Delhi HC Invokes Proportionality Doctrine for First Time — PMLA Section 45 Twin Bail Conditions Stayed in ₹2,400 Crore ED Case

The Income-tax Act, 1961 — a piece of legislation that survived sixty-five years and hundreds of amendments — was repealed on 1 April 2026. In its place stands the Income-tax Act, 2025 (Act No. 30 of 2025), which received Presidential assent on 21 August 2025 and came into force from the start of the current tax year. The transition is not merely cosmetic: while the government's stated objective was simplification and consolidation, the new Act contains structural and substantive changes that demand immediate attention from every practitioner, in-house counsel, and finance professional in India.

The 2025 Act is organised into 536 sections across 23 chapters and 16 schedules — a significant restructuring from the 1961 Act's less systematic layout. The concept of "previous year" and "assessment year," which had confused taxpayers for generations, has been replaced with the unified concept of "Tax Year." From Tax Year 2026-27 (i.e., income earned from 1 April 2026 to 31 March 2027), all assessments, returns, and computations are conducted under the new framework. Pending assessments under the 1961 Act will continue under transitional provisions in Section 536.

The Structural Shift: What Has Actually Changed

The most consequential changes are not in the headline tax rates — which remain largely unchanged — but in the architecture of the statute itself. The charging section has been materially simplified: the cascading provisos and explanations that made the 1961 Act nearly incomprehensible to non-specialists have been collapsed into clear, numbered sub-sections. The reassessment framework — previously spread across Sections 147 to 153 — has been consolidated into a single, cleaner chapter with explicit time limits and mandatory conditions precedent. This should, in principle, reduce the scope for arbitrary reopening of assessments.

Securities Transaction Tax on derivatives has been revised upwards from 1 April 2026: futures carry an STT of 0.05% (from 0.02%), options premium 0.15% (from 0.10%), and exercise of options 0.15% (from 0.125%). These changes, announced in the Union Budget 2026, are now operative under the new Act. For Foreign Portfolio Investors, GST on brokerage and intermediary services has been eliminated by treating such services as exports — a significant reduction in transaction costs that was much-sought by the FPI community.

AIF Classification — An Important Retained Provision

For the alternative investment fund industry, the new Act retains — and clarifies — the treatment of securities held by Category I and Category II AIFs as "capital assets." This statutory definition, carried forward from the 1961 Act framework, removes uncertainty about whether AIF-held securities could be recharacterised as stock-in-trade for tax purposes. The pass-through taxation regime under what was formerly Section 115UB of the 1961 Act continues under the corresponding provision of the 2025 Act, with income from Category I and II AIFs treated as capital gains in investors' hands.

For GIFT City units, the tax holiday has been extended to 20 consecutive years out of the first 25 years of operation, after which a concessional rate of 15% applies. This extension — announced in Budget 2026 and now encoded in the 2025 Act — is a material improvement for IFSC-based funds and financial services entities.

For Practitioners: Immediate Actions Required

Every legal notice, petition, order, and filing that references provisions of the 1961 Act must now be mapped to the corresponding section in the 2025 Act. The Income Tax Department has published a correlation table on its official portal. CBDT has also issued a set of FAQs addressing transition issues — including how to treat returns filed under the 1961 Act that are pending processing, and how reassessment notices issued pre-1 April 2026 are to be continued under the new Act's framework. Practitioners advising on cross-border transactions should note that DTAA references to "the Income-tax Act" are now read as references to the 2025 Act, without any need for treaty amendment.

The Supreme Court of India has delivered a clutch of consequential rulings across criminal, commercial, and constitutional law in the March–May 2026 period. LexBharat summarises the most significant decisions, drawing on publicly available cause list records and published orders.

Worker Regularisation: Uma Devi Principle Affirmed and Clarified (May 2026)

In a significant May 2026 ruling, the Supreme Court held that a worker's initial appointment on a temporary basis — or the fact that the appointment was not against a sanctioned post — does not by itself disentitle the worker from seeking regularisation under the principles laid down in State of Karnataka v. Uma Devi. The Court was considering the case of workers at a public sector undertaking who had rendered continuous service for periods ranging from 14 to 26 years under a scheme that, while purporting to provide security until age 60, effectively maintained their status as temporary daily-rated workers without permanent establishment benefits. Setting aside the restrictive clauses of that scheme, the Court directed that the transition to structured permanent employment — originally mandated over a decade ago — must now be implemented.

NI Act Liability Survives Liquidation: Section 138 Applies to Director (SCC OnLine SC 736)

In Abhaykumar Anandkumar Bhambore v. Ortho Relief Hospital and Research Centre, the Supreme Court declined to interfere with a Bombay High Court order holding a director personally liable under Section 138 of the Negotiable Instruments Act, 1881, even though the company against which the cheque was drawn was under liquidation at the relevant time. The Court's refusal to grant special leave affirms the position that personal liability under Section 138 NI Act survives the corporate debtor's entry into liquidation — an important clarification for practitioners advising directors of insolvent companies who may face NI Act prosecutions.

Sajjadanashin Succession: Custom and Nomination Prevail Over Lineal Inheritance (SCC OnLine SC 518)

In Syed Mohd. Ghouse Pasha Khadri v. Syed Mohd. Adil Pasha Khadri, the Court addressed a long-running dispute over succession to the spiritual office of Sajjadanashin of a dargah in Andhra Pradesh. The Court held that the succession to such an office is governed by the applicable religious custom and a valid nomination — and is not determined by mere lineal inheritance. The judgment reinforces the principle that courts exercise limited interference with concurrent factual findings on matters of custom and tradition, particularly in religious office succession disputes.

Summary Judgment Under Order XIII-A CPC: Courts Must "Grasp the Nettle and Decide"

In a ruling that will have immediate practical impact on commercial litigation, the Supreme Court issued guidelines on the exercise of the summary judgment procedure under Order XIII-A of the Code of Civil Procedure in commercial suits. The Court articulated a proactive mandate for judges to decide summary judgment applications without waiting for a full trial where the issue before the court is a neat point of law or contractual construction, and where the defendant's case is "fanciful or speculative" rather than real and substantial. The Court observed that a conventional trial "no longer reflects modern reality" and that judicial efficiency requires arresting proceedings at the threshold when appropriate.

Criminal Law: Limits on Quashing FIRs in Serious Offences (April 2026)

The April 2026 Supreme Court digest includes a significant reiteration of the limits on High Courts' power to quash FIRs in cases involving serious offences. In Shivaji Gangadhar Ingale & Ors. v. State of Maharashtra, the Court reaffirmed that FIRs involving rape and analogous heinous offences cannot ordinarily be quashed merely on the basis of a settlement between the parties. The Court clarified that such offences have a grave societal impact and are not purely private disputes — meaning the inherent powers under Section 482 CrPC (now Section 528 BNSS) must be exercised with "extreme caution" and only in genuinely exceptional circumstances where continuation of proceedings would constitute an abuse of process.

SEBI has issued two significant circulars in the March–May 2026 period that fundamentally change the compliance and operational landscape for Alternative Investment Funds registered in India. Taken together, the March 2026 reporting overhaul and the April 2026 fast-track scheme launch framework represent the most substantial revision to the AIF regulatory framework since SEBI's Master Circular of October 2024.

The March 2026 Reporting Overhaul: Annual Activity Report Replaces Fragmented Quarterly Filings

In a circular issued on 4 March 2026, SEBI introduced a restructured regulatory reporting mechanism for AIFs. The previous regime required AIFs to submit extensive quarterly reports covering investor composition, leverage, investments made during the quarter, portfolio concentration, and a wide range of other operational and financial data. SEBI acknowledged that this framework produced large volumes of fragmented data that made regulatory analysis complex and created operational inefficiencies for both the regulator and reporting entities.

Under the revised framework, AIFs must now submit a comprehensive Annual Activity Report providing a full-year overview covering investment strategy, sectoral allocation, investor composition, fund performance, valuation practices, risk management measures, and regulatory compliance. Quarterly reports continue but are significantly simplified — limited to essential information for ongoing monitoring rather than the exhaustive disclosures previously required. The first Annual Activity Report under the revised framework is due by 31 May 2026 for FY 2025-26.

The April 2026 Fast-Track Window: Scheme Launch Within 30 Days of Filing

SEBI's circular of 30 April 2026 (Circular No. HO/19/19/11(2)2026-AFD-RAC2 I/10624/2026) introduced a fast-track mechanism allowing AIFs — other than Large Value Funds — to launch new schemes and circulate placement memorandums 30 days after filing with the regulator. Previously, AIFs were required to wait for SEBI's explicit approval or comment clearance before launching, creating substantial delays in fund deployment. The new framework shifts to a disclosure-based regime while retaining post-filing regulatory oversight.

Under the circular, any comments issued by SEBI during the 30-day period must be complied with by the Merchant Banker and the AIF before scheme launch or PPM circulation. The first close of any new scheme must be declared within 12 months from the date on which the AIF becomes eligible to launch. SEBI has clarified that submission of a PPM does not constitute regulatory approval, and the regulator assumes no responsibility for the accuracy or completeness of disclosures — responsibility resting squarely with the Merchant Banker and the AIF Manager.

Tax Overlay: Income-tax Act 2025 and AIF Classification

With the Income-tax Act 2025 in force from 1 April 2026, AIF managers must also navigate the transition of the statutory framework governing pass-through taxation. The new Act retains the classification of securities held by Category I and II AIFs as "capital assets" through statutory definition — a provision that had previously required interpretation under the 1961 Act. The pass-through regime itself continues without substantive change, but practitioners should verify section number correspondences against the new Act before filing any AIF-related returns or opinions under the 2025 legislation.

India's insolvency infrastructure has continued operating at pace through May 2026, with the IBBI's published approvals data showing multiple NCLT resolution plan approvals in the final week of the month alone. Real estate, textiles, manufacturing, and biotech featured across the latest approvals, reflecting the broad cross-sectoral reach of the IBC's corporate insolvency resolution process nine years after its enactment.

May 2026 Resolution Plan Approvals: A Statistical Snapshot

The IBBI's official publications confirm resolution plan approvals for, among others, Nandini Impex Private Limited, Viola Resorts Private Limited, and Nexgen Laminators Private Limited — all approved on 24 May 2026 — as well as Morarjee Textiles Limited, approved on 22 May 2026, and Kobo Biotech Limited, whose plan received approvals on both 18 May and 24 May 2026. Earlier in the month, Shree Geeta Textile Mills Pvt. Ltd. (5 May 2026), Shri Ram Switchgears Limited (18 May), Vishal Structurals Private Limited (18 May), and Alpine Realtech Private Limited (early May) also received NCLT approval. The Q1 2026 (January–March 2026) IBBI newsletter, published 18 May 2026, provides the comprehensive sectoral data for this period.

NCLAT Clarifies "Financial Debt" — Written Contract Not Required (March 2026)

A significant March 2026 NCLAT ruling with wide practical implications held that the concept of "financial debt" under Section 5(8) of the IBC is a substantive legal concept — and that the Code contains no requirement for a written loan contract for a claim to qualify as financial debt. The Tribunal held that financial debt may be established through bank statements, promissory notes, acknowledgments of liability, TDS records, and dishonoured cheques. The ruling further clarified that RBI's Fair Practices directives governing lender behaviour do not override Section 238 of the IBC, which gives the Code a non-obstante effect over other laws.

NCLAT on Demat Securities and IBC Jurisdiction (March 2026)

The March 2026 NCLAT judgments also addressed the intersection of securities law and insolvency. In a ruling that considered stock exchange freeze orders on demat accounts of corporate debtors, the Tribunal held that once CIRP or liquidation commences under the IBC, the Resolution Professional or Liquidator has authority under the Code to take control of all assets of the corporate debtor — including dematerialised securities — and that penalties and annual listing fees that crystallised as of the insolvency commencement date constitute operational debts subject to the IBC distribution waterfall. The NCLT's jurisdiction under Section 60(5) was held to extend to such recovery questions where no further regulatory adjudication remains pending.

IBBI Amends IPA Governance Regulations (13 May 2026)

The Insolvency and Bankruptcy Board of India notified the IBBI (Model Bye-Laws and Governing Board of Insolvency Professional Agencies) (Amendment) Regulations, 2026 on 13 May 2026. The amendment addresses governance standards for Insolvency Professional Agencies — the bodies that regulate individual insolvency professionals — and forms part of IBBI's ongoing effort to strengthen the institutional infrastructure of India's insolvency ecosystem. Detailed analysis of the amendment's specific governance changes will be published in LexBharat's forthcoming IBC practice update.

April 2026 produced a rich body of GST jurisprudence across Indian courts — from the Supreme Court to various High Courts — reflecting a judiciary that is increasingly willing to engage with the constitutional principles and fairness norms that GST administration must respect. LexBharat's analysis of key rulings from across courts charts the trajectory of a maturing GST legal framework.

Bombay High Court Refers Consolidated SCN Question to Larger Bench

The Bombay High Court noted the existence of conflicting judicial views on a significant procedural question: whether the GST Department may issue a single consolidated Show Cause Notice covering multiple financial years or tax periods under Sections 73 and 74 of the CGST Act, 2017. Finding the judicial landscape divided on this question, the Bombay High Court referred the matter to a Larger Bench for definitive resolution. The outcome of this reference will have wide practical impact — consolidated SCNs have been a common revenue department practice, and a ruling against their permissibility could require hundreds of pending adjudications to be restarted with fresh, year-specific notices.

Gujarat High Court: Limitation for Appeal Runs from Rectification Rejection

In a ruling with significant practical importance for GST appellants, the Gujarat High Court held that where a taxpayer applies for rectification of a GST order and that application is rejected, the rejection creates a fresh cause of action — and the limitation period for filing an appeal begins to run from the date of the rectification rejection, not from the original order. This clarification, reported as New Kailash Suppliers v. State of Gujarat, provides meaningful relief to taxpayers who had pursued the rectification route in good faith and faced limitation objections on their subsequent appeals.

Supreme Court: Section 112(9) Deemed Stay Protection Confirmed

The Supreme Court confirmed the protection available to taxpayers under Section 112(9) of the CGST Act — the provision granting a deemed stay of recovery where a taxpayer files an appeal before the GST Appellate Tribunal and deposits the mandatory pre-deposit. The Court's affirmation of this statutory stay protection is important in the context of ongoing GST Appellate Tribunal operationalisation, as taxpayers have faced pressure from revenue authorities to pay disputed amounts in full pending tribunal hearing.

Rajasthan High Court: Procedural Bias Invalidates Adjudication

In Ramjilal Mohanlal v. Union of India, the Rajasthan High Court held that even procedural bias in the adjudication process — including where an adjudicating authority demonstrates pre-judgment — can invalidate the entire adjudication mechanism, irrespective of the merits of the substantive tax demand. This ruling reinforces the principle that natural justice is not a formality in tax adjudication: structural infirmity in the hearing process renders the resulting order voidable, regardless of whether the underlying demand may otherwise have been legally defensible.

Finance Minister Nirmala Sitharaman presented the Union Budget 2026 in Parliament on 1 February 2026. With the Income-tax Act 2025 coming into force from 1 April 2026, the tax proposals announced in the Budget are now operative — and certain changes have immediate significance for Foreign Portfolio Investors, derivatives traders, and entities operating out of GIFT City's International Financial Services Centre.

STT Increase on Derivatives: Now Effective

The Budget proposed, and the Finance Act 2026 has now enacted, an increase in Securities Transaction Tax on derivatives trading. From 1 April 2026, the STT on futures transactions is 0.05%, up from 0.02%; the STT on options premium is 0.15%, up from 0.10%; and the STT on exercise of options is 0.15%, up from 0.125%. These increases are operative for all transactions executed on Indian stock exchanges from the start of Tax Year 2026-27. High-frequency derivatives traders and algorithmic trading desks will need to recalibrate their cost models to account for the revised STT structure.

GST on FPI Brokerage: Eliminated

In a significant relief measure for FPIs transacting through Indian brokers, GST on brokerage and other intermediary services provided by Indian brokers to Foreign Portfolio Investors has been eliminated, with such services to be treated as exports of service. This treatment removes an 18% GST burden that had been levied on brokerage paid by FPIs to Indian intermediaries — a friction cost that had been a persistent complaint from the FPI community. The change is effective from the date of the Finance Act's commencement and applies to all eligible intermediary services provided to registered FPIs.

Buyback: Now Taxed as Capital Gains in Investors' Hands

The Budget proposed, and the Finance Act 2026 has now enacted, a change to the tax treatment of gains arising from company buybacks. From 1 April 2026, gains on shares tendered in a buyback are to be treated as capital gains in the hands of the investor — replacing the previous regime under which the company paid buyback tax and the shareholder received proceeds tax-free. This change significantly affects the economics of buyback transactions for institutional investors, FPIs, and promoter shareholders, who must now compute capital gains (at applicable short-term or long-term rates) on buyback proceeds.

GIFT City: 20-Year Tax Holiday and Expanded Scope

The GIFT City International Financial Services Centre receives two significant upgrades under Budget 2026. First, the income tax holiday for IFSC units is extended from the previous 10-consecutive-year framework to 20 consecutive years out of the first 25 years of the unit's operation, after which a concessional rate of 15% applies. This extended holiday dramatically improves the long-term economics of GIFT City operations for funds, banking units, insurance intermediaries, and financial service entities. Second, the Portfolio Investment Scheme — previously restricted to NRIs and OCIs — has been extended to all individual non-residents, with the individual investment cap doubled to 10% of company capital and the aggregate cap raised to 24%.

India's High Courts and the Supreme Court delivered several constitutionally significant rulings in the April–May 2026 window. This roundup covers public-domain orders on UAPA validity, the prospective extension of the right to free education, and judicial scrutiny of disproportionate administrative punishment — areas that collectively illuminate the Indian judiciary's current posture on fundamental rights and administrative law.

Bombay HC Dismisses Review Against UAPA Validity Judgment (29 April 2026)

The Bombay High Court dismissed a petition seeking review of its own earlier judgment upholding the constitutional validity of key provisions of the Unlawful Activities (Prevention) Act, 1967. The Court had previously held, in a ruling from July 2025, that the UAPA can reasonably be described as a deterrent to the commission of unlawful activities — and that it cannot, by any stretch of construction, be equated with preventive detention in the constitutional sense. The April 2026 dismissal of the review petition means that the Bombay High Court's affirmation of the UAPA's constitutional validity is now final at that court's level, leaving any further challenge to the Supreme Court.

SC Issues Notices on Extending Article 21A to Pre-Primary Education (April 2026)

In a development that could expand India's fundamental rights framework, a Supreme Court bench led by Chief Justice Surya Kant issued notices to the Central Government, all State Governments, and Union Territories on a public interest litigation seeking extension of the fundamental right to free and compulsory education under Article 21A to children aged 3 to 6 years. Article 21A, inserted by the 86th Constitutional Amendment in 2002, currently applies only to children between the ages of 6 and 14 — the mandate operationalised by the Right to Education Act, 2009. The PIL argues that early childhood care and education is essential for foundational development and is aligned with the National Education Policy 2020's emphasis on pre-primary learning. The Court indicated interest in examining nationwide implementation across States and Union Territories before determining the constitutional question.

SC Also Issues Notices on Biometric Voting at Polling Stations

In the same April 2026 sitting, the Supreme Court bench also issued notices on a separate PIL seeking mandatory biometric identification (fingerprint and iris) at polling stations to prevent voter impersonation. Chief Justice Surya Kant noted the financial burden and procedural challenges such a system would involve, ruling out implementation for currently ongoing 2026 State Assembly polls but agreeing to examine feasibility for future elections. The PIL engages the intersection of the right to vote as a statutory entitlement under Article 326 and the administrative feasibility of technological safeguards.

Karnataka HC Quashes Engineer's Suspension Over Bowring Hospital Wall Collapse

The Karnataka High Court quashed the suspension of an executive engineer following the collapse of a compound wall at Bowring Hospital in Bengaluru in April, which claimed seven lives. A Division Bench of the Karnataka High Court held that the mere fact of the wall's collapse does not in itself constitute "prima facie evidence of gross dereliction of duty" in the absence of specific evidence of the officer's individual culpability. The ruling is a reminder of the limits of vicarious administrative accountability — particularly where departmental suspensions are imposed without examining the specific chain of responsibility — and has significance for the broader body of administrative law governing disciplinary action against public servants.

Two important public-domain rulings from April–May 2026 address the rights of borrowers against coercive recovery practices by Non-Banking Financial Companies and the evidentiary burden on parties claiming that General Power of Attorney transactions were security arrangements rather than genuine sales — questions of significant practical importance to retail borrowers, vehicle finance customers, and property purchasers across India.

Uttarakhand HC: NBFC Coercive Repossession Violates Constitution (2 April 2026)

In Mohan Lal v. Reserve Bank of India (Writ Petition Misc. Single No. 2032 of 2023, decided 2 April 2026), the Uttarakhand High Court delivered a significant ruling on the constitutional dimensions of NBFC vehicle repossession. The Court held that where an NBFC repossesses or attempts to repossess a financed vehicle through coercive means — using recovery agents without adherence to due process and in violation of RBI's published recovery guidelines — the action is not merely a breach of the lending contract. It assumes a public law character and is amenable to judicial review under Article 226 of the Constitution.

The Court held such coercive repossession to be arbitrary, illegal, and violative of Articles 14 (equality before law), 19(1)(g) (freedom to carry on any occupation), and 21 (right to life and personal liberty). The ruling further observed that the petitioner had made specific and credible allegations of forcible repossession through recovery agents acting in clear violation of RBI guidelines — and that such conduct, if established, could not be treated as a mere contractual dispute but must be addressed as high-handed state-like action offending constitutional guarantees.

Why This Ruling Matters

India's vehicle finance sector, dominated by NBFCs operating under RBI's regulatory oversight, has long faced criticism for coercive recovery practices. RBI's Fair Practices Code for NBFCs — and subsequent Master Direction on Know Your Customer — impose specific constraints on recovery agent conduct. The Uttarakhand HC's ruling operationalises these regulatory obligations at the constitutional level, creating a pathway for aggrieved borrowers to seek writ remedies without having to pursue the slower route of civil litigation or consumer forum complaints. It also raises the question of when an NBFC — a private regulated entity — exercises functions sufficiently "public" in character to attract constitutional scrutiny under Part III of the Constitution.

SC on GPA Transactions as Security Arrangements: Burden of Proof Lies on the Claimant (May 2026)

In a separate but related development, the Supreme Court held in a May 2026 ruling that a person who claims that property transactions executed through General Powers of Attorney were merely security arrangements for loans — and not genuine sale transactions — bears the burden of establishing that claim. The Court's ruling is significant in the context of the large volume of GPA-based property transactions in India that have faced subsequent challenges, particularly in urban areas where GPA sales were commonly used to transfer property informally. The decision clarifies the evidentiary standard applicable to parties seeking to recharacterise a completed GPA transaction as a loan security arrangement — a recharacterisation that, if accepted, would have significant consequences for title, stamp duty liability, and the rights of subsequent purchasers.