Page 18 - Banking Finance June 2022

LEGAL UPDATE

explore the subject of personal guar- scheme akin to loan waiver to drop The SC ruling has come as a setback for
antor rights, said advocate Srijan prosecution in cheque-bouncing cases thousands of taxpayers who had got
Sinha. involving small sums of money. favourable orders from several high
courts on reassessment.
On the other hand, Anushkaa Arora, A bench of Justices L N Rao, B R Gavai
principal and founder of ABA Law Office, and S R Bhat said many past innova- The apex court held that notices issued
said that though there won't be any tions, like evening courts attempted by under the old regime will not be invalid
direct impact on other cases of NCLT, the high courts, have failed to arrest and shall be deemed to have been is-
an implied effect can be seen in cases the burgeoning number of cheque- sued under new provision of the reas-
involving similar questions or points of bouncing cases under Section 138 of sessment regime introduced in the Fi-
law. "This can be a catch for guarantors the Negotiable Instruments Act. nance Act, 2021.
of pending cases for obtaining interim
Of the 33.4 lakh pending cheque ….."in order to strike a balance be-
relief on the same lines," she said.
bouncing cases, Maharashtra ac- tween the rights of I-T and taxpayers
"In granting interim relief to Sodhi, the counted for the highest with 5.6 lakh and to prevent the loss of public exche-
top court took a forward step display- cases. It was followed by Rajasthan quer, the Supreme Court, as one-time
ing its intention to decide the matter on with 4.8 lakh, Gujarat 4.4 lakh, Delhi exception has directed that notices is-
merits. We will have to wait for a few 4.1 lakh, U.7 lakh, Haryana 2.36 lakh, sued earlier under Section 148 to be
more months to see how the law will Punjab 1.8 lakh and Madhya Pradesh deemed to have been issued under
evolve with respect to personal guaran- 1.7 lakh. Surprisingly, a large state like Section 148A of the Act under the new
tors," Arora said, adding that if the is- West Bengal has just 309 cheque law," the Supreme Court said in the
sue is not decided within six months, the bouncing cases pending in courts. order.
interim relief will automatically get va-
Referring to a note submitted by amici The new reassessment law had capped
cated. However, the court indicated
curiae, advocate Sidharth Luthra and the period for issuing notices with re-
that the issue of personal guarantors in
advocate K Parameshwar, the bench spect to reopening past cases at three
IBC would be decided soon.
said, "Find out how many of such loans, years, down from six years earlier.
According to Insolvency and Bank- declared bad because of cheque
Even as the new regime kicked in from
ruptcy Board of India data, applica- bouncing and non-payment, have been
April 1, 2021, the tax department had
tions invoking personal guarantees written off. If the banks have written
issued over 90,000 notices between
against corporate debtors filed by off small amounts, why should the
April 1 and June 30, 2021, for earlier
creditors surged to 637 as of March courts be continuing with the trial".
years.
2022 from 191 in FY21 and 16 in FY20.
The bench said the government could The notices were issued based on the
The total debt currently stands at Rs.
put a ceiling of Rs 10,000 or Rs 5,000
95,656.6 crore, while the guaranteed government's notification extending
for dropping the cases. But, additional
amount is Rs. 71,672.65 crore. the time limit to June 30, 2021, citing
solicitor general S V Raju put a caveat.
the second wave of the pandemic. Fol-
Ajay Shaw, partner, DSK Legal, said the "In loan repayments based on repay-
lowing this, 9,000 plus writ petitions
Supreme Court order may result in other ment through equated monthly
were filed in many courts challenging
personal guarantors wanting to tag instalments, a single cheque-bouncing
validation of the notices.
along to the matter filed by Sodhi, so may be of small amount but the entire
The tax department had issued these
that the proceeding against them under loan amount may be a large sum."
notices under section 148, alleging
IBC is stayed till a final order is passed.
under-reporting and misreporting of
I-T reassessment notices
Cheque bounce cases: SC income for years prior to the last three
valid: SC assessment years.
moots loan waiver-like
The Supreme Court (SC) ruled in favour "Introduction of section 148A ( new
plan of the Revenue Department in the re- regime) of the IT Act can be said to be
With over 33 lakh criminal cases relat- assessment dispute case. The top court a game changer with an aim to
ing to dishonour of cheques choking reversed the earlier high court orders achieve the ultimate object of simpli-
the justice delivery system, the Su- that had quashed income-tax notices fying the tax administration, ease
preme Court asked the Centre and issued after March 31, 2021, under the compliance and reduce litigation," the
states whether they could devise a old reassessment regime. apex court said.
18 | 2022 | JUNE | BANKING FINANCE