Page 22 - Banking Finance June 2025

LEGAL UPDATE

stitution bench of the Supreme Court Builder-Bank Nexus, Real parency and strengthen governance in
has held that courts can modify arbi- the housing sector. The case may also
tral awards by severing invalid parts Estate Sector Welcomes prompt tighter oversight of real estate
while retaining the valid ones to avoid Transparency financing and timely handover of
unnecessary litigation. Led by CJI Sanjiv projects to buyers.
Khanna, the majority stated that si- The Supreme Court has ordered a CBI
lence in the Arbitration and Concilia- investigation into allegations of a
"builder-bank nexus" that forced over SC Allows Input Tax Credit
tion Act, 1996, does not bar such judi-
1,200 homebuyers to pay EMIs for
cial intervention. for Mandatory GST Ap-
undelivered flats. The move has been
While Section 34 permits only setting welcomed by the real estate sector, peals, Eases Cash Burden
aside awards, the bench ruled modifi- with Naredco president G Hari Babu In a major relief to businesses, the Su-
cation is a "nuanced power" to pre- preme Court has ruled that taxpayers
calling it a step toward increased ac-
serve justice and reduce delays. The can use their electronic credit ledger
court can also alter post-award inter- countability and customer trust. (ECrL) for advance deposits in GST dis-
est rates or rectify clerical errors. The "Builders must be answerable for in- putes. The judgment came in favor of
ruling was opposed by Justice K V vestments, and banks should monitor Mumbai-based Yasho Industries, which
Viswanathan, who argued courts lack disbursements more closely," he said. was asked to pay Rs. 3.36 crore in cash
such powers as parties chose arbitra- The apex court's intervention came as a pre-deposit despite having suffi-
tion over litigation. after reports of collusion where finan- cient tax credits.
However, CJI Khanna emphasized that cial institutions allegedly approved Overturning this, the SC upheld the
courts can invoke the doctrine of sev- loans despite stalled or incomplete Gujarat High Court's decision allowing
erability if parts of the award are le- housing projects. use of tax credit for such compliance.
gally separable. The judgment is ex- The SC's ruling places responsibility on The apex court clarified that pre-de-
pected to bring greater flexibility and
both developers and banks to ensure posits qualify as tax obligations under
clarity to India's arbitration regime.
ethical practices. By upholding con- Circular No. 172/2022. This verdict
sumer interests, the decision is seen as closes the interpretational gap that
SC Orders CBI Probe into a milestone that will enhance trans- had let authorities demand cash-only
deposits, causing financial stress.
Experts hailed the ruling, stating it pro-
Private Banks Liable in Public Fund Cases, Rules motes cash flow efficiency, simplifies
Calcutta HC compliance, and aligns with GST's intent
to offer a taxpayer-friendly regime. EY's
The Calcutta High Court has ruled that private banks can be held account-
Saurabh Agarwal noted that since de-
able through writ petitions if they mishandle public money, ordering Axis
posits are adjusted within the credit
Bank to pay Rs. 25 lakh to an NGO for harassment and negligence. The ledger, refund claims won't be necessary
Society for Welfare of the Handicapped Persons discovered that a fake ac-
even if the taxpayer wins the case.
count was opened in its name, diverting donations meant for welfare work.
Justice Partha Sarathi Sen directed the RBI to form a three-member panel Join
to investigate violations of regulatory norms by the bank. The bank's claim
that the NGO's president was involved in the fake account was dismissed, Online Certificate
with charges instead filed against Axis Bank officials.
Course on
The court upheld its authority to issue writs under Section 35A of the Bank-
ing Regulation Act when statutory duties are violated. It emphasized that Risk Management
private banks, while not public authorities, bear responsibility when han-
For details please visit
dling public funds and cannot escape accountability by citing their private
status. www.smartonlinecourse.co.in

20 | 2025 | JUNE | BANKING FINANCE