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Punjab Financial Corporation v. M/s Paulbro Leathers Pvt. Ltd.

Civil Appeal · 2019 INSC 26Decided 7 Jan 2019
Civil Appeal Nos. 118-119 of 2019
Justice Abhay Manohar Sapre · Justice R. Subhash Reddy

Background

Paulbro Leathers had taken a loan from Punjab Financial Corporation and defaulted. The dispute was settled under the Corporation's one-time settlement policy, and a Chartered Accountant was appointed by the High Court to work out the outstanding balance. A fresh dispute arose over how much was actually still owed, and the Corporation raised a demand of about Rs. 49.86 lakh, which the company disputed and challenged in the High Court.

Decision Breakdown

The High Court had quashed the Corporation's demand, reasoning that since the parties had consented to the settlement process, the issue could not be reopened. The Supreme Court disagreed, holding that the Chartered Accountant's report had itself given rise to a new, genuine dispute about the actual liability and amounts already paid, which needed to be examined on its own merits rather than being shut out. The Court set aside both the High Court's original order and its order dismissing review, and remanded the writ petition to the High Court to be decided afresh on merits, directing it to record a clear finding on how the respondent's liability was discharged.

Lesson Learnt

Even after a negotiated settlement, if a genuine new dispute arises about how liability was actually computed or paid, courts cannot shut out that inquiry merely because the parties earlier agreed to the settlement process: the underlying merits must still be examined.

Official source (sci.gov.in)View Judgment (PDF)

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