Negotiable Instruments Act, 1881 – ss.118, 138 – Code of Criminal Procedure, 1973 – s.391 – Presumptions under the NI Act though rebuttable, operate in favour of the complainant – Accused to rebut such presumptions by leading evidence – Cheque dishonoured – Appellant convicted for offence punishable u/s.138 – Claiming mismatch of signatures, during the trial, the appellant had filed application seeking comparison of the signature as appearing on the cheque through the handwriting expert – Rejected by trial court – Order not challenged – At appellate stage, the appellant filed application u/s.391, CrPC for taking additional evidence and seeking a direction to obtain the opinion of the handwriting expert – Dismissed:

* Author

[2024] 1 S.C.R. 1083 : 2024 INSC 63

Ajitsinh Chehuji Rathod

v.

State of Gujarat & Anr.

(Criminal Appeal No. 478 of 2024)

29 January 2024

[B.R. Gavai and Sandeep Mehta*, JJ.]

Issue for Consideration

Appellant-accused convicted u/s.138, Negotiable Instruments

Act, 1881, had claimed mismatch of signatures on the cheque

in question. His application for comparison of the signature as

appearing on the cheque through the handwriting expert was

rejected by trial court. High Court whether justified in dismissing

the application filed by the appellant u/s.391, CrPC for taking

additional evidence at appellate stage and seeking a direction to

obtain the opinion of the handwriting expert.

Headnotes

Negotiable Instruments Act, 1881 – ss.118, 138 – Code of

Criminal Procedure, 1973 – s.391 – Presumptions under the

NI Act though rebuttable, operate in favour of the complainant

– Accused to rebut such presumptions by leading evidence

– Cheque dishonoured – Appellant convicted for offence

punishable u/s.138 – Claiming mismatch of signatures,

during the trial, the appellant had filed application seeking

comparison of the signature as appearing on the cheque

through the handwriting expert – Rejected by trial court –

Order not challenged – At appellate stage, the appellant filed

application u/s.391, CrPC for taking additional evidence and

seeking a direction to obtain the opinion of the handwriting

expert – Dismissed:

Held: s.118 sub-clause (e) provides a clear presumption regarding

indorsements made on the negotiable instrument being in order

in which they appear thereupon – Thus, the presumption of the

indorsements on the cheque being genuine operates in favour of

the holder in due course of the cheque in question which would

be the complainant herein – If the accused intends to rebut

such presumption, he would be required to lead evidence to this

effect – Certified copy of a document issued by a Bank is itself 

1084 [2024] 1 S.C.R.

Digital Supreme Court Reports

admissible under the Bankers’ Books Evidence Act, 1891 without

any formal proof thereof – Hence, in an appropriate case, the

certified copy of the specimen signature maintained by the Bank

can be procured with a request to the Court to compare the same

with the signature appearing on the cheque by exercising powers

u/s.73, Evidence Act, 1872 – However, in the present case,

despite having opportunity, the appellant did not put any question

to the bank official examined in defence for establishing his plea

of purported mismatch of signature on the cheque in question –

Hence, the appellate Court was not required to come to the aid

and assistance of the appellant for collecting defence evidence at

his behest – Power to record additional evidence u/s.391, CrPC

should only be exercised when the party making such request

was prevented from presenting the evidence in the trial despite

due diligence or the facts giving rise to such prayer came to light

at a later stage during pendency of the appeal and non-recording

of such evidence may lead to failure of justice – Furthermore, the

appellant also did not challenge the trial court’s order rejecting

his application for comparison of the signature as appearing on

the cheque through the handwriting expert and thus, had attained

finality – Impugned orders do not warrant interference. [Paras 14,

15, 17, 9, 18 and 20]

Code of Criminal Procedure, 1973 – s.391 – Power to record

additional evidence – Exercise of – Discussed. [Para 9]

Code of Criminal Procedure, 1973 – s.391 – Negotiable

Instruments Act, 1881 – s.138 – Appellant-accused alleged

that he did not receive the notice u/s.138 of the NI Act and

the concerned officer from the Post Office be summoned to

prove the same:

Held: It would be for the appellate Court while deciding the appeal

to examine such issue based on the evidence available on record

– Thus, there was no requirement for the appellate Court to have

exercised power u/s.391, CrPC for summoning the official from the

Post Office and it rightly rejected the application u/s.391, CrPC.

[Para 19]

List of Acts

Negotiable Instruments Act, 1881; Code of Criminal Procedure,

1973; Bankers’ Books Evidence Act, 1891; Evidence Act, 1872.

[2024] 1 S.C.R. 1085

Ajitsinh Chehuji Rathod v. State of Gujarat & Anr.

List of Keywords

Cheque dishonour; Presumptions under Negotiable Instruments

Act; Rebuttable; Indorsements made on negotiable instrument;

Holder in due course; Mismatch of signatures; Comparison of the

signature; Handwriting expert; Appellate stage, Additional evidence;

Document issued by Bank; Certified copy; Specimen signature

maintained by Bank; Bank official; Appellate Court; Failure of justice.

Case Arising From

CRIMINAL APPELLATE JURISDICTION: Criminal Appeal No.478

of 2024.

From the Judgment and Order dated 25.10.2023 of the High Court

of Gujarat at Ahmedabad in CRMA No.17933 of 2023.

Appearances for Parties

Shariq Ahmed, Sunil Kumar Verma, Vinay Vats, Tariq Ahmed for

M/s. Ahmadi Law Offices, Advs. for the Appellant.

Judgment / Order of the Supreme Court

Judgment

Mehta, J.

1. Leave granted.

2. The instant appeal by special leave filed at the behest of the appellant

accused calls into question the order dated 25th October, 2023 passed

by the High Court of Gujarat rejecting the Criminal Misc. Application

No. 17933 of 2023 preferred by the appellant under Section 482 read

with Section 391 of the Code of Criminal Procedure, 1973(hereinafter

being referred to as ‘CrPC’).

3. The appellant was prosecuted for the offence punishable under

Section 138 of the Negotiable Instruments Act, 1881(hereinafter

being referred to as ‘NI Act’) before the learned trial Court with an

allegation that the cheque to the tune of Rs. 10 lakhs issued by the

appellant in favour of the complainant Shri Mahadevsinh Cahndaasinh

Champavat upon being presented in the bank was dishonoured “for

insufficient funds and account dormant”.

4. During the course of trial, the appellant preferred an application

dated 13th June, 2019 before learned trial Court with a prayer to

send the cheque to the handwriting expert for comparison of the 

1086 [2024] 1 S.C.R.

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handwriting as well as signature appearing thereon with a plea that his

signatures had been forged on the cheque in question. The learned

trial Court rejected the application vide order dated 13th June, 2019

itself observing that the application was aimed at delaying the trial.

The learned trial Court further observed that the matter was at the

stage of defence and the accused could lead evidence to prove his

claim pertaining to mismatch of signatures.

5. The order dated 13th June, 2019 passed by learned trial Court was

not challenged any further and thus the same attained finality. The

trial Court, proceeded to convict the accused appellant vide judgment

dated 7th November, 2019.

6. The appellant preferred an appeal before the Principal Sessions

Judge, Gandhinagar and during pendency thereof, he filed an

application under Section 391 CrPC for taking additional evidence

at appellate stage and seeking a direction to obtain the opinion of

the handwriting expert after comparing the admitted signature of the

accused appellant and the signature as appearing on the disputed

cheque. Another prayer made in the said application was that the

concerned officer from the Post Office should be summoned so as

to prove the defence theory that the notice under Section 138 of NI

Act was never received by the accused appellant.

7. Such application preferred by the appellant was rejected by the

learned Principal Sessions Judge, Gandhinagar vide detailed order

dated 25th July, 2023, which was carried by the appellant to the

High Court by filing the captioned Criminal Misc. Application No.

17933/2023 which came to be dismissed by order dated 25th October,

2023 which is under challenge in this appeal.

8. We have considered the submissions advanced by learned counsel

for the appellant and have gone through the impugned order and

the material placed on record.

9. At the outset, we may note that the law is well-settled by a catena

of judgments rendered by this Court that power to record additional

evidence under Section 391 CrPC should only be exercised when

the party making such request was prevented from presenting the

evidence in the trial despite due diligence being exercised or that

the facts giving rise to such prayer came to light at a later stage

during pendency of the appeal and that non-recording of such

evidence may lead to failure of justice.

[2024] 1 S.C.R. 1087

Ajitsinh Chehuji Rathod v. State of Gujarat & Anr.

10. It is apposite to mention that the learned first appellate Court, i.e.,

the Principal Sessions Judge, Gandhinagar had taken note of the

fact that during the trial, the appellant examined the witness of the

Bank of Baroda in support of his defence but not a single question

was put to the said witness regarding genuineness or otherwise of

the signatures as appearing on the cheque in question.

11. Furthermore, as per the cheque return memo of the Bank dated 26th

February, 2018, the reason for the cheque being returned unpaid is

clearly recorded as “funds insufficient and account dormant”.

12. There is a specific column no. 10 in the said written memo which

reads as follows:-

“Bank of Baroda

(HEAD OFFICE MANDVI, BARODA)

Infocity Branch Date: 26.02.2018

Cheque No. 503273 for Rs. 10,00,000/- returned unpaid

for reason No. 22 3093010008596

1-9 ….

10 Drawer’s signature differs from specimen recorded

with us.

11-22 ….”

Manifestly, the cheque was not returned unpaid for the reason

that the signature thereupon differed from the specimen signature

recorded with the bank.

13. Section 118 of the NI Act has a bearing upon the controversy and

is thus, reproduced hereinbelow:-

“118. Presumptions as to negotiable instruments.—

Until the contrary is proved, the following presumptions

shall be made:

(a) of consideration: that every negotiable instrument

was made or drawn for consideration, and that every

such instrument, when it has been accepted, indorsed,

negotiated or transferred, was accepted, indorsed,

negotiated or transferred for consideration;

1088 [2024] 1 S.C.R.

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(b) as to date: that every negotiable instrument bearing

a date was made or drawn on such date;

(c) as to time of acceptance: that every accepted bill

of exchange was accepted within a reasonable time

after its date and before its maturity;

(d) as to time of transfer: that every transfer of a

negotiable instrument was made before its maturity;

(e) as to order of indorsements: that the indorsements

appearing upon a negotiable instrument were made

in the order in which they appear thereon;

(f) as to stamps: that a lost promissory note, bill of

exchange or cheque was duly stamped;

(g) that holder is a holder in due course: that the holder

of a negotiable instrument is a holder in due course:

Provided that, where the instrument has been obtained from its lawful

owner, or from any person in lawful custody thereof, by means of an

offence or fraud, or has been obtained from the maker or acceptor

thereof by means of an offence or fraud or for unlawful consideration,

the burden of proving that the holder is a holder in due course lies

upon him.”

14. Section 118 sub-clause (e) of the NI Act provides a clear presumption

regarding indorsements made on the negotiable instrument being in

order in which they appear thereupon. Thus, the presumption of the

indorsements on the cheque being genuine operates in favour of

the holder in due course of the cheque in question which would be

the complainant herein. In case, the accused intends to rebut such

presumption, he would be required to lead evidence to this effect.

15. Certified copy of a document issued by a Bank is itself admissible

under the Bankers’ Books Evidence Act, 1891 without any formal

proof thereof. Hence, in an appropriate case, the certified copy of

the specimen signature maintained by the Bank can be procured

with a request to the Court to compare the same with the signature

appearing on the cheque by exercising powers under Section 73 of

the Indian Evidence Act, 1872.

[2024] 1 S.C.R. 1089

Ajitsinh Chehuji Rathod v. State of Gujarat & Anr.

16. Thus, we are of the view that if at all, the appellant was desirous of

proving that the signatures as appearing on the cheque issued from

his account were not genuine, then he could have procured a certified

copy of his specimen signatures from the Bank and a request could

have been made to summon the concerned Bank official in defence

for giving evidence regarding the genuineness or otherwise of the

signature on the cheque.

17. However, despite having opportunity, the accused appellant did not put

any question to the bank official examined in defence for establishing

his plea of purported mismatch of signature on the cheque in question

and hence, we are of the firm opinion that the appellate Court was

not required to come to the aid and assistance of the appellant for

collecting defence evidence at his behest. The presumptions under

the NI Act albeit rebuttable operate in favour of the complainant.

Hence, it is for the accused to rebut such presumptions by leading

appropriate defence evidence and the Court cannot be expected to

assist the accused to collect evidence on his behalf.

18. The appellant had sought for comparison of the signature as

appearing on the cheque through the handwriting expert by filing

an application before the trial Court which rejected the same vide

order dated 13th June, 2019. The said order was never challenged

and had thus attained finality.

19. So far as the allegation of the accused appellant that he did not

receive the notice under Section 138 of the NI Act is concerned,

it would be for the appellate Court while deciding the appeal to

examine such issue based on the evidence available on record

and thus, there was no requirement for the appellate Court to have

exercised power under Section 391 CrPC for summoning the official

from the Post Office and had rightly rejected the application under

Section 391 CrPC.

20. As an upshot of the above discussion, we find no infirmity in the

impugned orders warranting interference. The appeal lacks merit

and is dismissed as such.

21. Pending application(s), if any, shall stand disposed of.

Headnotes prepared by: Divya Pandey Result of the case: Appeal dismissed. 

i) Whether the Working President could have convened the election meeting for 08.09.2002 as according to the Objectors, it was only the Secretary or in the alternative the President who could have convened the meeting under the bye laws; ii) Whether the 7 Objectors were entitled to a notice for the meeting of 08.09.2002 in view of their disqualification u/s. 15 of the Societies Registration Act, 1860; iii) Whether lack of notice to the said 7 Objectors would vitiate the entire election meeting of 08.09.2002; iv) Whether invalid members had signed the requisition dated 20.08.2002 and had been elected to the Executive Committee; v) Whether the private respondents had the locus to be heard before any forum or to file an appeal/petition against the order of the Joint Charity Commissioner.

* Author

[2024] 1 S.C.R. 1062 : 2024 INSC 52

Adv Babasaheb Wasade & Ors.

v.

Manohar Gangadhar Muddeshwar & Ors.

(Civil Appeal No. 10846 of 2018)

23 January 2024

[Vikram Nath* And Ahsanuddin Amanullah, JJ.]

Issue for Consideration

i) Whether the Working President could have convened the election

meeting for 08.09.2002 as according to the Objectors, it was only

the Secretary or in the alternative the President who could have

convened the meeting under the bye laws; ii) Whether the 7

Objectors were entitled to a notice for the meeting of 08.09.2002

in view of their disqualification u/s. 15 of the Societies Registration

Act, 1860; iii) Whether lack of notice to the said 7 Objectors would

vitiate the entire election meeting of 08.09.2002; iv) Whether invalid

members had signed the requisition dated 20.08.2002 and had

been elected to the Executive Committee; v) Whether the private

respondents had the locus to be heard before any forum or to file an

appeal/petition against the order of the Joint Charity Commissioner.

Headnotes

Societies Registration Act, 1860 – Bombay Public Trust Act,

1950 – Whether the Working President could have convened the

election meeting for 08.09.2002 as according to the Objectors,

it was only the Secretary or in the alternative the President

who could have convened the meeting under the bye laws:

Held: The effective office bearers of the Society namely the

President, Vice-President and the Secretary of the Society had

expired – Prior to his death, the President due to his poor health,

the Executive Body under his presidentship passed a resolution

on 01.07.1997 empowering appellant no. 1 to be designated as

the Working President – He was recognised was by almost all the

members of the General Body – In the instant case, it was not only

appropriate but also legal for the surviving members to request

for convening a meeting – Further, as many as 16 members had

requested in writing for convening the meeting – If the submission

of the Objectors is to be accepted that the Working President could 

[2024] 1 S.C.R. 1063

Adv Babasaheb Wasade & Ors. v. Manohar Gangadhar

Muddeshwar & Ors.

not convene the meeting, then no alternative has been suggested

by the Objectors as to who could convene the meeting – Even

the Vice-President and the Joint-Secretary had also passed away

and they had also not been replaced by any fresh elections –

The only person who could be said to be managing the affairs

of the Society was the Working President and in particular, when

all the 16 surviving and valid members had made a request for

convening a meeting, no fault could be found with the decision of

the Working President to convene the meeting – The other option

could have been that all the 16 members could have themselves

nominated any one of the members to chair the meeting of the

Executive Body and thereafter they could have proceeded to take

appropriate decisions – In such situation, the convening of the

meeting for holding the elections on 08.09.2002 cannot be faulted

with. [Paras 4, 19, 20]

Societies Registration Act, 1860 – Bombay Public Trust Act,

1950 – Whether the 7 Objectors were entitled to a notice for

the meeting of 08.09.2002 in view of their disqualification u/s.

15 of the Registration Act:

Held: It is not in dispute that all the Objectors were in arrears of

their membership fee for a period of more than three months – This

fact is admitted as is recorded by not only the High Court but all

the three authorities – The specific language used in s. 15 of the

Registration Act is that such members in default of membership

fee would not be entitled to vote and would not be counted as

members of the Society – If they were not entitled to vote and they

were not to be counted as members, there would be no illegality

or for that matter any prejudice being caused by not issuing any

notice as the same would be an exercise in futility. [Para 22]

Societies Registration Act, 1860 – Bombay Public Trust Act,

1950 – Whether lack of notice to the said 7 Objectors would

vitiate the entire election meeting of 08.09.2002:

Held: It is true that in the bye-laws of the present Society or the

Rules of the Society, there is no provision of automatic cessation

of membership where a member goes in default of payment of

membership fee for more than three months – However, the effect

of the proviso to Section 15 of the Registration Act which admittedly

is applicable to the Society, the Objectors have to be treated as

suspended members and therefore, would not be entitled to any

notice as they had no right to vote or to be counted as members 

1064 [2024] 1 S.C.R.

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– Once they are not to be counted as members, there was no

occasion to give them notice as such Non-issuance of notice to the

Objectors would not vitiate the proceeding of the special meeting

held on 08.09.2002. [Para 26]

Societies Registration Act, 1860 – Bombay Public Trust Act,

1950 – Whether invalid members had signed the requisition

dated 20.08.2002 and had been elected to the Executive

Committee:

Held: The signatories at serial nos. 12 to 16 of the requisition

dated 20.08.2002, had been duly admitted in the General Body

Meeting on 11.11.2001 – The said resolution of the meeting was

never challenged – The same is on record as Exhibit 131 and one

of the Objectors DVS was a signatory in the said proceeding –

With respect to the objections relating to signatory nos. 4 to 7, the

explanation is that were of the category of Employee Members – In

due course they had retired from service – However, even after

their retirement, they had continued to pay their subscription – As

their membership(s) have continued, at this stage, objection(s)

with regard to the validity thereof is not being examined in detail,

given the lack of clarity and absence of material facts on this

aspect. [Para 27]

Societies Registration Act, 1860 – Bombay Public Trust Act,

1950 – Whether the private respondents had the locus to be

heard before any forum or to file an appeal/petition against

the order of the Joint Charity Commissioner:

Held: During the pendency of the appeal before the Joint Charity

Commissioner all the seven objectors had died – The Joint Charity

Commissioner decided in favour of the appellants and directed for

accepting the Change Report – The contesting respondent preferred

a petition before the District Judge – He was neither an objector

before the Assistant Charity Commissioner nor a valid member

of the Society – He would have no locus to maintain the petition

before the District Judge – Although the contesting respondent

claimed himself to be the Vice-President of the Society but has

not been able to substantiate his claim – On this ground alone

the District Judge ought to have dismissed the petition. [Para 29]

Societies Registration Act, 1860 – Bombay Public Trust Act,

1950 – There were four signatories (Members 4 to 7 from the

category of Employee Members) to the requisition calling a 

[2024] 1 S.C.R. 1065

Adv Babasaheb Wasade & Ors. v. Manohar Gangadhar

Muddeshwar & Ors.

General Body Meeting – From a perusal of the available record,

it transpires that they had retired from service and even after

that had continued to pay their subscription – Propriety:

Held: In this context, the question that arises is that once the

said Members were Employee Members, their categorisation as

such was dependent on them being in service – On retirement,

the said signatories would cease to be employees, come out of

the category of Employee Members and their membership in

the Society could not have continued – Upon superannuation or

cessation of their employment, such four signatories could very well

have been made members of the Society, but there is no indication

on the record that they were made members of the Society by a

specific resolution and thereafter continued as members and paid

the subscription fee(s) – Thus, they could not have continued as

members of the Society in the category of Employee Members

even upon their superannuation by merely paying the yearly

subscription fee thereby blocking the entry of the persons, who

were still employees. [Para 34]

Principles/Doctrines – Doctrine of Necessity – When an action

is required to be taken under compelling circumstances –

Applicability of the doctrine of necessity on the facts of the

instant case:

Held: There is a doctrine of necessity where under given

circumstances an action is required to be taken under compelling

circumstances – The use of the doctrine of necessity is to justify

actions that would otherwise be outside the norm due to the urgent

need to restore order – In the instant case, had the Working

President not convened the meeting, the elections of the executive

body would have been in limbo for an unreasonable amount of

time – The convening of the meeting by the Working President

upon the requests by the 16 surviving members was a “necessity”

at the time. [Paras 15, 18]

Case Law Cited

Charan Lal Sahu v. Union of India [1989] 2 Suppl. SCR

597: (1990) 1 SCC 613 – followed.

Election Commission of India v. Dr Subramaniam Swamy

[1996] 1 Suppl. SCR 637: (1996) 4 SCC 104 – relied on.

1066 [2024] 1 S.C.R.

Digital Supreme Court Reports

Hyderabad Karnataka Education Society v. Registrar

of Societies and Others [1999] 5 Suppl. SCR 161 :

(2000) 1 SCC 566 – referred to.

Shri Bhaurao Versus Shri Dyaneshwar First Appeal No.

1435 of 2017; Ramesh Gangadhar Dongre and another

vs. Charity Commissioner, Mumbai and other 2020(5)

Mh.L.J.; Santosh vs. Purushottam 2017(6) Mh.L.J.; Shri

Sarbjit Singh & Others vs. All India fine Arts & Crafts

Society & Others ILR (1989) 2 Del 585 – referred to.

Books and Periodicals Cited

“Commentaries on the Laws of England” Book 1 of the

Rights of Persons by William Blackstone.

List of Acts

Societies Registration Act, 1860; Bombay Public Trust Act, 1950.

List of Keywords

Society; Members of Society; Trustees of Trust; Rules and

regulations of Society; Bye-laws; Life Members; Employee

Members; Ordinary Members; Donor Members; Executive

Body; Working President; Rights and duties of Working

President; Members of the General Body; Surviving

Members; Arrears of Membership; Notice; Change Report;

Requisition by Members; Meeting for Election; Defaulters;

Subscribers; Disqualification; Doctrine of Necessity.

Case Arising From

CIVIL APPELLATE JURISDICTION : Civil Appeal No.10846 of 2018.

From the Judgment and Order dated 20.07.2017 of the High Court of

Judicature at Bombay at Nagpur in FA No.811 of 2016.

Appearances for Parties

Shekhar Naphade, Sr. Adv., Gagan Sanghi, S.D Abhyankar, Ms.

Farah Hashmi, Ms. Aishwarya Dash, Dr. Prashant Pratap, Rameshwar

Prasad Goyal, Advs. for the Appellants.

Narender Hooda, Sr. Adv., Prashant Gode, Ms. Jayshree Satpute,

Nikhil Kirtane, Ms. Manju Jetley, Advs. for the Respondents.

[2024] 1 S.C.R. 1067

Adv Babasaheb Wasade & Ors. v. Manohar Gangadhar

Muddeshwar & Ors.

Judgment / Order of the Supreme Court

Judgment

Vikram Nath, J.

1. The present appeal assails the correctness of the judgment and

order dated 20.07.2017, passed by the Nagpur Bench of the Bombay

High Court in First Appeal No. 811 of 2016, whereby the Appeal

was dismissed, thereby confirming the order passed by the District

Judge-IV, Chandrapur which confirmed the order passed by the

Assistant Charity Commissioner, Nagpur rejecting the change report

filed by the appellants.

2. There is a society by the name of Shikshan Prasarak Mandal,

Mul1

 registered under the Societies Registration Act, 18602

 as a

charitable society since 1946. The Society in its turn framed its rules

and regulations. Later on, the Society was registered as a Public

Trust under the Bombay Public Trusts Act, 19503

. The rules and

regulations of the Society were incorporated as its bye-laws and

were duly registered under the Trusts Act.

3. As per the rules and regulations, the Society has four types of

members i.e. Life members, Employee members, Ordinary members

and Donor members. The members of each category were required

to pay an annual membership subscription of Rs. 11/- per year to

the Society.

4. The effective office bearers of the Society namely the President,

Vice-President and the Secretary of the Society expired. Even prior

to the death of the President due to his poor health, the Executive

Body under his presidentship passed a resolution on 01.07.1997

empowering Advocate Babasaheb Wasade (appellant No. 1) to be

designated as the Working President and he was required to look

after day-to-day affairs and management of the Society. This status

of Working President was given to the appellant No.1 at a time

when the President was suffering from serious illness and later on

succumbed due to ill health on 24.05.1998.

1 In short, “Society”

2 In short, Registration Act”

3 In short, “Trusts Act”

1068 [2024] 1 S.C.R.

Digital Supreme Court Reports

5. As there was no elected President, Vice-President or the Secretary,

16 members of the Society requested appellant No.1 vide written

request dated 20.08.2002 to summon extraordinary meeting to hold

the elections. Pursuant to the receipt of the said request, the appellant

No.1 acting as Working President, issued notice on 03.09.2002 for

summoning a special meeting for the elections of new Executive

Body. The elections were held on 08.09.2002 and a new Executive

Committee was elected with appellant No.1 as the President and

appellant No.2 as the Secretary. Accordingly, a Change Report bearing

no. 668 of 2002 was submitted under Section 22 of the Trusts Act

before the Assistant Charity Commissioner, Chandrapur.

6. Objections were filed by 7 persons alleging to be members of the

Society on the ground that notice dated 03.09.2002 had not been

served on them and that appellant No.1 had no authority to issue

notice to summon a meeting for election. It was also alleged in the

objections that the signatory nos. 12 to 16 to the request letter dated

20.08.2002, were not valid members of the Society and were yet to

be approved by the Executive Committee. Further signatory nos. 4

to 7 of the same objection had retired and hence, they ceased to

be members.

7. The elected Secretary filed his response to the said objections stating

therein that signatory nos. 4 to 7 and 12 to 16 are valid members of

the Society. Further that the 7 Objectors had not paid their annual

subscriptions for more than the prescribed period under Section 15

of the Registration Act as such they were barred from voting, and

therefore, even if notices were not sent to them, it would not make

any difference.

8. Before the Assistant Charity Commissioner parties led evidence. The

Assistant Charity Commissioner vide order dated 19.06.2010 allowed

the objections and accordingly rejected the Change Report. The

appellant preferred an appeal before the Joint Charity Commissioner,

Nagpur. The appeal was allowed by order dated 12.04.2016 and

the Change Report was accepted. Against this, Miscellaneous Civil

Application No. 50 of 2016 was filed by the Objectors before the

District Judge-4, Chandrapur, which was allowed vide judgment dated

29.07.2016. Aggrieved by the same, the First Appeal was preferred

before the Bombay High Court which has since been dismissed by

the impugned order, giving rise to the present appeal. 

[2024] 1 S.C.R. 1069

Adv Babasaheb Wasade & Ors. v. Manohar Gangadhar

Muddeshwar & Ors.

9. Certain facts are not disputed by the parties. The same are being

recorded hereunder:

i) 7 Objectors who had filed objections against the Change

Report were admittedly defaulters in payment of their annual

subscriptions, and were covered by the second part of Section

15 of the Registration Act which stated that no person shall be

entitled to vote or be counted as a member whose subscription

at the time shall have been in arrears for a period exceeding

three months. The 7 Objectors admittedly fell under this category

of default.

ii) Notice for the meeting fixed for 08.09.2002 was not issued to

the 7 Objectors for the reason that they were in arrears and as

such would not have the right to vote or be counted as members.

iii) All the office bearers holding important posts like President,

Vice-President and Secretary had expired prior to request

dated 20.08.2002 and no election had been held till then to fill

up the said posts.

iv) The appellant No.1 was functioning as Working President since

1997 without there being any challenge to such assignment in

the Executive Body meeting dated 01.07.1997.

v) All the 7 Objectors who had filed objections to the Change

Report had died during the pendency of the appeal before

the Joint Charity Commissioner. The contesting respondents

applied before the Joint Charity Commissioner to be impleaded

as respondents. Said request was allowed, despite objections

by the appellants that they had no locus as they were neither

trustees or members of the Society or the Trust.

vi) The appellants are in effective control of the Society and the

Trust for the last more than two decades and are being elected

during fresh elections held in the last two decades.

10. We have heard Shri Shekhar Naphade, learned Senior Counsel for

the Appellants and Shri Narender Hooda, learned Senior Counsel

appearing for the private respondents.

11. The arguments of Shri Naphade on behalf of the appellants are

briefly summarised hereunder:

1070 [2024] 1 S.C.R.

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i) Today none of the 7 Objectors are alive. The private respondents

to this appeal having not raised any objections to the Change

Report, cannot be heard because they are neither trustees or

members of any category of the Society.

ii) Consistent finding recorded by the Authorities, the District Judge

and the High Court is that the 7 Objectors were in default in

payment of their annual subscription and therefore, were not

entitled to any notice for the meeting of the elections as they

were prohibited from voting and being counted as member

under Section 15 of the Societies Registration Act. The Courts

below committed an error in holding that due to lack of service

of notice, the proceedings of meeting dated 08.09.2002 were

vitiated.

iii) The appellants are in effective control of the Society as also

the Trust and have been functioning in accordance with its

bye-laws for more than two decades and they are continuing

to hold elections from time to time, and should therefore, not

be disturbed.

iv) The reasoning given by the Courts below that as there was

no order of cancellation of membership or cessation of the

membership, the 7 Objectors would be entitled to notice and the

question whether they would be allowed to vote or not would

be a separate issue.

v) Reliance has been placed upon by Shri Naphade on a judgment

of this Court in the case of Hyderabad Karnataka Education

Society Versus Registrar of Societies and Others4

, where

a provision similar to Section 15 of the Registration Act was

being considered and this Court held that the provision was valid

and a member defaulting in payment of subscription would for

all practical purposes be deemed to not be a member entitled

to notice.

12. On the other hand, Mr. Hooda has strongly relied upon the reasoning

given by the High Court.

4 In [1999] 5 Suppl. SCR 161 : (2000) 1 SCC 566

[2024] 1 S.C.R. 1071

Adv Babasaheb Wasade & Ors. v. Manohar Gangadhar

Muddeshwar & Ors.

i) He has submitted that it suffers from no infirmity, warranting

any interference.

ii) The appellants are not entitled to any relief from this Court, as

they were not entitled to convene the meeting for the elections.

Appellant No.1 was neither Secretary nor President and under

the bye-laws, it is the Secretary who would convene the meeting.

iii) He further reiterated that the effect of Section 15 of the

Registration Act would not be of cancelling the membership of the

Objectors. Referring to the Hyderabad Karnataka Education

Society (supra) case, Mr. Hooda submitted that in the aforesaid

case under the bye-laws there was a provision that if there

was a default, the membership would stand cancelled, which

is not the case here as there is no such provision under the

bye-laws. According to him, the said judgment would be of no

help to the appellant as it would not apply to the present case.

iv) Lastly, it was submitted that a number of signatories to the

requisition dated 20.08.2002 and also elected as executive

members on 08.09.2002, were not members of the Society

at that time for the reason that either they had retired or were

never elected as per the bye-laws.

v) Mr. Hooda has further relied upon the following judgments as

part of his submissions:

i. Shri Bhaurao Versus Shri Dyaneshwar, in First Appeal

No. 1435 of 2017 passed by the High Court of Judicature

at Bombay, Nagpur Bench,

ii. Ramesh Gangadhar Dongre and another vs. Charity

Commissioner, Mumbai and others5

,

iii. Santosh vs. Purushottam6

,

iv. Shri Sarbjit Singh & Others vs. All India fine Arts &

Crafts Society & Others7

.

13. Having considered the respective submissions, the following questions

arise for consideration:

5 2020(5) Mh.L.J.

6 2017(6) Mh.L.J.

7 ILR (1989) 2 Del 585

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i) Whether the Working President Mr. Wasade could have

convened the election meeting for 08.09.2002 as according to

the Objectors, it was only the Secretary or in the alternative

the President who could have convened the meeting under

the bye-laws?

ii) Whether the 7 Objectors were entitled to a notice for the meeting

of 08.09.2002 in view of their disqualification under Section 15

of the Registration Act?

iii) Whether lack of notice to the said 7 Objectors would vitiate the

entire election meeting of 08.09.2002?

iv) Whether invalid members had signed the requisition dated

20.08.2002 and had been elected to the Executive Committee?

v) Whether the private respondents had the locus to be heard

before any forum or to file an appeal/petition against the order

of the Joint Charity Commissioner?

14. It is not in dispute that in the meeting of the Executive Body held on

01.07.1997, the then President on account of his ill health had got

a resolution passed that Mr. Wasade would thereon be the Working

President and will look after the day-to-day affairs and management

of the Society. The said resolution of 01.07.1997 was not put to any

challenge by any of the Trustees or the members of the General Body.

It is also not in dispute that before 20.08.2002, the President, the

Secretary, the Vice-President and the Joint-Secretary were not alive.

In the absence of the office bearers authorised under the bye-laws

who could convene the meeting, the only option left for convening

the meeting could either be with the Working President on his own

or upon the requisition made by the members to convene a meeting.

15. There is a doctrine of necessity where under given circumstances an

action is required to be taken under compelling circumstances. One

of the earlier proponents of the Doctrine of necessity in Common Law

was William Blackstone, who in his book, “Commentaries on the

Laws of England” Book 1 of the Rights of Persons, discusses

the meeting of the convention-parliament before Charles II’s return,

noting that it was an extraordinary measure taken out of necessity.

He describes the use of the doctrine of necessity to justify actions

that would otherwise be outside the norm due to the urgent need

to restore order. He describes another instance during the Glorious 

[2024] 1 S.C.R. 1073

Adv Babasaheb Wasade & Ors. v. Manohar Gangadhar

Muddeshwar & Ors.

Revolution when the lords and commons assembled and acted without

the usual royal summons, justified by the extraordinary circumstance

of a perceived vacant throne and the urgent need to address the

governance of the country.

“It is also true, that the convention-parliament, which

restored king Charles the second, met above a month

before his return; the lords by their own authority, and

the commons in pursuance of writs issued in the name

of the keepers of the liberty of England by authority of

parliament: and that the said parliament sat till the twenty

ninth of December, full seven months after the restoration;

and enacted many laws, several of which are still in

force. But this was for the necessity of the thing, which

supersedes all law; for if they had not so met, it was

morally impossible that the kingdom should have been

settled in peace. And the first thing done after the king’s

return, was to pass an act declaring this to be a good

parliament, notwithstanding the defect of the king’s writs.

So that, as the royal prerogative was chiefly wounded

by their so meeting, and as the king himself, who alone

had a right to object, consented to wave the objection,

this cannot be drawn into an example in prejudice of the

rights of the crown. Besides we should also remember,

that it was at that time a great doubt among the lawyers,

whether even this healing act made it a good parliament;

and held by very many in the negative: though it seems

to have been too nice a scruple.

It is likewise true, that at the time of the revolution, A.D. 1688,

the lords and commons by their own authority, and upon

the summons of the prince of Orange, (afterwards king

William) met in a convention and therein disposed of the

crown and kingdom. But it must be remembered, that this

assembling was upon a like principle of necessity as at the

restoration; that is, upon an apprehension that king James

the second had abdicated the government, and that the

throne was thereby vacant: which apprehension of theirs

was confirmed by their concurrent resolution, when they

actually came together. An in such a case as the palpable

vacancy of a throne, it follows ex necessitate rei, that the 

1074 [2024] 1 S.C.R.

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form of the royal writs must be laid aside, otherwise no

parliament can ever meet again. For, let us put another

possible case, and suppose, for the sake of argument, that

the whole royal line should at any time fail, and become

extinct, which would indisputably vacate the throne: in this

situation it seems reasonable to presume, that the body

of the nation, consisting of lords and commons, would

have a right to meet and settle the government; otherwise

there must be no government at all. And upon this and

no other principle did the convention in 1688 assemble.

The vacancy of the throne was precedent to their meeting

without any royal summons, not a consequence of it. They

did not assemble without writ, and then make the throne

vacant; but the throne being previously vacant by the king’s

abdication, they assembled without writ, as they must do

if they assembled at all. Had the throne been full, their

meeting would not have been regular; but, as it was really

empty, such meeting became absolutely necessary. And

accordingly it is declared by statute 1 W & M. st. 1. c. 1.

that this convention was really the two houses of parliament,

notwithstanding the want of writs or other defects of form.

So that, notwithstanding these two capital exceptions,

which were justifiable only on a principle of necessity,

(and each of which, by the way, induced a revolution in

the government) the rule laid down is in general certain,

that the king, only, can convoke a parliament.”

16. The doctrine of necessity has been elucidated by a Constitution Bench

of this Court in Charan Lal Sahu vs. Union of India8 as follows:

“The question whether there is scope for the Union of

India being responsible or liable as a joint tort-feasor is a

difficult and different question. But even assuming that it

was possible that the Central Government might be liable

in a case of this nature, the learned Attorney General was

right in contending that it was only proper that the Central

Government should be able and authorised to represent

the victims. In such a situation, there will be no scope

8 In [1989] 2 Suppl. SCR 597 : (1990) 1 SCC 613 in para 105

[2024] 1 S.C.R. 1075

Adv Babasaheb Wasade & Ors. v. Manohar Gangadhar

Muddeshwar & Ors.

of the violation of the principles of natural justice. The

doctrine of necessity would be applicable in a situation

of this nature. The doctrine has been elaborated, in

Halsbury’s Laws of England, 4th edn., page 89, paragraph

73, where it was reiterated that even if all the members

of the Tribunal competent to determine a matter were

subject to disqualification, they might be authorised and

obliged to hear that matter by virtue of the operation of

the common law doctrine of necessity. An adjudicator

who is subject to disqualification on the ground of bias

or interest in the matter which he has to decide may in

certain circumstances be required to adjudicate if there

is no other person who is competent or authorised to be

adjudicator or if a quorum cannot be formed without him

or if no other competent tribunal can be constituted. In the

circumstances of the case, as mentioned hereinbefore,

the Government of India is only capable to represent the

victims as a party. The adjudication, however, of the claims

would be done by the court. In those circumstances, we

are unable to accept the challenge on the ground of the

violation of principles of natural justice on this score. The

learned Attorney General, however, sought to advance,

as we have indicated before, his contention on the ground

of de facto validity. He referred to certain decisions. We

are of the opinion that this principle will not be applicable.

We are also not impressed by the plea of the doctrine of

bona fide representation of the interests of victims in all

these proceedings. We are of the opinion that the doctrine

of bona fide representation would not be quite relevant

and as such the decisions cited by the learned Attorney

General need not be considered.”

17. The applicability of the Doctrine of Necessity was further clarified by

this Court in Election Commission of India v. Dr Subramaniam

Swamy reported in (1996) 4 SCC 104 as follows:

“16. We must have a clear conception of the doctrine. It

is well settled that the law permits certain things to be

done as a matter of necessity which it would otherwise not

countenance on the touchstone of judicial propriety. Stated

differently, the doctrine of necessity makes it imperative 

1076 [2024] 1 S.C.R.

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for the authority to decide and considerations of judicial

propriety must yield. It is often invoked in cases of bias

where there is no other authority or Judge to decide the

issue. If the doctrine of necessity is not allowed full play in

certain unavoidable situations, it would impede the course

of justice itself and the defaulting party would benefit

therefrom. Take the case of a certain taxing statute which

taxes certain perquisites allowed to Judges. If the validity

of such a provision is challenged who but the members of

the judiciary must decide it. If all the Judges are disqualified

on the plea that striking down of such a legislation would

benefit them, a stalemate situation may develop. In such

cases the doctrine of necessity comes into play. If the

choice is between allowing a biased person to act or to

stifle the action altogether, the choice must fall in favour of

the former as it is the only way to promote decision-making.

In the present case also if the two Election Commissioners

are able to reach a unanimous decision, there is no need

for the Chief Election Commissioner to participate, if not

the doctrine of necessity may have to be invoked.”

18. In the present case, had the Working President not convened the

meeting, the elections of the executive body would have been in

limbo for an unreasonable amount of time. The convening of the

meeting by the Working President upon the requests by the 16

surviving members was a “necessity” at the time.

19. There is one more aspect of the matter to be discussed here with

respect to the duties of the ‘Working President’. Clause 11 of the

Byelaws recognizes a Working President and also defines his rights

and duties. The same is reproduced below:

“11. “Working President” –

The Rights and Duties of Working President:

1. To complete the work as per the written instructions

of the President of the Shikshan Prasarak Mandal,

the executive body of the Mandal and the General

Body of the Mandal.

2. Make efforts from the point of extending the area of

operation of the Shikshan Prasarak Mandal.”

[2024] 1 S.C.R. 1077

Adv Babasaheb Wasade & Ors. v. Manohar Gangadhar

Muddeshwar & Ors.

As per the above clause, the ‘Working President’ was to act on the

directions of the President, Executive Body and the General Body.

In the present case, the recognition was by almost all the members

of the General Body. He had no option but to call for a general body

meeting in accordance with the rights and duties conferred upon him.

20. In the present case, it was not only appropriate but also legal for the

surviving members to request for convening a meeting. Further in the

present case, as many as 16 members had requested in writing for

convening the meeting. If the submission of the Objectors is to be

accepted that the Working President could not convene the meeting,

then no alternative has been suggested by the Objectors as to who

could convene the meeting. Alternatively, the President and Secretary

who were authorized under the bye-laws had died and no election

had been held for replacing them. Even the Vice-President and the

Joint-Secretary had also passed away and they had also not been

replaced by any fresh elections. The only person who could be said

to be managing the affairs of the Society was the Working President

Mr. Wasade, and in particular, when all the 16 surviving and valid

members had made a request for convening a meeting, no fault could

be found with the decision of the Working President Mr. Wasade

to convene the meeting. The other option could have been that all

the 16 members could have themselves nominated any one of the

members to chair the meeting of the Executive Body and thereafter

they could have proceeded to take appropriate decisions. In such

situation, we are of the view that the convening of the meeting for

holding the elections on 08.09.2002 cannot be faulted with. Question

No.1 is answered accordingly in favour of the appellants.

21. Coming to the next question regarding notice to the objectors, at the

outset, Section 15 of the Registration Act is reproduced hereunder:

“Section 15 in The Societies Registration Act, 1860

15. Member defined.— Disqualified members - For the

purposes of this Act a member of a society shall be a person

who, having been admitted therein according to the rules

and regulations thereof, shall have paid a subscription, or

shall have signed the roll or list of members thereof, and

shall not have resigned in accordance with such rules and

regulations; Disqualified members.—But in all proceedings 

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under this Act no person shall be entitled to vote or be

counted as a member whose subscription at the time shall

have been in arrears for a period exceeding three months.”

The High Court, in the impugned order, has held that the said

provision is applicable.

22. It is not in dispute that all the Objectors were in arrears of their

membership fee for a period of more than three months. This fact

is admitted as is recorded by not only the High Court but all the

three authorities. In fact, these Objectors had gone to the extent of

saying that even if notices were issued to them, they will not receive

it. The question is what would be the effect of such non-payment in

the light of the proviso contained in Section 15 of the Registration

Act. The specific language used is that such members in default

of membership fee would not be entitled to vote and would not be

counted as members of the Society. If they were not entitled to vote

and they were not to be counted as members, there would be no

illegality or for that matter any prejudice being caused by not issuing

any notice as the same would be an exercise in futility.

23. It is a fact that under the bye-laws of the Society, there was no

provision that a member defaulting in payment of membership fee

and duly covered by the proviso to Section 15 of the Registration Act,

would automatically lose his membership or in effect would cease to

be a member of the Society. Be that as it may the only limited status

left of such members would be that their name would continue to

be in the Roll of the Society and at best by clearing of the arrears

of the membership fee in addition to any penalty or fine liable to be

charged for being reinstated as valid members would survive to them.

Such defaulting members could have applied that they are ready and

willing to pay their arrears and upon such application and payment

being made, the effect of the proviso to Section 15 of the Registration

Act could be considered by the appropriate officer/Committee of the

Society. Till such time they would continue to remain as suspended

members having no right to participate in any meeting.

24. The Executive Body or any other body competent under the bye-laws

could take up their matter and give them a show cause notice and

opportunity to save their membership by fulfilling their obligations

failing which their membership would be terminated. When despite

the same, they would not fulfil their obligations their membership

would be declared to have been terminated.

[2024] 1 S.C.R. 1079

Adv Babasaheb Wasade & Ors. v. Manohar Gangadhar

Muddeshwar & Ors.

25. This Court in the case of Hyderabad Karnataka Education Society

(supra) was dealing with a similar provision under Rule 7-A of the

Rules framed by Hyderabad Karnataka Education Society, read with

Section 2(b) and Section 6(2) proviso of the Karnataka Societies

Registration Act, 1960. Section 2(b) of the said Act defined ‘member’

which provided that to be treated as a member of the Society for the

year concerned, he should have been admitted to that membership

in accordance with rules and regulations and shall have paid the

subscription as laid down therein. Section 6(2) of the said Act was

akin to the proviso to Section 15 of the Registration Act that in

default of payment of membership fee for more than three months,

the membership would cease. The validity of such rule 7-A was

challenged before the High Court which found the same to be very

harsh and accordingly had held it to be ultra vires of Section 6(2) of

the Karnataka Societies Registration Act, 1960. This Court disagreed

with the reasoning given by the High Court and accordingly set it

aside. This Court held that the said rule could not be said to be

harsh or unreasonable, rather it was in line and in tune if it is read

with Section 2(b) and Section 6(2) of the said Act.

26. It is true that in the bye-laws of the present Society or the Rules

of the Society, there is no such provision of automatic cessation

of membership where a member goes in default of payment of

membership fee for more than three months. However, the effect of

the proviso to Section 15 of the Registration Act which admittedly

is applicable to the Society, the Objectors have to be treated as

suspended members and therefore, would not be entitled to any notice

as they had no right to vote or to be counted as members. Once they

are not to be counted as members, there was no occasion to give

them notice as such Non-issuance of notice to the Objectors would

not vitiate the proceeding of the special meeting held on 08.09.2002.

The argument raised by Mr. Hooda is to the effect that Hyderabad

Karnataka Education Society (supra) judgment would not apply

to the present case and would be of no help to the appellant. This

submission same cannot be accepted in view of the discussion made

above and also for the reasoning given by this Court in the said

judgment. Even if we do not take into consideration the judgment of

this Court Hyderabad Karnataka Education Society (supra), we

may record that a clear reading and interpretation of the proviso to

Section 15 of the Registration Act would disentitle such defaulting 

1080 [2024] 1 S.C.R.

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members from being given any notice even if their membership was

not terminated or ceased. Question nos. 2 and 3 are thus answered

in favour of the appellants.

27. In so far as the fourth question is concerned with regard to the

participation of invalid members in signing the requisition and being

elected in the executive is concerned, the same have been duly

explained by the appellants. The signatories at serial nos. 12 to 16

of the requisition dated 20.08.2002, had been duly admitted in the

General Body Meeting on 11.11.2001. The said resolution of the

meeting was never challenged. The same is on record as Exhibit

131 and one of the Objectors Dhanji Virji Shah was a signatory in the

said proceeding. With respect to the objections relating to signatory

nos. 4 to 7, the explanation is that were of the category of Employee

Members. In due course they had retired from service. However, even

after their retirement, they had continued to pay their subscription.

As their membership(s) have continued, at this stage, objection(s)

with regard to the validity thereof is not being examined in detail,

given the lack of clarity and absence of material facts on this aspect.

28. Coming to the last question regarding locus of the contesting

respondent which has been seriously pressed by Mr. Naphade,

learned Senior Counsel no material has been placed before us by

the respondent senior Counsel Mr. Hooda to establish their locus.

29. During the pendency of the appeal before the Joint Charity

Commissioner all the seven objectors had died. The Joint Charity

Commissioner decided in favour of the appellants and directed for

accepting the Change Report. The contesting respondent preferred

a petition before the District Judge. He was neither an objector

before the Assistant Charity Commissioner nor a valid member of the

Society. He would have no locus to maintain the petition before the

District Judge. Although the contesting respondent claimed himself

to be the Vice-President of the Society but has not been able to

substantiate his claim. On this ground alone the District Judge ought

to have dismissed the petition.

30. The judgments relied upon by Mr. Hooda referred to above are on

issue which were not argued before the High Court even otherwise

they relate to 15 days’ notice for convening a meeting which point

could have been raised by a valid member and not by a suspended

member.

[2024] 1 S.C.R. 1081

Adv Babasaheb Wasade & Ors. v. Manohar Gangadhar

Muddeshwar & Ors.

31. For all the reasons recorded above, the impugned judgment of the

High Court and the other authorities adverse to the appellants cannot

be sustained. The Change Report No.668 of 2002 deserves to be

accepted. The Joint Charity Commissioner had rightly accepted it.

32. The appeal is accordingly allowed. The impugned judgment and

order of the High Court as also the orders rejecting the Change

Report regarding General Body Meeting dated 08.09.2002 are set

aside and the Change Report is accepted.

33. However, having allowed the appeal, before parting, we would like to

address one grey area, which having been left unexplained cannot

be brushed aside. Insofar as it relates to four signatories to the

Requisition for calling a General Body Meeting, specifically being

Members 4 to 7 from the category of Employee Members, from a

perusal of the available record, it transpires that they had retired

from service. Yet even after this, they had continued to pay their

subscription and as such, their membership had continued.

34. In this context, the obvious question that arises is that once the said

Members were Employee Members, their categorisation as such

was dependent on them being in service. On retirement, the said

signatories would cease to be employees, come out of the category

of Employee Members and their membership in the Society could

not have continued. Upon superannuation or cessation of their

employment, such four signatories could very well have been made

members of the Society, but there is no indication on the record that

they were made members of the Society by a specific resolution and

thereafter continued as members and paid the subscription fee(s).

Thus, they could not have continued as members of the Society in

the category of Employee Members even upon their superannuation

by merely paying the yearly subscription fee thereby blocking the

entry of the persons, who were still employees.

35. Moreover, we find that the stalemate in the Society has continued

for a pretty long time, which does not bode well for any institution,

much less an institution which is running educational institutions and

is required to be run in a fair, transparent and legal manner. Thus,

we direct that fresh elections shall be held for the new Executive

Committee of the Society by the Charity Commissioner in accordance

with law within six months from the receipt of a copy of this Judgment.

It is left open for him to delve into all aspects of the matter for 

1082 [2024] 1 S.C.R.

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ensuring that the issue of membership/members of the Society is

resolved in terms of the existing records of the Society, ascertaining

the factual position and status of the members at relevant point of

time as also their right to continue as members of the Society and

be on the electoral roll for conduct of fresh election for constitution

of a new Executive Committee.

36. There shall be no order as to costs.

Headnotes prepared by: Ankit Gyan Result of the case: Appeal allowed.

Consortium of lenders represented by the State Bank of India filed affidavit stating that the lenders were agreeable that if Successful Resolution Applicant (SRA) satisfied particular criteria, including infusing Rs. 350 Crores by 31.08.2023, adhering to the resolution plan terms, and meeting employee payment obligations in accordance with the NCLAT order, they would abstain from challenging extension of time issues. However, the inability to meet these conditions would necessitate directing the Corporate Debtor-Jet Airways Limited into liquidation. SRA sought extension of time for the deposit of Rs 350 crores in two tranches of Rs 100 crores and the balance of Rs 150 crores by the adjustment of the Performance Bank Guarantee (PBG) issued in favour of the lenders. NCLAT whether justified in allowing the plea of the SRA for adjustment and consequential release of the PBG at the interlocutory stage.

* Author

[2024] 1 S.C.R. 1045 : 2024 INSC 51

State Bank of India and Ors

v.

The Consortium of Mr Murari Lal Jalan and

Mr Florian Fritsch and Anr

(Civil Appeal Nos 3736-3737 of 2023)

18 January 2024

[Dr Dhananjaya Y Chandrachud*, CJI, J B Pardiwala and

Manoj Misra, JJ.]

Issue for Consideration

Consortium of lenders represented by the State Bank of India

filed affidavit stating that the lenders were agreeable that if

Successful Resolution Applicant (SRA) satisfied particular criteria,

including infusing Rs. 350 Crores by 31.08.2023, adhering to the

resolution plan terms, and meeting employee payment obligations

in accordance with the NCLAT order, they would abstain from

challenging extension of time issues. However, the inability to

meet these conditions would necessitate directing the Corporate

Debtor-Jet Airways Limited into liquidation. SRA sought extension

of time for the deposit of Rs 350 crores  in two tranches of Rs

100 crores and the balance of Rs 150 crores by the adjustment

of the Performance Bank Guarantee (PBG) issued in favour of

the lenders. NCLAT whether justified in allowing the plea of the

SRA for adjustment and consequential release of the PBG at the

interlocutory stage.

Headnotes

Insolvency and Bankruptcy Code, 2016 – NCLAT permitted

the Successful Resolution Applicant (SRA) to adjust the last

tranche of Rs 150 crores by adjusting the Performance Bank

Guarantee (PBG) of Rs 150 crores – Correctness:

Held: The occasion for an extension of time to the SRA for the

deposit of Rs 350 crores arose as a consequence of the affidavit

which was filed by SBI before the NCLAT – SBI’s affidavit envisaged

that the lenders would not contest the issues pertaining to the grant

or exclusion of time; or extension in terms of the orders passed

by the NCLT on 13.01.2023 and 26.05.2023; and compliance of

the conditions precedent by the SRA – However, SBI’s offer was

subject to the fulfillment of three conditions that the SRA must infuse 

1046 [2024] 1 S.C.R.

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Rs. 350 Crores by 31.08.2023, adhering to the resolution plan

terms, and meeting employee payment obligations in accordance

with the NCLAT order dtd. 21.10.2022 upheld by this Court –

Conditional on compliance with the three conditions, SBI stated

that it would be willing to withdraw the company appeals pending

before the NCLAT as well as the Civil Appeals pending before this

Court – The offer made by SBI on behalf of the lenders had to

be complied with as it stood in the event that the SRA sought the

benefit of the offer – According to the SRA, the PBG was liable to

be released on adjustment in terms of the Resolution Plan – This

is a matter which would have to await an adjudication by NCLAT

in the pending appeal – Impugned order allowing the plea of the

SRA for adjustment and consequential release of the PBG at the

interlocutory stage prima facie would not be in accordance with

the tenor of the affidavit filed by SBI – Infusion meant that the

third tranche has to be paid in the same manner – Adjustment of

the PBG was not permissible – NCLAT not justified in holding that

the last tranche of Rs 150 crores which was to be paid would be

adjusted against the PBG – The SRA having deposited the first two

tranches each of Rs 100 crores must comply with the remaining

obligation of depositing Rs 150 crores (to make up a total payment

of Rs 350 crores) – Having by its conduct accepted the terms

set up by SBI it must be obligated to comply with the entirety of

its obligations – It must do so in strict compliance with the time

schedule as set out – Directions issued. [Paras 20-22 and 25]

List of Acts

Insolvency and Bankruptcy Code, 2016.

List of Keywords

Corporate Debtor (Jet Airways Limited); Conditions

Precedent; Director General of Civil Aviation; Effective Date;

Successful Resolution Applicant; Consortium of lenders;

Performance Bank Guarantee; Adjustment of Performance

Bank Guarantee; Infusing funds; Employees payment

obligations

Case Arising From

CIVIL APPELLATE JURISDICTION : Civil Appeal Nos.3736-3737 of

2023.

[2024] 1 S.C.R. 1047

State Bank of India and Ors v. The Consortium of Mr Murari Lal Jalan

and Mr Florian Fritsch and Anr

From the Judgment and Order dated 03.03.2023 of the National

Company Law Appellate Tribunal, Principal Bench at New Delhi in

Company Appeal (AT) (Insolvency) Nos.129-130 of 2023.

With

Civil Appeal Nos.4131-4134 And 6427-6428 of 2023.

Appearances for Parties

R. Venkataramani, Attorney General for India, Tushar Mehta,

Solicitor General, N. Venkataraman, A.S.G., Mukul Rohatgi,

Krishnendu Datta, Saurabh Kripal, Amit Sibal, Sanjay Singhvi,

Ritin Rai, Sr. Advs., Vikas Mehta, Mayan Prasad, Ms. Anshula

Vijay Kumar Grover, Ms. Rashi Rampal, Ms. Nitika Grover, Sahil

Khan, Sanjay Kapur, Devesh Dubey, Ms. Isha Virmani, Ms.

Mahima Kapur, Ms. Mansi Kapur, Mrs. Shubhra Kapur, Aashish

Vats, Harish Nadda, Kumar Shashank, Anant Singh, Ms. Srishty

Kaul, Rajat Sinha, Ms. Pooja Mahajan, Ms. Arveena Sharma, Ms.

Shruti Pandey, Avinash B. Amarnath, Raghav Shankar, Rajendra

Barot, Dhirajkumar Totala, Suharsh Sinha, Ms. Liz Mathew,

Nishant Upadhyay, Vinay Tripathi, Mayank Bhargava, Darpan

Sachdeva, Mehul Bachhawat, Ankit Pal, Ms. Mallika Agarwal,

Nisarg Bharadwaj, Ms. Rohini Thyagarajan, Shakti Vardhan, Ms.

Amiy Shukla, Pawanshree Agrawal, Ms. Shubhangi Negi, Ms.

Ekta Choudhary, Divyank Dutt Dwivedi, Ms. Aditi Sharma, Ms.

Petrushka Dasgupta, Mridul Yadav, Ms. Tahira Kathpalia, Ms.

Pallavi Pratap, Advs. for the appearing parties.

Judgment / Order of the Supreme Court

Judgment

Dr. Dhananjaya Y Chandrachud, CJI

1. This batch of appeals arises from three orders of the National

Company Law Appellate Tribunal1

. A Resolution Plan was submitted

under the Insolvency and Bankruptcy Code, 20162

 by a consortium

of Murari Lal Jalan and Florian Fristch in respect of the Corporate

1 “NCLAT”

2 “IBC”

1048 [2024] 1 S.C.R.

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Debtor (Jet Airways Limited). The Plan was voted upon and approved

by the Committee of Creditors on 17 October 2020. The Resolution

Professional then filed an application before the Adjudicating Authority

to seek approval of the Resolution Plan. The Plan received the

imprimatur of the Adjudicating Authority – the National Company

Law Tribunal3

 - on 22 June 20214

.

2. Clause 7.6 of the Resolution Plan stipulates conditions for

implementation. Clause 7.6.1 spells out the “conditions precedent”:

“7.6.1. Conditions Precedent - The obligation of the Resolution

Applicant to re-commence operations as an aviation

company, being the business proposed to be acquired is

subject to the fulfilment of the following conditions after

the Approval Date (“Conditions Precedent”):

(a) Validation of AOP of the Corporate Debtor by DGCA &

MoCA - The AOP of the Corporate Debtor shall have

been validated by the DGCA, the MoCA and any other

relevant Government Authority and grant of all other

mandatory approvals to the Corporate Debtor to enable it

to re-commence flying operations (including commercial/

cargo operations) and related on-ground services.

(b) Submission and approval of the Business Plan to DGCA

& MoCA The Business Plan of the Resolution Applicant

shall have been submitted after the Approval Date to

the DGCA and MoCA for their review, and approval.

The Resolution Applicant agrees to modify its business

plan to incorporate all reasonable changes required by

the DGCA/ MoCA, which otherwise does not make the

business unviable for the Resolution Applicant.

(c) Slots Allotment Approval The DGCA and MoCA shall

have approved the reinstatement of all the suspended

slots (including the bilateral rights and traffic rights) back

to Jet Airways/ Corporate Debtor. The slots (along with

related bilateral rights and traffic rights) can be allotted

to the Corporate Debtor gradually as per its Business

3 “NCLT”

4 “Plan Approval Order” 

[2024] 1 S.C.R. 1049

State Bank of India and Ors v. The Consortium of Mr Murari Lal Jalan

and Mr Florian Fritsch and Anr

Plan with immediate slots allotment approval (along with

related bilateral rights and traffic rights) for sectors on

which Jet 2.0 proposes to recommence operations after

the Effective Date.

(d) International Traffic Rights Clearance The Corporate

Debtor shall have received the International Traffic Rights

Clearance in compliance with Applicable Laws.

(e) Demerger - The Scheme filed as part of this Resolution

Plan shall have been approved under Applicable Laws

and the Demerged Employees shall have demerged

from the Corporate Debtor to AGSL along with all their

past dues, liabilities and outstanding’s with effect from

the Approval Date, without the requirement of any further

consent or approval of any other stakeholder of AGSL

(since we understand that AGSL currently does not

have any creditor) or any stakeholder of the Corporate

Debtor (including existing or past employee or workmen

or employees’ unions of the Corporate Debtor).”

3. Clause 7.6.4 contains a stipulation for “automatic withdrawal”:

“Automatic Withdrawal - The Resolution Applicant is

confident of completing all the Conditions Precedent (as

set out in Clause 7.6.1 above) within 90 (ninety) days

from the Approval Date. In the unlikely event that all the

Conditions Precedent cannot be fulfilled within 90 (ninety)

days, the Resolution Applicant takes the responsibility of

completing the outstanding Conditions Precedent at the

earliest and seeks to extend the Conditions Precedent

fulfilment period by another term of maximum 180 (one

hundred and eighty) days. If all the Conditions Precedent

are not fulfilled within such period (i.e. 270 (two hundred

and seventy) days from the Approval Date), then this

Resolution Plan shall automatically stand withdrawn without

any further acts, deeds, or things. On such withdrawal,

the members of the Resolution Applicant in the Monitoring

Committee shall resign, and the remaining members of

the Monitoring Committee shall assume absolute control

of the Corporate Debtor.”

1050 [2024] 1 S.C.R.

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4. In terms of Clause 7.6.1 of the Resolution Plan, the SRA is obligated

to re-commence operations as an aviation company subject to the

fulfilment of five conditions precedent, namely- (i) Validation of Airline

Operator Permit of the Corporate Debtor by the Director General

of Civil Aviation (DGCA) and Ministry of Civil Aviation (MoCA); (ii)

Submission and Approval of Business Plan by DGCA and MoCA, (iii)

Slot Allotment Approval, (iv) International Traffic Rights’ Clearance;

and (v) Approval of Demerger of ground handling business into a

company, namely AGSL. The date of completion of the Conditions

Precedent was defined as the ‘Effective Date’. Given the uncertainty

surrounding the Effective Date, the NCLT, in its Plan Approval Order,

mandated the completion of Conditions Precedent and the attainment

of the Effective Date within the first 90 days from the Approval Date.

The Order also granted the flexibility to request an extension of the

180-day timeline, allowing for an outer limit of 270 days, in accordance

with the provisions outlined in the Resolution Plan.

5. These conditions precedent had to be fulfilled, in any event, within

an outer limit of 270 days failing which the Resolution Plan would

automatically stand withdrawn. Upon this eventuality taking place, the

members of the Resolution Applicant in the Monitoring Committee

are to resign, and the remaining members of the committee are to

assume absolute control over the Corporate Debtor. Following the

Effective Date, the SRA is then required to infuse funds and fulfil

specified payments to stakeholders, including disbursements to

Employees, Workmen, and other Operational Creditors, within 180

days from the Effective Date.

6. The Successful Resolution Applicant5

 and the consortium of lenders

represented by the State Bank of India6

 were not ad idem on whether

the conditions precedent were fulfilled. The SRA took the position

that all conditions precedent had been duly fulfilled. Consequently,

on May 20 2022, the DGCA reissued an Air Operation Certificate,

confirming the authorization for the Corporate Debtor to engage in

commercial air operations. The SRA communicated via email to the

Lenders, affirming compliance with all prerequisites and proposing

that May 20 2022, should be recognized as the effective date

5 “SRA”

6 “SBI”

[2024] 1 S.C.R. 1051

State Bank of India and Ors v. The Consortium of Mr Murari Lal Jalan

and Mr Florian Fritsch and Anr

under the Resolution Plan. However, the lenders took a position to

the contrary. On 15th November 2022, the SRA filed I.A. No. 3398

of 2022 (Implementation Application) and I.A. No. 3508 of 2022

(Exclusion Application) before the NCLT seeking a determination in

accord with its position.

7. By an order dated 13 January 2023, the NCLT came to the conclusion

that the SRA was compliant with the conditions precedent. It allowed

the Implementation Application, thereby inter alia permitting the

SRA to take control and management of the Corporate Debtor. The

period of six months for implementation would commence from 16

November 2022. The tribunal reasoned that:

(i) On 21 October 2022, the NCLAT confirmed SRA’s compliance

with necessary conditions precedent (CPs) to the satisfaction

of MC. Despite the lenders seeking clarification through IA

4771 of 2022, the NCLAT’s findings were reaffirmed on 20

December 2022;

(ii) There is no dispute regarding compliance with CPs at serial no.

(i) and (v) as per the approved plan, including the validation of the

Air Operator Certificate by DGCA and MoCA, and the approval

of the demerger of the ground handling business into AGSL;

(iii) Concerning CP at serial no. (ii), the business plan’s submission

and approval to DGCA and MoCA were deemed as complete,

with the issuance of the Air Operator Certificate (AOC),

considered as implicit approval;

(iv) Regarding slot allotment approval, aligned with the plan approval

order, confirming slots were granted as per the plan;

(v) For International Traffic Right Clearance, the requirement was

deemed satisfied after successfully recommencing operations,

adhering to applicable laws, and plan approval order conditions.

Consequently, all Conditions Precedent were duly complied

with; and

(vi) Regarding the Exclusion Application, it was deemed appropriate

to grant an exclusion for 180 days until November 16, 2022,

in the interest of justice and to achieve the primary objective

of maximizing assets and resolving the insolvency of the

Corporate Debtor.

1052 [2024] 1 S.C.R.

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The order of the NCLT has been challenged by SBI in appeal. The

appeal is pending before the NCLAT.

8. On 3 March 2023, the NCLAT declined to stay the order of the

NCLT, which has given rise to the first in the three sets of appeals

being Civil Appeal Nos 3736-3737 of 2023. By a subsequent order

dated 26 May 2023, the NCLAT allowed an extension commencing

from 3 March 2023 until 31 August 2023. This order has given rise

to the second in the batch of appeals being Civil Appeal Nos 4131-

4134 of 2023.

9. The Resolution Plan envisaged that with an intent to settle the

total outstanding claims made by domestic banks, foreign banks

and financial institutions, the assenting financial creditors would be

entitled to the benefit of payments and securities. This is described

as “Summary of payments and security package”. Clause 6.4.4 of

the Resolution Plan is titled as “Treatment of Financial Creditors”

and is reproduced below, insofar as it is relevant:

“Head Amount

payable

Security

Offered

Value of

Security

Date of

Creation of

Security

Date of Release of

Security

Cash

payment

Up to Rs.185

crores

PBG of Rs.

47.5 crores

Rs. 393.5 cr

(with BKC)

or

Rs. 147.5 Cr

(without BKC)

Effective Date PBG adjusted

BKC Property

(if given)

To be released on

sale of BKC

Mortgage over

Dubai Property

No. 1 valued at

more than Rs.

100 crores

Year 5 or on

complete payment,

whichever is earlier

Cash

payment

Rs. 195 Crores BKC Property

(if given)

Rs. 445 Cr

(with BKC)

or

Rs. 200 Cr

(without BKC)

Effective Date To be released on

sale of BKC

Mortgage over

Dubai Property

No. 1 valued at

more than Rs.

100 crores

Effective Date Year 5 or on

complete payment,

whichever is earlier

Mortgage over

Dubai Property

No. 2 valued at

more than Rs.

100 crores

Effective Date

[2024] 1 S.C.R. 1053

State Bank of India and Ors v. The Consortium of Mr Murari Lal Jalan

and Mr Florian Fritsch and Anr

Cash

payment

NPV of Rs. 391

Crores (using

the discount

rate specified

in the

Evaluation

Matrix)

Mortgage over

Dubai Property

No. 1 valued at

more than Rs.

100 crores

Rs. 600 Crores Effective Date Year 5 or on

complete payment,

whichever is

earlier”

Mortgage over

Dubai Property

No. 2 valued at

more than Rs.

100 crores

Effective Date

Mortgage over

Dubai Property

No. 1 valued at

more than Rs.

50 crores

Effective Date

10. In an effort to resolve the imbroglio, on 16 August 2023, an affidavit

was filed on behalf of SBI, by its Chief Manager. The affidavit stated

that the lenders were agreeable to a certain course of action. In other

words, the lenders had agreed that if SRA satisfies particular criteria,

including infusing Rs. 350 Crores by 31 August 2023, adhering to the

resolution plan terms, and meeting employee payment obligations

in accordance with the NCLAT order dated 21 October 2022, they

would abstain from challenging exclusion/extension of time issues.

However, the inability to meet these conditions necessitates directing

the Corporate Debtor into liquidation, as stipulated in Paragraphs

8(a) to (c). Paragraph 8 is reproduced below:

“8. In the present appeal, the lenders are agreeable that in

case;

a) SRA infuses Rs. 350 Crores by 31.08.2023, the date by

which said payment is to be made as per the Resolution

Plan, read with Order dated 26.05.2023 passed by this

Hon’ble Tribunal; and

b) SRA Undertakes to scrupulously follow the other terms

and conditions of the resolution plan and

c) SRA complies with the liabilities relating to payment to

the employees as per order of NCLAT dated 21.10.2022

which has been upheld by the Hon’ble Supreme Court in

its order dated 30.01.2023,

the Lenders would not contest the issues relating to

granting of exclusion/extension of time (in terms of the

orders dt. 13.01.2023 passed by NCLT and order dt. 

1054 [2024] 1 S.C.R.

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26.05.2023 passed by this Hon’ble Tribunal) as well as

on the issue relating to compliance of condition precedent

by the SRA and accordingly undertakes to withdraw the

present Company Appeal (AT) Ins 129-130 of 2023 which

is pending adjudication before this Hon’ble Tribunal along

with Civil Appeal Nos. 4131-34 of 2023 & 3736-37 of 2023

filed before the Hon’ble Supreme Court, on the said two

issues. In other words, lenders would not contest the

granting of exclusions as well as on the issue regarding the

compliance of Conditions Precedent, in case the aforesaid

steps are taken by SRA without any further delay. Failing

to comply with the conditions mentioned in Para 8(a) to

(c) above, the Corporate Debtor should be directed to go

into liquidation.”

11. Following the affidavit, which was filed by SBI, an application was

moved by the SRA on 18 August 2023 seeking liberty to pay the

amount of Rs 350 crores as envisaged in the affidavit of SBI in the

following manner:

(i) The first tranche of Rs 100 crores by 31 August 2023;

(ii) The second tranche of Rs 100 crores by 30 September 2023; and

(iii) The balance of Rs 150 crores by the adjustment of the

Performance Bank Guarantee7

 issued by the SRA in favour

of the lenders.

12. Permission to do so was granted by the NCLAT on 28 August 2023

extending time until 31 August 2023 for the payment of Rs 100

crores; till 30 September 2023 for the payment of Rs 100 crores and

for the balance of Rs 150 crores by adjusting the payment against

the PBG issued by the SRA.

13. The reference to the PBG was contained in the tabulated statement

in clause 6.4.4 of the Resolution Plan, which is set out above.

Apart from the above stipulations, it would be material to make a

reference, at this stage, to certain provisions of the Request for

Resolution Plans8

. Clause 3.13 of the RFRP provides for performance

security. It stipulates that (i) the SRA must furnish an unconditional

7 “PBG”

8 “RFRP”

[2024] 1 S.C.R. 1055

State Bank of India and Ors v. The Consortium of Mr Murari Lal Jalan

and Mr Florian Fritsch and Anr

and irrevocable PBG, either INR 150 Crores or 10% of the upfront

amount, within seven days of declaration; (ii) The PBG, following

Format VIII-A, remains valid for 180 days or until Resolution Plan

completion, extendable by SRA as directed by the CoC; (iii) Failure

to provide the Performance Security upon accepting the Letter of

Intent may lead to its cancellation at the discretion of the CoC :

“3.13 Performance Security

3.13.1 The Successful Resolution Applicant shall furnish or

cause to be furnished, an unconditional and irrevocable

performance bank guarantee or a demand draft, issued

by any scheduled commercial bank in India or a foreign

bank which is regulated by the central bank of a jurisdiction

outside India which is compliant with the Financial

Action Task force Standards and is a signatory to the

International Organisation of Securities Commissions

Multilateral Memorandum of Understanding, provided that

it is acceptable to the Resolution Professional (acting for

the CoC) (“PBG Bank”), of an amount of INR 150 Crores

(Indian Rupees Hundred and Fifty Crores only) or 10%

of upfront amount (payable as per the resolution plan

by the Successful Resolution Applicant), whichever is

higher in favour of “State Bank of India, (that is, SBI) (in

its capacity as an agent of the CoC (and acting on behalf

of the Company), within 7 (seven) days of declaration of

the Successful Resolution Applicant, or by way of a direct

deposit by way of the real time gross settlement system

into a bank account held by the SBI Bank, the details

of which shall be shared separately with the Successful

Resolution Applicant (“Performance Security”)

3.13.2 If the Performance Security is being provided as a

performance bank guarantee, it shall be in accordance

with Format VIII-A of this RFRP (“PBG”). The PBG shall

be valid, till the later of (i) a period of 180 days from the

date of the PBG; and (ii) the date of completion of the

implementation of the Resolution Plan (as determined by

the RP and the (CoC) and shall be subject to re-issuance

or extension by the Successful Resolution Applicant as may

be required by the CoC (as assisted by the Resolution

Professional) (“PBG Validity”).

1056 [2024] 1 S.C.R.

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3.13.3 It is hereby clarified that non-submission of the Performance

to permit the Resolution Applicant, along with the

acceptance of the Letter of Intent, shall lead to cancellation

of Letter of Intent issued by the CoC, unless otherwise

determined by the CoC at its sole discretion...”

14. Clause 3.13.7 empowers SBI as an agent of the Committee of

Creditors to invoke the performance security on the occurrence of

certain eventualities:

“3.13.7 SBI, in its capacity as an agent of the CoC (and acting

on behalf of the Company), shall have the right to invoke

the Performance Security on behalf of the CoC (and upon

receiving approval from the CoC), (by issuance of a written

demand to the Bank to invoke the Performance Security,

if provided as a PBG). The Performance Security can be

invoked and appropriated at any time, upon occurrence

of any of the following conditions, without any reference

to the Resolution Applicant.

i. any of the condition under the Letter of Intent or the

Successful Resolution Plan are breached;

ii. if the Resolution Applicant fails to re-issue or extend the

Performance Security (if provided as a PBG), in accordance

with the terms of this RFRP; or

iii. failure of the Successful Resolution Applicant to implement

the Approved Resolution Plan to the satisfaction of the

CoC, and in accordance with the terms of the Approved

Resolution Plan.”

15. Clause 3.13.9 specifies that the performance security shall not be

set off against or used as part of the consideration which the SRA

proposes to offer in relation to the company:

“3.13.9 The Performance Security shall not be set-off against or used

as part of the consideration that the Successful Resolution

Applicant proposes to offer in relation to the Company, even

if expressly indicated as such by the Successful Resolution

Applicant in the Successful Resolution Plan.”

[2024] 1 S.C.R. 1057

State Bank of India and Ors v. The Consortium of Mr Murari Lal Jalan

and Mr Florian Fritsch and Anr

16. Clause 9.4 of the Resolution Plan specifically contemplates that the

performance guarantee provided by the Resolution Applicant can be

invoked in terms of RFRP. NCLAT has permitted the SRA to adjust

the last tranche of Rs 150 crores by adjusting the PBG of Rs 150

crores. This forms the subject matter of appeal in this Court.

17. Mr N Venkataraman, Additional Solicitor General appearing on behalf

of SBI, submitted that:

(i) By its affidavit dated 16 August 2023, SBI had clearly stipulated

three conditions, among them being that the SRA must infuse

Rs 350 crores by 31 August 2023;

(ii) The plain meaning of the expression “infuse” is that the SRA

was liable to pay three tranches of a total amount of Rs 350

crores and the NCLAT was not justified at the interim stage in

permitting an adjustment of the PBG of Rs 150 crores against

the obligation to deposit the last tranche;

(iii) The SRA had to undertake to comply with the other terms and

conditions of the Resolution Plan besides complying with the

liabilities relating to the payment to the employees. As regards

the payment to the employees, an appeal filed by the SRA

before this Court against the order of the NCLAT dated 21

October 2022 was dismissed on 30 January 2023. Yet there is

no compliance towards the employees and staff; and

(iv) There has been a default on the part of the SRA in complying

with the conditions precedent spelt out in clause 7.6 and on

various other aspects, including the payment of workmen’s

dues, airport dues and other matters.

18. The submission which has been urged on behalf of the lenders has

been opposed on behalf of the SRA by Mr Krishnendu Datta, senior

counsel. On behalf of the SRA, it has been submitted that:

(i) The Resolution Plan specifically contemplates the adjustment of

the PBG (originally of Rs 47.5 crores, subsequently enhanced

to Rs 150 crores). In support of this submission, reliance has

been placed on the summary of payments and security package

forming a part of clause 6.4.4 of the Resolution Plan;

(ii) The SRA was in the first tranche required to pay an amount of

up to Rs 185 crores against the creation of securities, namely,

(i) PBG of Rs 47.5 crores; (ii) BKC Property (if given); and (iii) 

1058 [2024] 1 S.C.R.

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Mortgage over Dubai Property No 1 valued at over Rs 100

crores. In the last column of the table, it has been stipulated

that the securities would be released, as indicated;

(iii) The PBG was liable to be adjusted against the cash payment

of the first tranche of Rs 185 crores;

(iv) No specific date for the release of the security in relation to the

PBG has been mentioned;

(v) Moreover, in respect of the second tranche comprising of Rs

195 crores, there was no requirement to furnish any security

in the form of a PBG;

(vi) The securities, in other words, were of a revolving nature, but

significantly on the release of the PBG against a cash payment

of Rs 185 crores, the PBG is not required to be renewed as a

fresh security for the following tranches; and

(vii) As regards the creation of security in respect of the Dubai

property, at all material times, the SRA has been ready and

willing to effect the security and, as a matter of fact, this is

evident in the 37th Meeting of the Monitoring Committee of the

Corporate Debtor held on 9 October 2023.

19. While considering the rival submissions, it must be noted, at the

outset, that the appeal, stemming from the NCLT’s January 13

2023 order holding that the SRA is compliant with the conditions

precedent is pending before the NCLAT. Hence, the observations

in the present judgment are confined to the arrangement which

must operate during the pendency of the appeal without this Court

expressing a final view on the merits of the appeal, which will fall

for consideration before the NCLAT.

20. The occasion for an extension of time to the SRA for the deposit of

Rs 350 crores arose as a consequence of the affidavit which was

filed by SBI before the NCLAT on 16 August 2023. SBI’s affidavit

envisaged that the lenders would not contest the issues pertaining

to (a) the grant or exclusion of time; or (b) extension in terms of the

orders which were passed by the NCLT on 13 January 2023 and

26 May 2023; and (c) compliance of the conditions precedent by

the SRA. SBI’s offer was, however, subject to the fulfillment of three

conditions. The three conditions were:

[2024] 1 S.C.R. 1059

State Bank of India and Ors v. The Consortium of Mr Murari Lal Jalan

and Mr Florian Fritsch and Anr

(i) The SRA must infuse an amount of Rs 350 crores by 31 August

2023 (the date by which the payment was to be made in terms

of the Resolution Plan read with the order dated 26 May 2023

of NCLT);

(ii) The SRA must undertake to scrupulously follow the other terms

and conditions of the Resolution Plan; and

(iii) The SRA must comply with the liabilities in regard to the

payment to the employees in terms of the order of the NCLAT

dated 21 October 2022 which has been upheld by this Court

on 30 January 2023.

21. Conditional on compliance with the three conditions set out above,

SBI stated that it would be willing to withdraw both the company

appeals which were pending before the NCLAT as well as the Civil

Appeals which were pending before this Court, details of which

were set out in the affidavit. The offer which was made by SBI on

behalf of the lenders had to be complied with as it stood in the

event that the SRA sought the benefit of the offer. According to the

SRA, the PBG was liable to be released on adjustment in terms of

the Resolution Plan. This is a matter which would have to await an

adjudication by NCLAT in the pending appeal. The impugned order

of the NCLAT, on the other hand, allowed the plea of the SRA for

adjustment and consequential release of the PBG at the interlocutory

stage. This prima facie would not be in accordance with the tenor

of paragraph 8 of the affidavit which was filed by SBI in which it

stated that the lenders would not contest the issues in the pending

appeal conditional on compliance with the three conditions which

were set out in the affidavit. Infusion of Rs 350 crores, as envisaged

in the affidavit, could not have been substituted with a direction for

adjustment of the PBG, at that stage. Infusion meant that the third

tranche has to be paid in the same manner. Adjustment of the PBG

was not permissible.

22. In the circumstances, we have come to the conclusion that NCLAT

was not justified in holding, in its order dated 28 August 2023, that

the last tranche of Rs 150 crores which was to be paid would be

adjusted against the PBG. The SRA having deposited the first two

tranches each of Rs 100 crores must comply with the remaining

obligation of depositing Rs 150 crores (to make up a total payment

of Rs 350 crores). Having by its conduct accepted the terms set 

1060 [2024] 1 S.C.R.

Digital Supreme Court Reports

up by SBI it must be obligated to comply with the entirety of its

obligations. It must do so in strict compliance with the time schedule

set out hereafter.

23. The lenders have submitted that:

(i) The admitted claim of the Financial Creditors is Rs 7800 crores,

while the package offered by the SRA in the Resolution Plan

is Rs 4783 crores payable in tranches in five years;

(ii) Instead of infusing Rs 350 crores, being the first tranche of

payment, which was to be paid in 180 days, the SRA has

infused a sum of Rs 187 crores after two years, in addition to

Rs 13 crores paid by a third party; and

(iii) The lenders have already incurred Rs 386.72 crores during the

CIRP and after the approval of the Plan towards maintaining

the Corporate Debtor, excluding airport dues. In addition, the

lenders are incurring Rs 22.26 crores on a monthly basis towards

expenses/carrying cost for maintaining the Corporate Debtor.

24. SBI has stated that the lenders have been saddled with huge recurring

expenditure every month to maintain the remaining airline assets of

the Corporate Debtor. The lenders have been embroiled in litigation

before the NCLT and NCLAT with little progress on this ground towards

implementing the resolution plan. Such a state of affairs cannot be

permitted to continue interminably as it defeats the very object and

purpose of the provisions of and timelines under the IBC. The timely

resolution of insolvency cases is vital for sustaining the effectiveness

and credibility of the insolvency framework. Therefore, concerted

efforts and decisive actions are imperative to break the deadlock

and ensure the expeditious implementation of the resolution plan.

25. The lenders have argued in the appeals that there has been a failure

on the part of the SRA to comply with the conditions precedent. If the

SRA were to comply with the terms as envisaged in SBI’s affidavit

dated 16 August 2023, evidently issues pertaining to compliance with

the conditions precedent were not to be pressed thereafter. In order

to furnish this SRA a final opportunity to comply and consistent with

the above position, we issue the following directions:

(i) The SRA shall peremptorily on or before 31 January 2024,

deposit an amount of Rs 150 crores into the designated account

of SBI, failing which the consequences under the Resolution

Plan shall follow;

[2024] 1 S.C.R. 1061

State Bank of India and Ors v. The Consortium of Mr Murari Lal Jalan

and Mr Florian Fritsch and Anr

(ii) The PBG of Rs 150 crores shall continue to remain in operation

and effect, pending the final disposal of the appeal before

NCLAT, and shall abide by the final outcome of the appeal and

the directions that may be issued by NCLAT; and

(iii) Whether or not the SRA has been compliant with all the

conditions of the Resolution Plan as well as of the conditions

set out in paragraph 8 of the affidavit dated 16 August 2023

shall be decided by the NCLAT in the pending appeal.

26. The order dated 28 August 2023 of the NCLAT is modified in part

in terms of the above directions and, hence, the permission which

was granted to the SRA to adjust the last tranche of Rs 150 crores

against the PBG shall stand substituted by the above directions.

27. The NCLAT is requested to endeavour an expeditious disposal of

the appeal by the end of March 2024.

28. The appeals are accordingly disposed of.

29. Pending applications, if any, stand disposed of.

Headnotes prepared by: Divya Pandey Result of the case:

Appeals disposed of.