List of Current Affairs

Source: Madras High Court 

Why in News? 

Recently, the Madras High Court in P. Kishore v. The Secretary to Government, addressed the crucial constitutional issues concerning phone tapping, privacy rights, and the legality of interception orders under the Indian Telegraph Act, 1885.  

• The judgment reaffirms that surveillance actions must meet strict legal criteria and cannot be used as routine tools in ordinary criminal investigations. Justice N. Anand Venkatesh underscored that the right to privacy is a fundamental right under Article 21, and unauthorized surveillance amounts to a serious violation of this right. 

What was the Background of P. Kishore v. The Secretary to Government (2025) Case? 

• Petitioner: P. Kishore, then Managing Director of M/s Everonn Education Limited, Chennai. 
• 12th August 2011: 
  • The Union Ministry of Home Affairs passed an interception order under Section 5(2) of the Telegraph Act, 1885 and Rule 419-A of the Indian Telegraph Rules, 1951, authorizing phone tapping of Kishore’s mobile (No. 98410-77377) citing "public safety" and "public order". 
• 29th August 2011: 
  CBI registered FIR RC MA1 2011 A 0033: 
  • A1: Andasu Ravinder (IRS officer) allegedly demanded a ₹50 lakh bribe from A2: P. Kishore (petitioner). 
  • A3: Uttam Bohra (friend of A1) was allegedly to transport the bribe. 
  • CBI intercepted A1 and A3 at A1's residence and recovered ₹50 lakh from a carton. Kishore was not present, and no money was recovered from him. 
• Investigation and Charge Sheet: 
  • CBI completed investigation and filed a final report before the Special CBI Court, Chennai in C.C. No. 3 of 2013. 
• 2014: Kishore challenged the phone tapping order in Criminal Petition No. 12404/2014. The High Court granted an interim stay. 
• 27th October 2017: Petition dismissed on technical grounds, allowing liberty to move under Article 226. 
• 10th January 2018: Kishore filed Writ Petition No. 143 of 2018 under Article 226 to: 
  • Quash the interception order. 
  • Declare intercepted communications as invalid and unconstitutional. 
• CBI and Centre’s Stand: 
  • Defended interception as necessary to detect and prevent corruption. 
  • Argued that bribery affects public safety by damaging the credibility of public institutions. 

What were the Court’s Observations? 

Right to Privacy and Phone Tapping: 

• Telephone tapping constitutes a violation of the right to privacy unless justified by a procedure established by law. 
• The right to privacy is part of Article 21 of the Constitution of India, 1950 (COI) and phone conversations are an essential part of modern life. 

On Section 5(2) of the Indian Telegraph Act, 1885: 

• Section 5(2) permits surveillance only when: 
  • There is a public emergency or interest of public safety. 
  • The surveillance is necessary in the interest of sovereignty, integrity, security of State, public order, etc. 
• The words of Section 5(2) of the Act cannot be strained to include detection of ordinary crime. 
• It was further held that: 
  • The interception order was a templated reproduction of Section 5(2) without any application of mind. 
  • There was no public emergency or threat to public safety in a routine bribery investigation. 

On Procedural Safeguards (Rule 419-A of the Telegraph Rules, 1951): 

• The intercepted material was not placed before the Review Committee, violating the Supreme Court's mandate.  

Final Judgment:  

• The interception order dated 12th August 2011 was quashed. 
• All telephonic communications intercepted pursuant to it declared invalid. 
• However, evidence gathered independently of the intercepted calls can be evaluated by the trial court on merits. 

What are the Legal Provisions in Relation to Phone Tapping in India?  

About:  

• Phone tapping or cell phone tracking/tracings an activity where a user's phone calls, and other activities are tracked using different software. 
  • This procedure is majorly carried out without the targeted person being notified of any such activity. 
• It can be done by authorities making a request to the service provider, which is bound by law, to record the conversations on the given number and provide these in real time through a connected computer. 
• However, Article 21 of the COI says that “No person shall be deprived of his life or personal liberty except according to procedure established by law.”

Power to Tap Phones: 

• State Level: 
  • In the states, police have the power to tap phones. 
• Central Level: 
  • Intelligence Bureau, Central Bureau of Investigation (CBI) Enforcement Directorate, Narcotics Control Bureau, Central Board of Direct Taxes, Directorate of Revenue Intelligence, National Investigation Agency Research and Analysis Wing (R&AW), Directorate of Signal Intelligence, Delhi Police Commissioner.

Laws governing Phone Tapping in India:

• The Indian Telegraph Act, 1885: 
  • According to Section 5(2) of the Act on the occurrence of any public emergency, or in the interest of public safety, phone tapping can be done by the Centre or states. 
  • The order can be issued if they are satisfied it is necessary in the interest of public safety, “sovereignty and integrity of India, the security of the State, friendly relations with foreign States or public order or for preventing incitement to the commission of an offence”. 
• Exception for Press: 
  • Press messages intended to be published in India of correspondents accredited to the Central Government or a State Government shall not be intercepted or detained, unless their transmission has been prohibited under this sub-section. 
  • The competent authority must record reasons for tapping in writing.

Authorization of Phone Tapping: 

• Phone tapping is authorized by Rule 419A of the Indian Telegraph (Amendment) Rules, 2007. 
  •  Rule 419A of the Indian Telegraph Rules, 1951 was implemented in March 2007 with specific safeguards. 
  • In the case of the Central Government: The order can be issued by an order made by the Secretary to the Government of India in the Ministry of Home Affairs. 
  • In the case of a State Government: By the Secretary to the State Government in-charge of the Home Department. 
• In Emergency Situation: 
  • In such a situation, an order may be issued by an officer, not below the rank of a Joint Secretary of India, who has been authorized by the Union Home Secretary, or the State Home Secretary. 
  • In remote areas or for operational reasons, if it is not feasible to get prior directions, a call can be intercepted with the prior approval of the head or the second senior-most officer of the authorized law enforcement agency at the central level, and by authorized officers, not below the rank of Inspector General of Police, at the state level. 
  • The order must be communicated within three days to the competent authority, who must approve or disapprove of it within seven working days. 
  • If confirmation from the competent authority is not received within the stipulated seven days, such interception shall cease.

Source: National Company Law Tribunal (NCLT) Delhi Bench 

Why in News? 

The National Company Law Tribunal (NCLT) Delhi Bench delivered a significant judgment in the case of M/s Goyal Tea Agencies Private Limited v. M/s Shakti Bhog Snacks Limited., establishing that the Insolvency and Bankruptcy Code, 2016(IBC) cannot be used to frustrate proceedings under the Prevention of Money Laundering Act, 2002 (PMLA).  

• The ruling, delivered by a coram of Bachu Venkat Balaram Das (Member Judicial) and Dr. Sanjeev Ranjan (Member Technical) emphasized the primacy of PMLA over IBC in matters involving money laundering allegations. 

What was the Background of M/s Goyal Tea Agencies Private Limited v. M/s Shakti Bhog Snacks Limited (2025) Case? 

Background and Initiation: 

• Initial Application: M/s Goyal Tea Agencies Private Limited filed an application under Section 9 of the IBC against M/s Shakti Bhog Snacks Limited (Corporate Debtor). 
• Corporate Insolvency Resolution Process (CIRP) Commencement: The application was admitted on 3rd January 2023, with a moratorium declared under Section 14 of the IBC. 
• Appointment of Resolution Professional (RP): Mr. Umesh Gupta was appointed as Interim Resolution Professional, later confirmed as Resolution Professional by the Committee of Creditors on 2nd February 2023. 

Claims and Committee Formation: 

• Public Announcement: Published in Hindi edition of Jansatta and English edition of Financial Express on 6th January 2023. 
• Claims Received: Only one claim received from State Bank of India (Financial Creditor) for ₹14,62,18,009.83 with 100% voting share. 
• Committee of Creditors: Constituted on 25th January 2023, with SBI as the sole member. 
• No Other Claims: No claims received from operational creditors, employees, or workmen. 

Challenges in Asset Recovery: 

• Director Non-Cooperation: Suspended directors, including Mr. Naresh Chander Varshney, refused to provide documents or information. 
• Section 19(2) Application: Filed due to lack of cooperation from suspended directors. 
• Physical Verification: RP visited registered office at Pearls Business Park, Pitampura, New Delhi. 
• Office Status: Found office sealed by Enforcement Directorate with no operations or available records. 

Asset Position and Meetings: 

• No Physical Assets: No physical assets available for the Corporate Debtor. 
• Property Sale: Land and building at B-87, Sector-64, Noida sold by SBI under SARFAESI Act in December 2019. 
• Financial Records: Last available financial statements from FY 2015-16. 
• CoC Meetings: Three meetings held (2nd February 2023; 28th February 2023; 19th June 2023). 
• CoC Decision: Unanimously recommended dissolution under Section 54 instead of liquidation due to absence of assets. 

Section 54 Application: 

• Filing: Resolution Professional filed application under Section 54 of IBC seeking dissolution. 
• Grounds: No assets to liquidate, no prospects of revival, economically impractical to continue CIRP. 
• Precedents Cited: Multiple coordinate bench decisions supporting dissolution in similar circumstances. 

ED's Opposition and PMLA Proceedings: 

• ED Entry: Enforcement Directorate filed reply opposing dissolution. 
• Money Laundering Investigation: ECIR/DLZO-I/12/2021 dated 31st January 2021 against Shakti Bhog Foods Limited and group entities. 
• Group Company Status: Shakti Bhog Snacks Limited identified as group company of Shakti Bhog Foods Limited. 
• Criminal Allegations: Company accused of routing loan funds through bogus invoices and money laundering activities. 
• Financial Involvement: Acquired and possessed proceeds of crime worth ₹97.87 crores, transferred ₹127.81 crores to group entities (FY 2007-08 to 2014-15). 

Prosecution and Attachment: 

• Criminal Prosecution: Corporate Debtor arraigned as accused in 5th Supplementary Prosecution Complaint dated 20th September 2024. 
• Court Cognizance: Special Court, PMLA took cognizance and issued summons, 
• Asset Attachment: ICICI Bank account (A/c No. 042305000350) with balance of ₹3,701.81 attached under PMLA. 
• Attachment Confirmation: Confirmed by Adjudicating Authority, PMLA vide order dated 26th May, 2022. 

RP's Counter-Arguments:  

• Timing: Corporate Debtor implicated only on 20th September 2024, after 19 months of CIRP commencement. 
• Limited Involvement: Reference to Corporate Debtor confined to pages 20-21 of prosecution complaint. 
• Minimal Assets: Only ₹3,701.81 in bank account under attachment. 
• Parent Company Orders: ED stated no objection to release of parent company properties; Trial Court allowed restoration of attached properties to RP/Liquidator of Shakti Bhog Foods Limited.

What were the Court’s Observations? 

Jurisdictional Principles: 

• PMLA Primacy: The PMLA is a special and self-contained legislation designed to prevent, detect, and punish acts of money laundering. It provides for its own adjudicatory framework and overrides any inconsistent provisions of other laws by virtue of Section 71 of the PMLA. 
• NCLT Limitations: The tribunal emphasized that NCLT and NCLAT do not have jurisdiction to interfere with proceedings or orders passed under the PMLA, including attachment orders or criminal prosecution 

Key Judicial Pronouncements: 

• Character Over Quantum: It is not the quantum but the character of the proceedings that is determinative. The IBC cannot be used as a mechanism to frustrate or sidestep the legitimate process of law under the PMLA. 
• Judicial Overreach Prevention: Permitting dissolution despite the pendency of the Special Court's cognizance over the Corporate Debtor would amount to judicial overreach and would impair the ED's ability to complete its investigation, pursue trial, and recover proceeds of crime. 
• Corporate Availability for Criminal Liability: This Adjudicating Authority cannot assume jurisdiction in a manner that would render the Corporate Debtor unavailable for criminal liability, particularly when it stands named as an accused, and assets, however meagre, are under attachment. 

Legal Reasoning: 

• Consequences of Dissolution: Court noted that dissolution under Section 54 results in the corporate debtor ceasing to exist as a legal entity, which would frustrate ongoing criminal prosecution. 
• Statutory Hierarchy: Recognized that PMLA, being a special legislation, holds primacy over IBC in proceedings relating to money laundering.

Final Disposition: 

• Application Dismissed: In light of the above facts and circumstances, the prayer(s) sought in the present Application cannot be allowed and hence, IA-3695-2023 In IB-1713-2019, hereby stands dismissed. 
• No Costs: Court ordered no costs, indicating the application was not frivolous but legally unsustainable. 
• Certified Copy: Provision made for issuance of certified copy upon compliance with formalities’ 

Judicial Impact: 

• This judgment establishes important precedent regarding the intersection of insolvency law and anti-money laundering enforcement, clarifying that: 
  • IBC proceedings cannot shield entities from PMLA enforcement. 
  • Special legislation (PMLA) takes precedence over general commercial law (IBC). 
  • Criminal liability considerations override commercial convenience in dissolution matters. 
  • Minimal asset value does not diminish the importance of criminal proceedings.

What is the Insolvency and Bankruptcy Code (IBC), 2016?

About: 

• The IBC, 2016 is the bankruptcy law of India that consolidates and amends the existing laws relating to insolvency and bankruptcy of corporate persons, partnership firms, and individuals. 
  • Insolvency is a state where the liabilities of an individual or an organization exceed its assets and that entity is unable to raise enough cash to meet its obligations or debts as they become due for payment. 
  • Bankruptcy is when a person or company is legally declared incapable of paying their due and payable bills. 
• The IBC aims to provide a time-bound and creditor-driven process for insolvency resolution and to improve the credit culture and business environment in the country. 
• IBC resolves claims involving insolvent companies. This was intended to tackle the bad loan problems that were affecting the banking system.

Regulating Authority: 

• The Insolvency and Bankruptcy Board of India (IBBI) was established under the Insolvency and Bankruptcy Code, 2016. 
• It is a statutory body, responsible for making and implementing rules and regulations for insolvency and bankruptcy resolution of corporate persons, partnership firms, and individuals in India. 
• The IBBI has 10 members, representing the Ministry of Finance, the Ministry of Corporate Affairs, and the Reserve Bank of India.

Salient Features:  

• Covers all individuals, companies, Limited Liability Partnerships (LLPs) and partnership firms. 
• Adjudicating authority: 
  • National Company Law Tribunal (NCLT) for companies and LLPs. 
  • Debt Recovery Tribunal (DRT) for individuals and partnership firms.

What is the Prevention of Money Laundering Act, 2002 (PMLA)? 

About: 

• The Prevention of Money Laundering Act, 2002 (PMLA) is an Act of the Parliament of India enacted to prevent money laundering and provide for the confiscation of property derived from money laundering. 
• It aims to combat money laundering related to illegal activities such as drug trafficking, smuggling, and terrorism financing.

Objectives of PMLA: 

• Prevention: To prevent money laundering by implementing stringent measures and monitoring financial transactions. 
• Detection: To detect and investigate instances of money laundering through proper enforcement and regulatory mechanisms. 
• Confiscation: To confiscate properties derived from money laundering activities to deter offenders and disrupt illicit financial flows. 
• International Cooperation: To facilitate international cooperation in combating money laundering and terrorist financing activities.

Key Provisions: 

• Offences and Penalties: PMLA defines money laundering offences and imposes penalties for such activities. It includes rigorous imprisonment and fines for offenders. 
• Attachment and Confiscation of Property: The Act allows for the attachment and confiscation of property involved in money laundering. It provides for the establishment of an Adjudicating Authority to oversee these proceedings. 
• Reporting Requirements: PMLA mandates certain entities, such as banks and financial institutions, to maintain records of transactions and report suspicious transactions to the Financial Intelligence Unit (FIU). 
• Designated Authority and Appellate Tribunal: The Act establishes a Designated Authority to assist in the investigation and prosecution of money laundering offences. It also provides for the establishment of an Appellate Tribunal to hear appeals against orders of the Adjudicating Authority.

Recent Amendments to PMLA, 2002: 

• Clarification about the Position of Proceeds of Crime: Proceeds of the Crime not only includes the property derived from scheduled offence but would also include any other property derived or obtained indulging into any criminal activity relate-able or similar to the scheduled offence. 
• Money Laundering Redefined: Money Laundering was not an independent crime rather depended on another crime, known as the predicate offence or scheduled offence. The amendment seeks to treat money laundering as a stand-alone crime.

Comparative Analysis: IBC vs. PMLA 

Nature and Purpose: 

Procedural Framework: 

Asset Treatment: