Ashmeet Singh Bhatia Vs. Pragati Impex India Private Limited & Anr. - The mere fact that Section 7 Application has been admitted does not denude the jurisdiction of the Adjudicating Authority to examine the application under Section 65 of the Code.

 NCLAT (2024.02.02) in Ashmeet Singh Bhatia Vs. Pragati Impex India Private Limited & Anr. [(2024) ibclaw.in 63 NCLAT, Company Appeal (AT) (Insolvency) No. 1413 of 2023] held that;

• The mere fact that Section 7 Application has been admitted does not denude the jurisdiction of the Adjudicating Authority to examine the application under Section 65 of the Code. 

• The observations of the Adjudicating Authority are that the Appellant is opposing the admission of the proceeding which admission has been affirmed by the Appellate Tribunal. The above does not denude the jurisdiction of the Adjudicating Authority to examine the allegations made in the Section 65 Application even after admission of the proceedings under Section 7.

Excerpts of the Order;

# 1. This Appeal has been filed challenging the Order dated 01.09.2023 passed by National Company Law Tribunal, New Delhi, Special Bench, Court-II (hereinafter referred to as “The Adjudicating Authority”) in I.A. No. 4654 of 2023 in CP(IB) No. 662/ND/2021. By the Impugned, Order, Intervention Application filed by the Appellant praying for certain reliefs have been rejected.

# 2. Appellant aggrieved by the said order has come up in this Appeal.

# 3. Brief facts necessary for deciding this Appeal are:-

I. The Appellant in this Appeal is a home-buyer having allotted residential apartment in the Group Housing Project ‘Lotus Panache’ of Granite Gate Properties Private Limited (GGPPL in short). Allotment Letter was issued on 01.12.2011 by GGPPL.

II. A ‘Corporate Insolvency Resolution Process’ commenced against a group company namely M/s Vistar Construction Private Limited by Order dated 05.08.2022 in an application filed by the Pragati Impex India Private Limited. The ex-director of the Corporate Debtor challenged the Order of CIRP which order was upheld by this Tribunal by Judgment and Order dated 06th January, 2023 in C.A.(AT) Ins. No. 1431 of 2022.

III. Appellant claiming to be home-buyer in a sister company of the Corporate Debtor filed an application being I.A. No. 4654 of 2023 praying for following reliefs:

• “a. Pass an order allowing the Applicant to intervene in the captioned matter i.e. C.P. (IB) 662 of 2022;

• b. Pass an order to take on record and consider the facts and documents mentioned by the present Application, while adjudicating over the captioned matter i.e. C.P. (IB) 662 of 2022 and I.A. bearing number 3636 of 2023 filed in the captioned matter;

• c. Pass an order dismissing the captioned matter i.e. C.P. (IB) 662 of 2022 and I.A. bearing number 3636 of 2023, filed in the captioned matter;

• d. Pass an order imposing heavy penalty, under Section 65 of the Code, upon the Financial Creditor and the Corporate Debtor;

• e. Pass an order directing the Insolvency and Bankruptcy Board of India, to conduct an enquiry, regarding the ex-facie collusion between the Ld. RP and the Financial Creditor, the Corporate Debtor and the SRA;

• f. Pass an order directing a detailed inquiry by an appropriate investigating agency of the Government of India Such as Enforcement Directorate, SFIO into the affairs of Financial Creditor and the Corporate Debtor

• g. Pass any other order, as this Hon’ble Tribunal may deem fit, in the light of the facts and circumstances of the present case, in the interest of transparency, equity and justice.”

IV. The Appellant in the Application has made serious allegations of collusion and fraud against the Financial Creditor and the Corporate Debtor. It was pleaded that there is no genuine debt and initiation of CIRP by the Financial Creditor was mala fide and fraudulent. Appellant in his application has stated that alleged debt was transferred in circular manner back to one of the group company of the Financial Creditor on the same day. It was pleaded that there was complex round tripping by Financial Creditor amounting to Rs. 1,75,81,442/-. The Adjudicating Authority was pleaded to dismiss the Company Petition and penalty under Section 65 of the Code was also prayed to be imposed. The Application was opposed by the Learned Counsel appearing for the Resolution Professional. The Adjudicating Authority observed that Appellant has no transaction with the Corporate Debtor and he has no locus to oppose the order admitting the CP(IB) No. 662/ND/2021 when the Order admitting CIRP was affirmed by the Appellate Tribunal, the Application was rejected with these observations. It is useful to extract the impugned order. The Impugned Order was passed on the Application which is to the following effect:

• “IA-4654/2023: Ms. Ridhima Verma, Ld. Counsel appearing for the Applicant submitted that she is one of the Home Buyers qua M/s Granite Gate Properties Pvt. Ltd. By way of the captioned IA, the Applicant has virtually assailed the order dated 05.08.2022 passed in IB-662/ND/2021. Ld. Sr. Counsel P. Nagesh appearing for the Respondent opposed the application and submitted that on the challenge, the order dated 05.08.2022 passed in IB-662/ND/2021was upheld by the Hon’ble NCLAT in the Company Appeal (AT) (Insolvency) No. 1431 of 2022. He further stated that the Applicant had no direct transaction with the CD viz. Vistar Construction Pvt. Ltd. According to the Ld. Counsel for the Applicant, M/s Granite Gate Properties Pvt. Ltd. had some transaction with the FC/CD qua the IB662/ND/2021.

• The transaction of the Applicant qua M/s Granite Gate Properties Pvt. Ltd. does not give her any locus to oppose or question the order of admitting the IB-662/ND/2021, more so, when the admission has been affirmed by the Hon’ble NCLAT. In our considered view, the application is not maintainable. Accordingly, the same is rejected.”

# 4. We have heard Mr. Gaurav Mitra, Learned Counsel appearing for the Appellant, Mr. Abhijeet Sinha, Learned Counsel appearing for the Financial Creditor and Mr. Pankaj Agarwal, Learned Counsel appearing for Resolution Professional.

# 5. Affidavit has been filed by the Respondent No. 1 and 2 in the Appeal, Rejoinder to which has also been filed by the Appellant.

# 6. Mr. Gaurav Mitra, Learned Counsel appearing for the Appellant submits that the entire proceeding initiated by the Financial Creditor against the Corporate Debtor for financial debt of Rs. 1,75,81,442/- is non-existent debt. It is submitted that there is transaction on same day i.e. 02nd June, 2018 between related company of the Financial Creditor and the Corporate Debtor, where same amount which came from Financial Creditor to the Corporate Debtor was returned to the related company of the Financial Creditor and the financial debt did not remain with the Corporate Debtor for even one day and the entire transaction was clear cut case of round tripping. Learned Counsel for the Appellant has referred to the Bank Statement of Corporate Debtor, Financial Creditor and Related Company of the Financial Creditor namely M/s. Oasis Supplier Pvt. Ltd. and submits that the same amount was transferred by the related party of the financial creditor M/s Oasis Supplier Pvt. Ltd. and on the same day financial creditor transferred the said amount to the corporate debtor and the Corporate Debtor on the same day returned the same amount to related party of the Financial Creditor i.e. M/s. Oasis Supplier Pvt. Ltd. It is submitted that round tripping clearly indicates that it was not a financial debt but only paper transaction and there being no financial debt, the initiation of CIRP was fraudulent and present was a fit case where the Adjudicating Authority ought to have exercised power under Section 65 of the Code to impose penalty and close the proceedings. It is submitted that Appellant had not prayed for recall of the admission order of CIRP rather it prayed for dismissal of the company petition and the Adjudicating Authority observed that the admission order having been affirmed by the Appellate Tribunal cannot be questioned, has not correctly appreciated the prayers made in the Application. It is submitted that the observation of the Adjudicating Authority that Appellant has no locus to file the application is also incorrect. Appellant is a home-buyers of related company of the GGPPL and under the Forensic Audit Report conducted in the CIRP of GGPPL, it is clearly mentioned that amount of Rs. 19.57 Crores is recoverable from Corporate Debtor. The CIRP has been initiated to get away from all liabilities of the Corporate Debtor. GGPL is already in CIRP and under the said CIRP the houses to the several thousand owners have not been given and out of receivables from amount to GGPPL the construction has to be carried out hence Appellant has locus to question the fraudulent transaction initiated by the Financial Creditor against the Corporate Debtor. It is submitted that the Corporate Debtor is group company of Three C Groups which has indulged in siphoning off fund to its group companies defrauding home-buyers including the Appellant. Appellant has filed several proceedings against its group companies of Three C Company for protection of his rights.

# 7. Mr. Abhijeet Sinha, Learned Counsel appearing for the Financial Creditor refuting the submissions of Appellant contends that Appellant has no locus to file the application since he has no direct transaction with the Corporate Debtor. His transaction with a group company namely GGPPL cannot be reason to file any application in CIRP of the Corporate Debtor where Appellant has no concern. It is submitted that the Financial Creditor and Corporate Debtor entered into loan agreement dated 31st May, 2018 and it was resolved to advance an amount of Rs. 1,76,00,000/- to the Corporate Debtor by the Financial Creditor. The Appellant is selectively referring to four entries of 2nd June, 2018 whereas there are several transactions between the Corporate Debtor and the Financial Creditor. Several amounts were transferred by the Corporate Debtor to the Group Company of the Financial Creditor which was refunded. Learned Counsel has referred to transaction between Corporate Debtor, M/s. Oasis Supplier Pvt. Ltd. between May 2018 to July, 2018. He submits that Appellant has filed several frivolous applications in proceeding related to Three C Companies, Appellant has no locus to file I.A. No. 4654 of 2023 which has rightly been dismissed. Appellant is trying to mislead the Tribunal by misrepresenting the transaction pertaining to the corporate debtor.

# 8. Learned Counsel appearing for the Resolution Professional also refuting the submissions of the Appellant submits that Applicant is in habit of filing multiple applications at belated stage against the Corporate Debtor as well as other group companies. He has referred to several company appeals filed by the Appellant as well as the Application filed in Company Petition before the Adjudicating Authority in paragraph 10 of the Reply. It is submitted that in the present case, Appellant has not filed the application after admission of the Section 7 Application rather has come up at the stage when Resolution Plan was submitted and pending consideration for the approval by the Adjudicating Authority. It is submitted that Appellant has no locus to file the Application.

# 9. We have considered the submissions of the parties and perused the record.

# 10. Before we come to the Impugned Order, it is necessary to notice certain averments made in the I.A. No. 4654 of 2023. Copy of the Application have been filed by the Appellant at Annexure A-2 where there was serious allegation that parties are in collusion and has intentionally filed the application. In paragraph 4,5 and 7 of the Application, following has been stated:

• “4. At the outset, it is submitted that the present case is a case of an ex-facie fraudulent, malicious and collusive initiation of CIRP, and therefore, when the basic edifice on which the resolution plan of the corporate debtor is approved by a single member committee of creditors, is non-est in law; the superstructure of the resolution plan cannot sustain itself and therefore, the application for approval of resolution plan is liable to be outrightly dismissed, with exemplary costs.

• 5. The present case is a fit case for invoking powers under Section 65 of the Code and abate the entire CIRP process, impose penalties upon the Financial Creditor/M/s Pragati Impex India Pvt. Ltd. (“Financial Creditor”), as well as the Corporate Debtor and order an enquiry, through Insolvency and Bankruptcy Board of India (“IBBI”), upon the Ld. Resolution Professional, regarding the ex-facie illegal and fraudulent collusion between the Financial Creditor and the Corporate Debtor, proactively furthered and perpetuated by the Ld. RP.

• …………

• 7. The fact is that the present CIRP proceedings are nothing, but a jointly premeditated, intentional and dishonest fraud being played upon this Hon’ble Tribunal, by the parties to it (the alleged Financial Creditor and the alleged Corporate Debtor), for their wrongful personal gains. Significantly, the parties to the captioned petition, in collusion and connivance with each other, have shown an ex-facie fictitious financial transaction (in fact a criminal act of money laundering) to be an alleged debt and default and fraudulently pushed the corporate debtor in CIRP. In this regard, it is relevant to mention that the parties have intentionally and dishonestly concealed and suppressed from this Hon’ble Tribunal that the alleged unpaid financial debt claimed in the captioned petition, is nothing but a circular, fraudulent and criminal round tripping of funds transaction, between the related company of the alleged financial creditor/M/s Oasis Suppliers Pvt. Ltd, the alleged financial creditor and the corporate debtor.”

# 11. Allegations made in the application has been reiterated in paragraph 2 of the synopsis. It is sufficient to notice paragraph 2 of the synopsis of the Appeal which captures three transaction dated 02nd June, 2018 for the same amount of Rs. 1,75,81,442/-. Paragraph 2 of the synopsis is as follows:

• “2. Significantly, vide the afore said Application, the Appellant herein had approached the Ld. AA under the powers of section 65 of the code, which penalize fraudulent initiation of CIRP, in light of the clear cut round tripping of the alleged Financial Debt forming subject matter of the Company Petition. The alleged debt was transferred in a circular manner back to one of the group companies of the Financial Creditor on the same day it had been transferred to the Corporate Debtor, on pretext of a loan. The complex round-tripping of this financial debt, amounting to INR 1,75,81,442 (Rupees One Crore Seventy Five Lac Eighty-One Thousand Four Hundred and Forty Two) all occurred on a single day, i.e. 02.06.2018. A pictorial representation is mentioned hereinbelow for the ease of understanding of this Appellate Tribunal;

# 12. In the application filed by the Appellant, Appellant has also brought on record the Bank Transaction of concerned account to plead that on the same day i.e. 02nd June, 2018 M/s. Oasis Suppliers Pvt. Ltd. the group company of the Financial Creditor transferred the amount of INR 1,75,81,442/- on which date Financial Creditor transferred the amount of INR 1,75,81,442/- to the Corporate Debtor and on the same day Corporate Debtor transferred back the amount of INR 1,75,81,442/- to M/s. Oasis Supplier Pvt. Ltd. who has initially transferred the amount to Financial Creditor. The above indicates the round tripping of amount, which transaction was initiated by M/s. Oasis Suppliers Pvt. Ltd. and after routing through Financial Creditor Corporate Debtor same was returned to M/s. Oasis Supplier Pvt. Ltd. on the same day.

# 13. Appellant in his application has made further pleadings in paragraph 16, 20, 22 and 24 which are as follows:

• “16. It is significant to mention here that it is an admitted fact as stated by the Respondent No.1 itself in the Captioned matter, that the Corporate Debtor had approached the Respondent No.1, seeking financial assistance, in the month of April-May, 2018, following which, the Respondent No.1, had sanctioned a loan to the Corporate Debtor to the tune of INR 1,76,00,000/- out of which, after deducting some expenses, INR 1,75,81,442/- (One Crore Seventy Five Lakhs Eighty One Thousand Four Hundred Forty Two), were advanced as loan to the Corporate Debtor on 02.06.2018. The following glaring facts would go to prove that the afore stated transaction, was just a small part of the much larger siphoning off funds, their criminal round tripping and misappropriation; which has been jointly, intentionally and dishonestly, portrayed in the nature of an unpaid financial debt, to intentionally push the Corporate Debtor under CIRP, for achieving joint hidden nefarious agendas, as briefly mentioned hereinbelow:-

• ……

• 20. The irrefutable fact that the said amount of INR 1,75,81,442/-, did not stay in the said Bank Account of the Corporate Debtor even for a day and was sent back to the associate company of the Respondent No.1 on the very same day, proves beyond an iota of doubt that per se there was never any financial debt as such and therefore the captioned company petition is an ex-facie fraudulent, malicious and collusive Petition, filed with ulterior motives, inter alia, of (i) defrauding creditors and evading liabilities at large of the Corporate Debtor and (ii) legalising large scale fraud carried out by the erstwhile management and promoters of the Corporate Debtor, misusing it for their personal, dishonest and wrongful financial gains.

• …….

• 22. As such the present matter is a fit case for invoking powers under Section 65 of the Code by this Hon’ble Adjudicating Authority, outrightly rejecting, with exemplary costs, the said ex-facie tailor made, fraudulent and illegal Resolution Plan of the Corporate Debtor and order a detailed inquiry by an appropriate authority of the Government of India, into these extremely serious financial frauds and heinous crimes, so as to suitably discourage such brazenly anti-social promoters to repeatedly and consistently misuse the sacrosanct process of the IBC, for their dishonest and wrongful personal gains, at huge and wrongful costs to the homebuyers and to the various other Government bodies, like the NOIDA Authority, the Departments of Income Tax, GST, Stamps and Registration, etc. and to the public interest at large.

• ………….

• 24. In the present factual matrix, it is thus submitted that the captioned matter, squarely falls in the category of a fraudulent, malicious and collusive Company Petition, under Section 7 of the Code, as carved out by the Hon’ble NCLAT in Ocean Deity (Supra) and hence, this Hon’ble Tribunal, ought to consider these facts, before taking an informed decision on the ex-facie fraudulent and illegal Resolution Plan filed by the SRA, which would tantamount to legalising large scale financial frauds and heinous economic offences, which is against the spirit and contents of the sacrosanct Code and all other established tenets of law.”

# 14. Ld. Adjudicating Authority as noticed above have given two grounds to reject the Application. Firstly, the admission order having been affirmed by this Appellate Tribunal, same cannot be allowed to be questioned and secondly, the Appellant has no locus to file the Application.

# 15. Coming to the first ground that Appellant cannot question the order admitting Section 7 Application which has been affirmed by the Appellate Tribunal. It is on record that admission order was affirmed by this Tribunal by its Judgment and Order dated 06th January, 2023. But when we look into the prayers made in application, Appellant has not prayed for recall of the admission order rather the prayer was that Company Petition be dismissed and penalty be imposed under Section 65 and further to conduct enquiries regarding the collusion. Section 65 of the Code provides as follows:

• “Section 65: Fraudulent or malicious initiation of proceedings.-(1) If, any person initiates the insolvency resolution process or liquidation proceedings fraudulently or with malicious intent for any purpose other than for the resolution of insolvency, or liquidation, as the case may be, the Adjudicating Authority may impose upon such person a penalty which shall not be less than one lakh rupees, but may extend to one crore rupees.

• (2) If, any person initiates voluntary liquidation proceedings with the intent to defraud any person, the Adjudicating Authority may impose upon such person a penalty which shall not be less than one lakh rupees but may extend to one crore rupees.

• (3) If any person initiates the pre-packaged insolvency resolution process—

• (a) fraudulently or with malicious intent for any purpose other than for the resolution of insolvency; or

• (b) with the intent to defraud any person, the Adjudicating Authority may impose upon such person a penalty which shall not be less than one lakh rupees, but may extend to one crore rupees.”

# 16. The power under Section 65 of the Code can be exercised by the Adjudicating Authority only after satisfying that grounds as mentioned exist, if the Adjudicating Authority come to the conclusion that insolvency proceedings have been initiated fraudulently or with malicious intent for any other purpose other than for the resolution of insolvency of the Corporate Debtor, it can impose penalty as provided in the provision. While exercising jurisdiction under Section 65, the Adjudicating Authority is also fully entitled to close CIRP process and pass all consequential order. The mere fact that Section 7 Application has been admitted does not denude the jurisdiction of the Adjudicating Authority to examine the application under Section 65 of the Code. The observations of the Adjudicating Authority are that the Appellant is opposing the admission of the proceeding which admission has been affirmed by the Appellate Tribunal. The above does not denude the jurisdiction of the Adjudicating Authority to examine the allegations made in the Section 65 Application even after admission of the proceedings under Section 7.

# 17. Now coming to the question of locus of Appellant, Appellant in the Application has given details of the facts, the transaction which is basis of financial debt by the Financial Creditor. The averments prima facie makes it a case for looking in to the allegations more closely and when such glaring facts have come to the Court, the Court need to examine the allegations. Moreso, Appellant’s case is that GGPPL which is also in CIRP, of which the Appellant admittedly is home-buyer has to receive amount from the Corporate Debtor which chance shall also be adversely affected due to commencement of CIRP of the Corporate Debtor. We are of the view that in the facts of the present case, Appellant has locus to file the I.A. No. 4654 of 2023. Further the facts of the case required a deeper examination by the Adjudicating Authority.

# 18. Learned Counsel for the Respondent submitted that Application have been filed belatedly at the stage when Resolution Plan of the Corporate Debtor is under consideration. The mere fact that Application has been filed at the time when plan is under consideration does not take away the jurisdiction of the Adjudicating Authority to consider the allegations and find out the truth, if any.

# 19. It is well settled that when proceedings have been fraudulently initiated, the appropriate orders can be passed by Court.

# 20. We thus are of the view that the Adjudicating Authority committed error in rejecting the Application without considering the Application on its merit. In result, the Order dated 01.09.2023 is set aside, the Application I.A. No. 4654 of 2023 is revived before the Adjudicating Authority to be considered and decided in accordance with law. We further observe that Adjudicating Authority shall proceed to consider the Application for approval of the Resolution Plan after deciding I.A. No. 4654 of 2023.

# 21. We may further observe that we have not expressed any opinion on the merits of the allegations of the Appellant or the defence which has been raised by the Respondents in opposition to the Application. It is for the Adjudicating Authority to consider the Application and decide in accordance with law.

The Appeal is disposed of, accordingly.

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Shijosh K. & Anr. vs The State of Kerala & Anr. - It is the well settled law that in a prosecution alleging commission of offence punishable under Section 138 of the NI Act, the complainant would get the benefit of twin presumptions under Sections 118 and 139 of the NI Act and the pre condition for the same is proof of the transaction and execution of the cheque in a convincing manner.

  HC Kerala (2026.06.09) in Shijosh K. & Anr. vs The State of Kerala & Anr. [2026:KER:40471, Crl. Appeal No.1403/2008] held that;

• It is the well settled law that in a prosecution alleging commission of offence punishable under Section 138 of the NI Act, the complainant would get the benefit of twin presumptions under Sections 118 and 139 of the NI Act and the pre condition for the same is proof of the transaction and execution of the cheque in a convincing manner.

• On scrutiny of the evidence of PW1 and the discussion as aforesaid, it is emphatically clear that the transaction which led to execution of Ext.P1 cheque failed to be proved by the evidence of PW1 and the complainant had miserably failed to discharge the initial burden cast upon him, to prove the transaction which led to the execution of the cheque, which would disentitle him the benefit of presumptions under Sections 118 and 139 of the NI Act in favour of him.

Excerpts of the Order;

The complainant in C.C.No.1252/2004 on the files of Judicial First Class Magistrate-II (Mobile) Kottayam, has filed this appeal challenging the judgment in the said case dated 21.3.2007.

# 2. Heard the learned counsel for the appellant/complainant as well as the learned counsel for the 2nd respondent/accused and the learned Public Prosecutor appearing for the State in detail.

# 3. On the facts of the case, consequent to dishonour of a cheque dated 09.03.2004 alleged to be issued by the accused to the complainant in discharge of an amount of Rs.4,50,000/- alleged to be borrowed by the accused from the complainant, the complainant lodged prosecution alleging commission of offence punishable under Section 138 of the Negotiable Instruments Act (`NI Act' for short) .

# 4. After securing the presence of the accused for trial, the  learned Magistrate tried the matter and finally acquitted the accused. 

# 5. While challenging the verdict with support of the twin presumptions under Sections 118 and 139 of the NI Act, it is argued by the learned counsel for the appellant/complainant that in this case PW1, the complainant, deposed supporting the averments in the complaint and proved the transaction and execution of the cheque. Therefore the learned Magistrate went wrong in acquitting the accused. Thus he pressed for reversal of the verdict to record conviction and imposition of proper sentence.

# 6. Whereas it is submitted by the learned counsel for the 2nd respondent/accused that in this case PW1 the complainant, while giving evidence deposed that the money was given by his father on 5 installments and the details of the same were noted by the father in a note book and the same would be available at his house. He argued further that the complainant has no direct knowledge regarding the transaction which led to execution of the cheque and in such a case the learned Magistrate is right in holding that the complainant failed to prove the case beyond reasonable doubt and the allegation of the complainant is in the midst of doubt and the same would dis-entitle the benefit of presumptions under Sections 118 and 139 of the N.I Act. Therefore, the verdict is liable to be confirmed.

# 7. Adverting to the rival contentions, the points arise for consideration are :

• (i) Whether the learned Magistrate went wrong in holding that the appellant/complainant failed to prove the case beyond reasonable doubts?

• (ii) Whether the verdict impugned is liable to be reversed to record conviction?

• (iii) Is it necessary to interfere with the judgment in any manner?

• (iv) The order to be passed?

Point Nos.(i) to (iv)

# 8. In the instant case the evidence is confined to that of PW1 and Exts.P1 to P6. Ext.P1 is the original cheque dated 09.03.2004 issued for Rs.4,50,000/-. Ext.P2 is the dishonour memo, Ext.P3 is the dishonour intimation memo, Ext.P4 is the copy of lawyer notice, Ext.P5 is the postal receipt and Ext.P6 is the postal acknowledgment.

# 9. The complainant got examined as PW1 after filing proof  affidavit. During cross examination, his evidence is that Rs.4,50,000/- was given to the accused by his father on 5 installments and whether the accused agreed for a particular period to repay the same was not known to him. His further version is that his father maintained a note book and in the said note book each installments with date thereof were endorsed and the note book would be available in his house. Despite this evidence, the said note book was not tendered in evidence. Further he deposed that he was unaware of the fact that when his father had given the first installment to the accused and stamp paper and a cheque were obtained. Then he added that the stamp paper was available, but when a question was asked as to what was written in the agreement, he answered that he did not read the same.

# 10. It is the well settled law that in a prosecution alleging commission of offence punishable under Section 138 of the NI Act, the complainant would get the benefit of twin presumptions under Sections 118 and 139 of the NI Act and the pre condition for the same is proof of the transaction and execution of the cheque in a convincing manner. The same would definitely include passing of consideration covered by the cheque. Indubitably such evidence shall be given by the person, who had direct knowledge regarding the transaction and execution of the cheque and the evidence of a person, who does not know the same is insufficient to prove the transaction and the execution of the cheque. In the instant case, as per the evidence given by PW1, money was given to the accused by 5 installments by the father of the complainant and details of the same were noted by his father in a note book. This evidence would show that, in fact, the transaction and passing of consideration are in between the father and the accused, and the complainant did not know the transaction or execution of the cheque, including passing of consideration. Thus in the instant case the competent person to depose about the transaction and execution of Ext.P1 cheque is none other than the father of PW1. It is relevant to note that, despite this fact, the father of the complainant was not examined. According to the learned counsel for the 2nd respondent/complainant, the father was engaged in money lending business even though he had been working as a police officer and thereby he could not do the business of money lending as against the prohibition contained in the Conduct Rules applicable to Government servants. That is why, he did not opt to give evidence.

# 11. On scrutiny of the evidence of PW1 and the discussion as aforesaid, it is emphatically clear that the transaction which led to execution of Ext.P1 cheque failed to be proved by the evidence of PW1 and the complainant had miserably failed to discharge the initial burden cast upon him, to prove the transaction which led to the execution of the cheque, which would disentitle him the benefit of presumptions under Sections 118 and 139 of the NI Act in favour of him. In such view of the matter, the learned Magistrate is right in holding that the complainant failed to prove the case beyond reasonable doubts and therefore the impugned verdict is only to be confirmed. In the result, the appeal fails and is accordingly dismissed confirming the verdict of the learned Magistrate.

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T.K.A. Padmanabhan vs Abhiyan Cooperative Group Housing Society Limited . - A claim for compensation for delayed possession necessarily arises from the period prior to the actual delivery of possession. The subsequent receipt of possession cannot, by itself, extinguish the right of the allottee to seek adjudication of a claim for compensation for the alleged delay.

  SCI (2026.06.04) in T.K.A. Padmanabhan vs Abhiyan Cooperative Group Housing Society Limited . [CIVIL APPEAL NO(S). 10724/2016] held that;

• A claim for compensation for delayed possession necessarily arises from the period prior to the actual delivery of possession. The subsequent receipt of possession cannot, by itself, extinguish the right of the allottee to seek adjudication of a claim for compensation for the alleged delay.

Excerpts of the Order;

# 1. Permission to appear and argue in person is granted to the appellant.

# 2. The present civil appeal arises from the judgment and order dated 04.01.2016 passed by the National Consumer Disputes Redressal Commission, New Delhi [In short “National Commission” ] in Revision Petition No. 1942 of 2013.

# 3. The appellant, T.K.A. Padmanabhan, had instituted Consumer Complaint No. 579 of 2005 before the District Consumer Forum-VII, New Delhi [In short “District Forum”] against the respondent, Abhiyan Cooperative Group Housing Society Limited, alleging deficiency in service on account of delay in handing over possession of Flat No. 232.

# 4. The District Forum, by order dated 27.07.2009, referred the parties to arbitration. The said order was affirmed by the Delhi State Consumer Disputes Redressal Commission [In short “State Commission”] by order dated 26.02.2013. The appellant’s revision petition against the same came to be dismissed by the National Commission by the impugned order dated 04.01.2016.

# 5. The facts giving rise to the present appeal are as follows:

5.1. The appellant became a member of the respondent society in January 2003. He claims to have paid the full amount towards allotment of a flat in the respondent society.

5.2. Flat No. 232 was allotted to the appellant and an agreement was entered into between the parties on 27.02.2004.

5.3. On 08.08.2005, the appellant filed Consumer Complaint No. 579 of 2005 before the District Forum claiming compensation for the alleged delay in handing over possession of the flat. 

5.4. The complaint was admitted and notice was issued to the respondent. Thereafter, the respondent filed an application under Section 8 of the Arbitration and Conciliation Act, 1996, seeking reference of the dispute to arbitration.

5.5. By order dated 21.09.2005, the District Forum rejected the said application, inter alia, on the ground that the remedy under the Consumer Protection Act, 1986, was in addition to any other remedy available to an aggrieved party. 

5.6. The respondent challenged the said order before the High Court of Delhi in C.M.(M) No. 2405 of 2005. By order dated 30.03.2007, the High Court set aside the order dated 21.09.2005 and directed the District Forum to reconsider the issue by passing a reasoned order.

5.7. The respondent thereafter approached this Court in Special Leave Petition (Civil) No. 9962 of 2007, which was dismissed on 28.07.2008.

5.8. Upon reconsideration, the District Forum, by order dated 27.07.2009, allowed the respondent’s application under Section 8 of the Arbitration and Conciliation Act, 1996, and referred the parties to arbitration.

5.9. The appellant challenged the said order before the State Commission in First Appeal No. 680 of 2009. By order dated 26.02.2013, the State Commission dismissed the appeal and affirmed the order passed by the District Forum.

5.10. The appellant then filed Revision Petition No. 1942 of 2013 before the National Commission. By the impugned order dated 04.01.2016, the National Commission dismissed the revision petition. Hence, the present appeal.

# 6. We have heard the appellant, who appears in person, and learned counsel appearing for the respondent society.

# 7. The appellant has submitted that the consumer complaint could not have been referred to arbitration merely on the basis of an arbitration clause in the agreement between the parties. According to him, the complaint had already been admitted and notice had been issued to the respondent. It is therefore submitted that the District Forum ought to have decided the complaint on merits in accordance with the Consumer Protection Act, 1986.

# 8. Learned counsel for the respondent, on the other hand, has supported the orders passed by the District Forum, the State Commission and the National Commission. It is submitted that the agreement between the parties contained an arbitration clause and, therefore, the consumer fora committed no error in relegating the parties to arbitration.

# 9. In view of the above, the question which arises for our consideration is whether the consumer complaint filed by the appellant could have been referred to arbitration  without adjudication on merits, and whether the National Commission was justified in dismissing the revision petition on the ground that the appellant was not a consumer.

RELEVANT STATUTORY FRAMEWORK

# 10. Before we examine the correctness of the orders passed by the consumer fora, it is necessary to state the relevant provisions of the Consumer Protection Act, 19864 applicable to the present case.

# 11. Section 2(1)(d) of the 1986 Act defines the term “consumer”. Insofar as the present case is concerned, the relevant part of the provision reads as under:

• ““consumer” means any person who hires or avails of any services for a consideration which has been paid or promised or partly paid and partly promised, or under any system of deferred payment, and includes any beneficiary of such services other than the person who hires or avails of the services for consideration paid or promised, or partly paid and partly promised, or under any system of deferred payment, when such services are availed of with the approval of the first mentioned person.” In short “the 1986 Act”

# 12. Section 2(1)(o) of the 1986 Act defines the term “service”. The said provision, insofar as relevant, has been reproduced hereunder:

• ““service” means service of any description which is made available to potential users and includes, but is not limited to, the provision of facilities in connection with banking, financing, insurance, transport, processing, supply of electrical or other energy, board or lodging or both, housing construction, entertainment, amusement or the purveying of news or other information, but does not include the rendering of any service free of charge or under a contract of personal service.”

# 13. Section 3 of the 1986 Act expressly declares the nature of the remedy under the Act. It reads as follows:

• “Act not in derogation of any other law.—The provisions of this Act shall be in addition to and not in derogation of the provisions of any other law for the time being in force.”

# 14. Section 12 of the 1986 Act assumes particular significance in the present case. It deals with the manner in which a complaint may be made before the District Forum. Sub- section (4) thereof is material and reads as under:

• “Where a complaint is allowed to be proceeded with under sub-section (3), the District Forum may proceed with the complaint in the manner provided under this Act.

• Provided that where a complaint has been admitted by the District Forum, it shall not be transferred to any other court or tribunal or any authority set up by or under any other law for the time being in force.”

# 15. The respondent had invoked Section 8 of the Arbitration and Conciliation Act, 1996, on the ground that the agreement between the parties contained an arbitration clause. The question, therefore, is whether the existence of such an arbitration clause could have displaced the statutory jurisdiction of the consumer forum in the facts of the present case.

ANALYSIS

# 16. At the outset, we must emphasize that the 1986 Act is a beneficial legislation intended to provide a simple, inexpensive and expeditious remedy to a consumer who complains of defect in goods or deficiency in service. Section 3 of the 1986 Act makes the position explicit by providing that the remedy under the Act is in addition to and not in derogation of any other remedy available under law. The existence of another forum or another mode of adjudication, therefore, does not by itself exclude the jurisdiction of the consumer fora.

# 17. This principle has been consistently recognised by this Court. In Fair Air Engineers Pvt. Ltd. v. N.K. Modi5  [(1996) 6 SCC 385], this Court held that the remedy under the 1986 Act is an additional remedy and that the existence of an arbitration clause would not automatically oust the jurisdiction of the consumer forum. The same principle was reiterated in Secretary, Thirumurugan Cooperative Agricultural Credit Society v. M. Lalitha [(2004) 1 SCC 305], where this Court held that the remedy under the 1986 Act is available notwithstanding the existence of remedies under the cooperative societies law. Again, in National Seeds Corporation Ltd. v. M. Madhusudhan Reddy [(2012) 2 SCC 506], this Court emphasised that the availability of an alternative statutory remedy is not a bar to the maintainability of a consumer complaint.

# 18. The position has been put beyond doubt in Emaar MGF Land Ltd. v. Aftab Singh [(2019) 12 SCC 751]. In the said decision, this Court held that even where an agreement contains an arbitration clause, the consumer forum is not denuded of its jurisdiction to entertain and decide a consumer complaint. The reason is that the 1986 Act creates a special and additional remedy for consumers and the  jurisdiction so conferred cannot be displaced merely by reference to an arbitration agreement between the parties.

# 19. The legal position upheld in the precedents above is of direct relevance in the present case. The appellant’s complaint was not a civil suit simpliciter. It was a complaint under the 1986 Act alleging deficiency in service on account of delay in handing over possession of a flat. The fact that the agreement between the parties contained an arbitration clause could not, by itself, be treated as sufficient to non-suit the appellant before the consumer forum.

# 20. The matter must also be examined in the light of Section 12(4) of the 1986 Act. Section 12 of the 1986 Act contemplates a statutory sequence. At the threshold, the District Forum is required to consider whether the complaint deserves to be admitted or rejected. Once the complaint is admitted and allowed to be proceeded with, the forum is required to deal with it in the manner provided under the Act. The proviso to Section 12(4) contains a clear legislative restraint. It provides that where a complaint has been admitted by the District Forum, it shall not be transferred to any other court, tribunal or authority set up by or under any other law for the time being in force.

# 21. The significance of the proviso lies not merely in its text, but also in the statutory policy which it reflects. The 1986 Act creates a special adjudicatory mechanism for consumer disputes. Once that mechanism is validly invoked and the complaint is admitted, the consumer cannot be driven out of that forum merely because the agreement between the parties contains an arbitration clause. A private contractual clause cannot be permitted to defeat the continued operation of a statutory remedy which Parliament has expressly made additional to other remedies under Section 3 of the 1986 Act.

# 22. Section 12(4) therefore has to be read harmoniously with Section 3 of the 1986 Act. Section 3 preserves the additional character of the consumer remedy. Section 12(4), after admission of the complaint, gives procedural effect to that protection by requiring the consumer forum to proceed under the Act and by preventing diversion of the complaint to another forum. The provision is intended to ensure that a consumer complaint, once admitted, is not rendered illusory by compelling the consumer to begin afresh before another forum or authority.

# 23. In the present case, the complaint had been admitted and notice had been issued to the respondent. The respondent thereafter filed an application under Section 8 of the Arbitration and Conciliation Act, 1996. The District Forum  initially rejected the application by noticing that the remedy under the 1986 Act is in addition to other remedies. However, after the matter was remitted by the High Court for reconsideration, the District Forum referred the parties to arbitration. The State Commission affirmed that view. In our opinion, this approach did not give due effect to the scheme of the 1986 Act and to the settled principle that an arbitration clause does not, by itself, oust the jurisdiction of the consumer forum.

# 24. The order of the National Commission suffers from an additional infirmity. The principal issue before the National Commission was whether the District Forum and the State Commission were justified in referring the complaint to arbitration. The National Commission, however, dismissed the revision petition on the ground that the appellant was not a consumer at the time of filing of the complaint, since he had already taken possession of the flat without protest. In doing so, the National Commission failed to address the central jurisdictional question arising from the orders passed by the District Forum and the State Commission.

# 25. The reasoning adopted by the National Commission cannot be sustained. The appellant’s complaint was not for delivery of possession simpliciter. His grievance was that there had been delay in handing over possession of  the flat and that he was entitled to compensation for such delay. A claim for compensation for delayed possession necessarily arises from the period prior to the actual delivery of possession. The subsequent receipt of possession cannot, by itself, extinguish the right of the allottee to seek adjudication of a claim for compensation for the alleged delay.

# 26. Whether there was in fact any delay, whether such delay was attributable to the respondent, whether the appellant had accepted possession unconditionally, and whether any compensation is payable are all matters which require adjudication on merits. The consumer complaint has not been adjudicated on merits at any stage. The claim of the appellant for compensation on account of alleged delay in handing over possession has neither been accepted nor rejected after evidence. Equally, the defence of the respondent society has also not been examined on merits. These issues could not have been concluded at the threshold by holding that the appellant ceased to be a consumer merely because possession had been delivered before the complaint was filed. In such circumstances, it would not be appropriate for this Court to record any finding on the factual controversy between the parties.

# 27. The proper course, therefore, is to restore the consumer complaint for adjudication on merits. The parties must be  afforded due opportunity of hearing and of leading evidence. All questions relating to deficiency in service, delay, waiver, acceptance of possession, entitlement to compensation, and all other issues on merits shall remain open to be considered by the competent consumer forum in accordance with law.

# 28. During the intermediary period, the District Consumer Disputes Redressal Commission has been set up at Dwarka. It is also stated before us that both parties are staying in Dwarka. In view of the same, and in order to avoid any further inconvenience and delay, it would be appropriate to direct that the complaint be placed before the District Consumer Disputes Redressal Commission, Dwarka.

CONCLUSION

# 29. For the reasons recorded above, the appeal is allowed.

# 30. The judgment and order dated 04.01.2016 passed by the National Commission in Revision Petition No. 1942 of 2013, the order dated 26.02.2013 passed by the State Commission in First Appeal No. 680 of 2009, and the order dated 27.07.2009 passed by the District Forum are set aside.

# 31. Consumer Complaint No. 579 of 2005, stated to have been renumbered as Complaint No. 712 of 2007, is restored and  shall be placed before the District Consumer Disputes Redressal Commission, Dwarka, for decision on merits.

# 32. The District Consumer Disputes Redressal Commission, Dwarka, shall decide the complaint after affording due opportunity of hearing and of leading evidence to both parties.

# 33. Since the complaint is of the year 2005, the District Consumer Disputes Redressal Commission, Dwarka, shall make an endeavour to decide the same preferably within a period of one year from the date of receipt of a copy of this order.

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

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