 342, 343, 416, 417, 418, 419, 420, 421, 422, 423, 424].

Arbitration Law – Remedy against Termination Order – Arbitral Tribunal's Power – Where an arbitral tribunal terminates proceedings, the appropriate remedy is to first file an application for recall of such order before the arbitral tribunal itself. The arbitral tribunal possesses inherent procedural power to recall an order terminating proceedings to correct patent or procedural errors, not to revisit merits. If the recall application is dismissed, the aggrieved party can approach the court under Section 14(2) of the Act to determine if the arbitrator's mandate legally terminated. [Paras 267, 268, 269, 270, 271, 272, 273, 274, 275, 276, 277, 278, 279, 280, 281, 282, 283, 284, 285, 286, 287, 288, 289, 290, 291, 292, 293, 294, 295, 296, 297, 298, 299, 300, 301, 302, 303, 304, 305, 306, 307, 308, 309, 310, 311, 312, 313, 314, 315, 316, 415(VII), 415(VIII), 415(IX), 415(X), 410, 411, 412].

Arbitration Law – Remedy against Termination Order – Court's Power – The court can then set aside the termination order and remand the matter or appoint a substitute arbitrator under Section 15. A fresh application under Section 11 to initiate a second round of arbitration is not permissible. [Paras 267, 268, 269, 270, 271, 272, 273, 274, 275, 276, 277, 278, 279, 280, 281, 282, 283, 284, 285, 286, 287, 288, 289, 290, 291, 292, 293, 294, 295, 296, 297, 298, 299, 300, 301, 302, 303, 304, 305, 306, 307, 308, 309, 310, 311, 312, 313, 314, 315, 316, 415(VII), 415(VIII), 415(IX), 415(X), 410, 411, 412].

Arbitration Law – Remedy against Termination Order – Constitutional Remedy (Article 227) – The Act, 1996, being a complete code, generally restricts challenges to interlocutory orders under Article 227, except in exceptional circumstances like want of good faith or where the litigant is remediless. Termination of proceedings under Section 32(2) that results in termination of proceedings can be challenged under Article 227 if no other statutory remedy exists. A party who, by obdurate stance, allows proceedings to terminate should ordinarily not be allowed to re-initiate arbitration to prevent "Tribunal Hopping" and misuse of the arbitral system. [Paras 267, 268, 269, 270, 271, 272, 273, 274, 275, 276, 277, 278, 279, 280, 281, 282, 283, 284, 285, 286, 287, 288, 289, 290, 291, 292, 293, 294, 295, 296, 297, 298, 299, 300, 301, 302, 303, 304, 305, 306, 307, 308, 309, 310, 311, 312, 313, 314, 315, 316, 415(VII), 415(VIII), 415(IX), 415(X), 410, 411, 412].

Arbitration Law – Legislative Reform – Arbitration and Conciliation Bill, 2024 – Suggestions for Consolidation and Clarification – The Court noted the persistent procedural issues in Indian arbitration, particularly regarding termination of proceedings. It suggested that the Arbitration and Conciliation Bill, 2024, should consolidate the power to terminate proceedings into a single provision (like SIAC or LCIA Rules) or clarify contradictory phraseology to ensure consistency. The Bill should explicitly define the nature and effect of termination, the arbitral tribunal's authority to entertain recall applications, and provide a proper remedy against termination orders. [Paras 394, 395, 396, 397, 398, 399, 400, 401, 402, 403, 404, 405, 406, 413, 414].

Arbitration Law – Legislative Reform – Arbitration and Conciliation Bill, 2024 – Suggestions for Statutory Appeal – Parliament should consider a statutory appeal under Section 37 of the Bill against termination orders, similar to orders under Section 16. A policy decision is needed on whether a belligerent party should be allowed to re-initiate arbitration after wilful termination. [Paras 394, 395, 396, 397, 398, 399, 400, 401, 402, 403, 404, 405, 406, 413, 414].

Decision: Appeal partly allowed – Matter remanded to the High Court for appointment of a substitute arbitrator.

Constitutional Law – Judicial Review of Economic Policy – Revision of Property Tax – Akola Municipal Corporation revised property tax rates after a gap of 16 years (since 2001) – High Court quashed the resolution citing procedural lapses – Held: The High Court exceeded its jurisdiction by sitting in appeal over a policy decision. Tax revision falls squarely within the domain of the Corporation. Courts cannot substitute their judgment for that of the legislature or its agents in matters of economic policy unless the decision is ex-facie arbitrary, perverse, or unconstitutional. Trivial procedural errors do not vitiate the entire tax regime. – [Paras 19-24, 26].

Public Interest Litigation (PIL) – Locus Standi and Abuse of Process – Writ Petition by Corporator – Respondent No. 1, a sitting Corporator, filed a PIL challenging the tax revision and the tender process for property survey – Held: The PIL was a subterfuge to air individual grievances and potential business conflicts (challenging specific tenders). The petitioner did not represent the public at large but raised technical procedural objections. PILs cannot be entertained when filed to settle personal scores or business interests, especially when statutory remedies (Section 406 of the Maharashtra Municipal Corporations Act) exist. – [Paras 12-16, 18].

Municipal Laws – Financial Autonomy of Municipal Bodies – Obligation to Revise Taxes – Context: The Corporation had not revised taxes for 16 years, leading to revenue stagnation – Held: Municipal bodies have a statutory obligation and financial autonomy to generate revenue for public welfare (sanitation, health, infrastructure). Dependence on State grants weakens their functional efficacy. The revision of tax after 16 years was justified and necessary to match rising costs; the lack of revision for such a long period depicted gross laxity. – [Paras 6-9, 27].

Decision: Appeals allowed - Impugned judgment of the High Court set aside - [Paras 28-29].

Criminal Law – Scheduled Castes and the Scheduled Tribes (Prevention of Atrocities) Act, 1989 – Section 3(1)(s) – "Place within public view" – Allegations that Appellants hurled caste-based abuses at the complainant inside her house – Held: To constitute an offence under Section 3(1)(s), the place must be open where members of the public can witness or hear the utterance – If the alleged offence takes place within the four corners of a wall where members of the public are not present, it cannot be said to have taken place within public view – The complaint specifically averred that abuses were uttered inside the premises – Essential ingredient of "public view" not satisfied – Summoning order qua SC/ST Act quashed – Paras 10-13, 16.

Criminal Procedure – Quashing of Summoning Order – Scope of Appellate Powers – Context of summoning order issued by Special Judge and upheld by High Court despite lack of ingredients for SC/ST Act offence – Held: While appellate powers must be exercised with caution, the Court must examine the contents of the complaint as they stand – Where essential ingredients of the offence (specifically regarding public view under SC/ST Act) are prima facie absent, the Court ought to exercise powers to quash the proceedings – High Court erred in concluding the incident occurred in public view contrary to the complaint's averments – Paras 13-15.

Decision: Appeal partly allowed - Proceedings under Section 3(1)(s) of the SC/ST Act quashed - Trial to proceed for offences under Sections 323 and 504 IPC - Paras 16-17.

Criminal Law – Anticipatory Bail – Cancellation – Factors to be Considered – The Appellant (Complainant) challenged the High Court's grant of anticipatory bail to the Respondent (Accused), a Senior Accountant alleged to have embezzled over Rs. 3 Crores – Held: The High Court erred by taking a mechanical route and failing to consider the investigation status report which categorically stated the accused was on the run and custodial interrogation was necessary to recover embezzled amounts and identify accomplices – The High Court's reasoning that the accused returned half the amount and was willing to declare assets was insufficient to override the requirements of a fair investigation – Order granting bail set aside. [Paras 9-13]

Criminal Law – Custodial Interrogation – Impact of Chargesheet – The accused contended that since the chargesheet had been filed (on 22.05.2025), custodial interrogation was no longer warranted – Held: Even if a chargesheet is filed, the judgment granting bail is vitiated if it suffers from non-consideration of essential facts at the time of passing the order – The initial failure to consider the gravity of the offence and the conduct of the accused (absconding) renders the bail order legally untenable. [Para 12]

Criminal Law – Principles for Cancellation of Bail – Distinction between Appeal against Grant of Bail and Application for Cancellation – Reiterated principles from Ashok Dhankad v. State (NCT of Delhi) and Vipan Kumar Dhir v. State of Punjab – An appellate court can interfere if the order granting bail suffers from perversity, illegality, or non-application of mind to relevant factors such as the gravity of the offence and the impact on society. [Paras 7-8]

Decision: Appeal allowed. Impugned order dated 02.04.2025 set aside. Accused directed to surrender before the Trial Court within two weeks. [Paras 13, 15]

GPF – Nomination – Automatic Invalidity on Subscriber Acquiring Family – Subscriber nominated mother in 2000; married appellant in 2003 – Nomination form itself provided that nomination becomes invalid upon acquiring family – Held: Nomination became invalid in 2003; failure of subscriber to file fresh nomination does not revive earlier invalid nomination – High Court erred in treating nomination as subsisting [Paras 6–9].

GPF(CS) Rules – Rule 33 – Distribution of Fund – When nomination does not subsist, amount must be shared equally by all eligible family members – CAT correctly applied Rule 33 and Rule 476 Note 2, directing 50–50 distribution between wife and mother – Supreme Court upholds CAT’s view and sets aside High Court judgment [Paras 7–10].

Nomination – Legal Effect – Nominee does not obtain beneficial interest – Nomination only indicates the hand authorised to receive payment; property devolves by succession – Court applies principles from Sarbati Devi v. Usha Devi and Shakti Yezdani v. Jayanand Salgaonkar – Mother’s nomination does not override widow’s entitlement under succession law where nomination stood invalid [Paras 9].

Administrative Duty – Subscriber alone responsible for updating nomination – Authorities not obligated to demand changes – Rules contemplate consequences of invalid nomination; hence equal distribution mandated [Para 7].

Final Directions – CAT order restored – Appellant having received her half share earlier; remaining half deposited with Registrar to be released to Respondent No.1 upon application within two weeks – Appeal allowed [Para 10].

Arbitration – Prohibitory/Excepted Clauses – Contractual bar on idle labour, machinery, overheads, business loss – Arbitral Tribunal allowed claims 3, 4 and 6 despite explicit contractual prohibition – Civil Court set aside award under Section 34 – High Court restored award solely relying on Bharat Drilling – Held: High Court erred in not examining contractual clauses; autonomy of parties and contractual limitations must guide arbitral jurisdiction [Paras 4–9].

Interpretation of Contract – Party Autonomy – Court reiterates that party autonomy is the “brooding and guiding spirit” of arbitration – Arbitral Tribunal is bound by procedures and substantive restrictions agreed by parties – Award granting prohibited claims contrary to contract is unsustainable [Paras 8–9].

Scope of Bharat Drilling & Foundation Treatment Pvt. Ltd. v. State of Jharkhand, (2009) 16 SCC 705 – Not an authority for proposition that contractual prohibitory clauses bind only the employer and not the Arbitral Tribunal – Decision did not examine contractual clauses and relied on precedent relating to interest under Section 31(7), which stands on a different legal footing – Ratio doubtful and inconsistent with later decisions (CORE, Cox and Kings, Interplay Reference) – Matter requires reconsideration by larger Bench [Paras 7–12].

Interest under Section 31(7) – Distinct from Prohibited Claims – Court clarifies that principles governing grant of interest under Section 31(7) cannot be applied to interpret contractual clauses restricting substantive claims – Prohibitory clauses founded purely on freedom to contract and must be strictly enforced [Paras 10–11].

Direction – Judgment in Bharat Drilling referred to Larger Bench for authoritative adjudication to ensure certainty and clarity of law – Registry directed to place matter before Hon’ble Chief Justice for constitution of larger Bench [Para 12].

Family Law – Divorce – Irretrievable Breakdown – Long Separation – Parties living separately since 2012 with no meaningful attempt at reconciliation – High Court granted divorce holding marriage had broken down – Supreme Court affirmed finding that continuing the marital bond would not serve either spouse or their 17-year-old daughter – Divorce decree upheld [Paras 4–7].

Cruelty – Divorce Petition – Family Court rejected husband’s case of cruelty and found him responsible for acts of cruelty – High Court reversed Family Court and dissolved marriage – Supreme Court given prolonged separation and acrimony declined to reopen factual findings, holding dissolution justified irrespective of contested allegations of cruelty [Paras 4–7].

Permanent Alimony – Enhancement – Respondent-husband a serving judicial officer – Wife no longer in legal practice – Considering income, status, and responsibility to ensure dignified financial security, alimony enhanced from Rs.30 lakhs to Rs.50 lakhs – To be paid within three months – Treated as full and final settlement of all monetary and other claims [Paras 8–11].

Maintenance of Child – Directions Affirmed – Deposit of LIC maturity amount (~Rs.41 lakhs) in daughter’s account – Monthly deposit of Rs.30,000 until she can maintain herself – Husband to bear all marriage expenses – Prohibition against disinheriting daughter – All conditions upheld by Supreme Court [Para 10].

Final Directions – All civil/criminal proceedings between parties arising from marriage to stand closed – Wife to furnish bank details for payment – Appeal disposed [Paras 11–14].