Month: October 2026

Supreme Court: A Broad No-Interest Clause Can Bar Pre-Reference and Pendente Lite Interest in Arbitration

Post author By Binay
Post date 16 October, 2026
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Supreme Court: A Broad No-Interest Clause Can Bar Pre-Reference and Pendente Lite Interest in Arbitration

Case: MS Sharma Enterprises v. National Building Construction Corporation
Neutral Citation: 2026 INSC 1135
Date: 15 October 2026
Bench: Justice Aravind Kumar and Justice Vipul M. Pancholi
Area of Law: Arbitration | Construction Contracts | Commercial Disputes

What was the issue?

Can an arbitral tribunal award interest for the period before commencement of arbitration and while the arbitration is pending when the underlying contract contains a clause excluding interest?

The Supreme Court considered the question in a long-running construction dispute between MS Sharma Enterprises and NBCC.

Section 31(7)(a) is subject to the parties’ agreement

Section 31(7)(a) of the Arbitration and Conciliation Act, 1996 permits an arbitral tribunal to award interest for the pre-award period, but the provision expressly makes that power subject to the agreement of the parties.

The relevant contract contained an interest-exclusion clause covering specified categories and ending with the words “or otherwise.”

The Supreme Court rejected the argument that those words had to be narrowly confined to items similar to those specifically listed before them.

In the contractual setting before the Court, the expression was sufficiently wide to prohibit pre-reference as well as pendente lite interest.

The arbitrator, whose authority arises from the contract, could not disregard that contractual restriction.

Post-award interest stands on a different footing

The judgment carefully distinguishes two statutory periods:

Section 31(7)(a): interest up to the date of the award, which is subject to the parties’ agreement; and
Section 31(7)(b): post-award interest, which is governed by a different statutory rule.

The High Court had therefore been justified in interfering with the award of pre-reference and pendente lite interest while leaving the post-award position intact.

The appeal was dismissed.

The ruling is clause-specific

The judgment should not be read as holding that every clause mentioning interest automatically deprives an arbitral tribunal of power to award pre-award interest.

The contractual language has to be examined.

What mattered here was the breadth of the particular exclusion clause and, especially, the Court’s interpretation of the words “or otherwise.”

What this means for contractors and businesses

Interest can form a substantial part of a commercial claim, particularly where construction and infrastructure disputes remain unresolved for years.

Before commencing arbitration, parties should therefore separate:

the principal claim;
pre-reference interest;
pendente lite interest; and
post-award interest.

Each component should then be tested against the precise contractual language and Section 31(7).

For businesses negotiating contracts, a no-interest clause may have major financial consequences long after the commercial work itself has ended.

Key takeaway

An arbitrator’s power to award pre-award interest is not unlimited. Where the parties have clearly contracted out of such interest, Section 31(7)(a) requires the tribunal to respect that bargain.

Primary source: Official Supreme Court judgment viewer.

Related JLP resources: Dispute Resolution & Litigation · Corporate & Commercial Law

Disclaimer: This legal update is intended solely for general information and discussion of recent judicial developments. It does not constitute legal advice or create an advocate-client relationship. The application of any judgment depends upon the facts and legal circumstances of the individual matter. Persons requiring advice concerning a particular dispute should obtain professional legal advice.

Tags Arbitration, Commercial Dispute, Construction Contract, Interest, NBCC, Section 31(7)

Supreme Court Updates

Supreme Court on Disciplinary Proceedings: Findings Based on “No Evidence” Remain Open to Judicial Review

Post author By Binay
Post date 16 October, 2026
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The Justice Law Partners

Supreme Court on Disciplinary Proceedings: Findings Based on “No Evidence” Remain Open to Judicial Review

Case: R. Saravanan v. Periyar University represented by its Registrar & Ors.
Neutral Citation: 2026 INSC 1136
Date: 16 October 2026
Bench: Justice Prashant Kumar Mishra and Justice Shree Chandrashekhar
Area of Law: Service Law | Disciplinary Proceedings | Article 226 | Letters Patent Appeal

The dispute

R. Saravanan, a Deputy Registrar of Periyar University, had been removed from service following disciplinary proceedings.

The allegations included misuse of official position in connection with affiliation granted to an institution associated with his wife and allegations concerning acquisition of property and a vehicle.

A Single Judge of the Madras High Court interfered with the removal after concluding that important findings in the inquiry were unsupported by evidence and rested upon conjecture.

A Division Bench reversed that decision.

The matter reached the Supreme Court.

The inquiry mechanism itself was not invalid

An important part of the Supreme Court’s judgment is that it did not accept the employee’s procedural challenge to the constitution of the One-Man Commission/inquiry mechanism.

The Court found that the relevant statutory framework permitted the procedure adopted and that the employee had knowledge of the proceedings and an opportunity to participate.

The decisive problem was therefore not the mere existence of the inquiry mechanism.

It was the evidentiary foundation of the findings ultimately recorded against the employee.

Disciplinary findings must rest on some material

Judicial review of departmental proceedings is not an appeal on facts.

A High Court ordinarily does not reweigh evidence merely because it might have reached another conclusion.

But this principle has an equally important counterpart: a finding based on no evidence, or upon conjecture and surmise rather than material capable of supporting the charge, is vulnerable to judicial review.

The Inquiry Officer performs a quasi-judicial function. Although the standard is not proof beyond reasonable doubt, the conclusion must still be supported by material capable of satisfying the applicable civil standard of proof.

Suspicion cannot substitute for evidence.

What power does a Letters Patent Bench have?

The Supreme Court also clarified the scope of an intra-court appeal.

A Letters Patent Bench is not confined by the same restrictions that govern a second appeal under Section 100 of the Code of Civil Procedure. It may, in an appropriate case, examine questions of fact as well as law.

That does not mean, however, that it should reverse a reasoned Article 226 judgment merely because it prefers another possible view of the record.

Where the Single Judge’s conclusion is just, reasonable and based upon relevant considerations, interference requires a cogent reason or a demonstrable material error.

The Supreme Court found that such justification was absent.

Result

The Division Bench judgment was set aside and the decision of the Single Judge was restored.

What this means for employees and disciplinary authorities

The judgment is relevant to government servants, university employees, statutory bodies and public authorities.

For employees, it confirms that the label “finding of fact” does not immunise a conclusion that has no evidentiary foundation.

For employers and disciplinary authorities, it reinforces the importance of linking every material finding of misconduct to evidence appearing in the inquiry record.

Key takeaway

Courts should not substitute themselves for disciplinary authorities where findings are supported by evidence. But deference ends where a decisive finding rests on conjecture rather than evidence.

Primary source: Official Supreme Court judgment viewer.

Related JLP resources: Labour & Employment · Public Policy & Human Rights · Supreme Court Practice

Tags Article 226, Disciplinary Proceedings, Government Employee, Letters Patent Appeal, Service Law, University Employment

Supreme Court Updates

Supreme Court: Conversion Alone Does Not Confer Backward Class Muslim Status

Post author By Binay
Post date 16 October, 2026
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The Justice Law Partners

Supreme Court: Conversion Alone Does Not Confer Backward Class Muslim Status

Case: The Secretary to Government v. Sameer Ahamed N. & Ors.
Neutral Citation: 2026 INSC 1129
Date: 15 October 2026
Bench: Justice Prashant Kumar Mishra and Justice Shree Chandrashekhar
Area of Law: Constitutional Law | Reservation | Community Certificates

What was the issue?

The Supreme Court considered whether a person belonging before conversion to a Backward Class, Most Backward Class, Denotified Community or Scheduled Caste could, upon conversion from Hinduism to Islam, automatically claim recognition as a member of one of the notified Backward Class Muslim communities in Tamil Nadu.

The case arose from an application for a Backward Class Muslim community certificate.

Conversion establishes religion—not automatically a notified community

The Court drew a distinction between religious affiliation and membership of a legally notified socio-historical community.

Conversion may establish that a person has adopted Islam. It does not, by itself, establish that the person has become a member of one of the particular Muslim communities notified for backward-class benefits.

Consequently, the person’s earlier caste or community classification cannot simply be transposed into a notified Backward Class Muslim category after conversion.

A community certificate recognises status; it does not create it

The Court emphasised that a community certificate is declaratory.

It records an entitlement that exists under law; it does not itself manufacture membership of a notified community.

The legal foundation for claiming membership of the particular notified class therefore has to exist independently of the certificate.

The Court also made clear that a private religious organisation cannot conclusively determine an individual’s entitlement to a statutory reservation classification.

Government Order could not be sustained

The proceedings concerned Government Order (Ms.) No. 314 dated 9 March 2024, which provided a route for certain converts who had previously availed backward-class benefits to obtain a Backward Class Muslim certificate.

The Supreme Court agreed with the central reasoning of the Madras High Court that the Government Order could not automatically carry forward antecedent status into one of the notified Muslim backward-class communities.

The Special Leave Petition was dismissed.

What the judgment should not be read as saying

The judgment should not be reduced to the broad proposition that every conversion necessarily extinguishes every possible claim to affirmative-action status.

The precise issue was narrower: conversion alone does not establish membership of one of the notified Backward Class Muslim communities, and antecedent caste or community status cannot automatically be transferred into that classification.

Any claim has to satisfy the legal conditions governing the particular notified community.

Why the ruling matters

The judgment will be relevant to administrative authorities and individuals dealing with:

community certificates;
reservation in public employment;
educational admissions;
conversion-related status claims; and
scrutiny of membership of notified backward classes.

Key takeaway

Religious conversion and statutory community classification are related but legally distinct questions. Reservation status must be established under the legal framework governing the particular notified class.

Primary source: Official Supreme Court judgment viewer.

Related JLP resources: Public Policy & Human Rights · Supreme Court Practice

Tags Backward Class, Community Certificate, Constitutional Law, Conversion, Reservation, Supreme Court, Tamil Nadu

Supreme Court Updates

Supreme Court Clarifies Homebuyer Refunds Where a Bank Financed the Flat: No Double Recovery of Unrepaid Loan Amounts

Post author By Binay
Post date 16 October, 2026
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The Justice Law Partners

Supreme Court Clarifies Homebuyer Refunds Where a Bank Financed the Flat: No Double Recovery of Unrepaid Loan Amounts

Case: Madhu Kudapa (formerly K. Madhusudhan Rao) v. M/s Lodha Healthy Constructions and Developer Private Limited & Anr.
Neutral Citation: 2026 INSC 1131
Date: 15 October 2026
Bench: Justice P.S. Narasimha and Justice Alok Aradhe
Area of Law: Consumer Protection | Real Estate | Housing Finance

The practical problem before the Court

A flat is often purchased partly from the homebuyer’s own funds and partly through a housing loan disbursed directly by the lender to the developer.

If the transaction fails and the developer is ordered to refund the consideration, can the homebuyer receive the entire amount, including loan money that the buyer has not repaid to the bank?

The Supreme Court has held that the answer cannot be determined by treating the builder-buyer relationship in isolation.

Why the entire amount could not simply be released to the buyer

The Court found that the homebuyer had personally paid ₹1,27,34,726, while the balance consideration had been funded by the bank.

The borrower’s liability towards the lender remained the subject of separate proceedings.

If the complete amount paid to the builder—including money supplied by the bank—were released to the borrower without resolving the bank’s claim, the result could amount to unjust enrichment.

The Court therefore separated the buyer’s own entitlement from the amount connected with the unresolved lender-borrower dispute.

Relief granted

The Supreme Court directed release to the homebuyer of:

₹1,27,34,726, representing the amount personally paid;
interest at 12% per annum from the respective dates of deposit until payment; and
a further ₹15 lakh as compensation.

The remaining amount deposited before the Consumer Commission was directed to remain in an interest-bearing account pending determination of the separate proceedings concerning the bank’s recovery claim.

The Court did not decide the ultimate liability between the borrower and the lender.

Bank’s conduct also remained relevant

The litigation was not merely a builder-versus-buyer dispute.

The Consumer Commission had also found deficiency in service on the part of the bank in relation to its disbursement of the housing loan. The Supreme Court found no basis to disturb the compensation of ₹2 lakh awarded on that account.

The case therefore illustrates why homebuyer disputes involving financed property may require the legal relationships between the buyer, developer and lender to be considered separately.

What this means for homebuyers

Where a housing loan is involved, a person seeking refund should place clear material before the consumer forum showing:

the amount paid from personal funds;
the amount disbursed directly by the lender;
EMIs and interest already paid;
the outstanding loan position;
the tripartite agreement, if any; and
the manner in which the lender made disbursements.

The form in which the purchase was financed can materially affect the structure of the final refund.

Key takeaway

A consumer is entitled to effective restitution, but the refund mechanism cannot produce double recovery of money that was financed by a third-party lender and remains the subject of an unresolved repayment claim.

Primary source: Official Supreme Court judgment viewer.

Related JLP resources: Real Estate & Infrastructure · Banking, Finance & Insolvency

Tags Bank Loan, Builder Refund, Consumer Commission, Homebuyer, Housing Loan, Real Estate, Unjust Enrichment

Supreme Court Updates

Supreme Court Clarifies Proof of Default Under Section 7 IBC — and Flags AI-Generated Non-Existent Judgments

Post author By Binay
Post date 16 October, 2026
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Supreme Court Clarifies Proof of Default Under Section 7 IBC — and Flags AI-Generated Non-Existent Judgments

Case: Deepak Raheja & Anr. v. Omkara Assets Reconstruction Private Limited & Anr.
Neutral Citation: 2026 INSC 1134
Date: 15 October 2026
Bench: Justice Dipankar Datta and Justice Augustine George Masih
Area of Law: Insolvency & Bankruptcy | Section 7 IBC | Information Utility

What did the Supreme Court decide?

The Supreme Court has clarified the evidentiary threshold for establishing default when a financial creditor seeks commencement of the Corporate Insolvency Resolution Process under Section 7 of the Insolvency and Bankruptcy Code, 2016.

The Court upheld commencement of CIRP and emphasised the substantial evidentiary value of an authenticated Record of Default maintained by an Information Utility.

Default and the precise amount outstanding are different questions

A significant part of the judgment is the distinction between:

the occurrence of default; and
the precise amount ultimately outstanding.

A default is a historical event: a debt became due and remained unpaid.

The precise quantum can subsequently change because of interest, repayments, adjustments, appropriations and other accounting entries.

At the Section 7 admission stage, the NCLT is conducting a summary statutory inquiry into whether a financial debt and default exist. It is not expected to conduct a full forensic reconciliation of accounts before CIRP can commence.

Evidentiary value of an Information Utility record

The Court held that an authenticated Information Utility Record of Default carries a high evidentiary presumption and can, by itself, provide sufficient prima facie proof of default.

That presumption is not conceptually irrebuttable, but it cannot ordinarily be displaced by a bare denial or an unsupported accounting disagreement. Rebuttal requires clear and credible material.

Where an Information Utility record is unavailable, the financial creditor may still rely upon other legally permissible material such as loan documents, account statements, acknowledgments and correspondence.

The Court also considered the subsequent legislative development concerning Section 7 and treated it as reinforcing the role of authenticated Information Utility records rather than creating an entirely new principle.

Profitability does not disprove default

The Court rejected the argument that positive EBITDA or an otherwise viable business necessarily establishes absence of default.

A business may be commercially viable and yet fail to pay a debt when due.

The statutory inquiry under Section 7 remains whether the legally relevant default occurred.

The Court’s warning concerning AI-generated authorities

The judgment separately records a serious incident during the proceedings.

A compilation placed before the Court was objected to on the ground that it contained AI-generated, non-existent judgments. The Court strongly disapproved of the incident.

This was not the ratio of the insolvency case, but the observation carries an important professional message.

Artificial intelligence can assist legal research and drafting, but no authority should be cited or placed before a court without independent verification from an authentic legal source.

What this means for creditors and businesses

For financial creditors, properly authenticated Information Utility records can substantially simplify proof of default at the admission stage.

For corporate debtors, Information Utility authentication requests should not be treated as routine correspondence. A failure to dispute inaccurate information at the appropriate stage may later have serious evidentiary consequences.

Key takeaway

Section 7 admission is not a mini-trial of the parties’ complete accounts. The Court asks whether a financial debt and default are established on the statutory standard; exact reconciliation can follow through the insolvency claims process.

Primary source: Official Supreme Court judgment viewer.

Tags Artificial Intelligence, IBC, Information Utility, Insolvency, Legal Research, NCLT, Section 7 IBC

Supreme Court Updates

Supreme Court Upholds Quashing of YES Bank AT-1 Bond Write-Down: What the Ruling Means for Investors

Post author By Binay
Post date 16 October, 2026
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The Justice Law Partners

Supreme Court Upholds Quashing of YES Bank AT-1 Bond Write-Down: What the Ruling Means for Investors

Case: YES Bank Limited & Anr. v. Axis Trustee Services Limited & Ors.
Neutral Citation: 2026 INSC 1132
Date: 15 October 2026
Bench: Justice Dipankar Datta and Justice Augustine George Masih
Area of Law: Banking & Finance | Regulatory Law | Investor Protection

What did the Supreme Court decide?

The Supreme Court has declined to interfere with the Bombay High Court’s decision invalidating the write-down of YES Bank’s Additional Tier-1 (AT-1) bonds during the bank’s reconstruction in March 2020.

The Court made an important distinction. The central issue was not whether AT-1 bonds were, in principle, capable of being written down under the applicable regulatory framework. The issue was whether the particular write-down had been carried out by the competent authority and in accordance with the governing legal and regulatory framework.

The Court held that it had not.

Why was the write-down invalid?

The Court examined the Banking Regulation Act, the RBI’s Basel III framework, the Information Memoranda governing the bonds and the statutory reconstruction scheme for YES Bank.

A provision contemplating write-down of the AT-1 bonds had appeared in the draft reconstruction scheme, but that provision did not form part of the final scheme notified by the Central Government.

The Administrator could not derive from a general power under the reconstruction framework a specific regulatory authority that had not been conferred upon him.

The Supreme Court therefore agreed that the write-down, in the manner in which it was undertaken, could not be sustained.

The appeals were dismissed.

The Court also clarified that payment of the annual coupon would remain governed by the relevant Information Memoranda and would not be defeated merely by the dismissal of the appeals.

An important observation concerning retail investors

The judgment also records concern about the exposure of individual investors to complex and high-risk AT-1 instruments.

AT-1 bonds are not equivalent to ordinary fixed deposits. Their regulatory design permits loss absorption in specified circumstances. The Court’s observations reinforce the need for appropriate scrutiny when such instruments are sold or distributed to individual investors.

What this means for investors and financial institutions

The judgment does not hold that AT-1 bonds can never be written down.

Its significance lies elsewhere: even where a financial instrument permits extraordinary loss-absorption measures, those powers must be exercised by the legally competent authority, at the legally permissible stage and in accordance with the governing regulatory and contractual framework.

For banks, trustees, regulators and investors, the case underlines the importance of reading the instrument documentation together with the applicable statutory and regulatory regime.

Key takeaway

Regulatory necessity does not dispense with legal authority. A financially consequential action may still fail if the person taking it lacks the power to do so in the manner adopted.

Primary source: Official Supreme Court judgment viewer.

Related JLP resources: Banking, Finance & Insolvency · Corporate & Commercial Law · Supreme Court Practice

Tags AT-1 Bonds, Banking Regulation Act, Investor Protection, RBI, Supreme Court, YES Bank