June 15th, 2026

A. Case Laws

[A.1] Merely citing an AI-Generated case by a judicial officer is not enough to vitiate the judgement

In a remarkable ruling, the High Court of Andhra Pradesh in Gummadi Usha Rani v. Sure Mallikarjuna Rao held that a judicial order is not automatically invalidated simply because it inadvertently relies on non-existent, AI-generated legal citations.

In this case, a trial court judge used an artificial intelligence tool for the first time, leading to the hallucination of four completely fictitious precedents in her order regarding an advocate commissioner’s report.

On revision, the High Court accepted the judge’s good-faith explanation but thoroughly evaluated the core substance of the decision. It ruled that if the actual legal principles applied to the facts are correct under the established law of the land, the mere presence of fake AI citations does not constitute a jurisdictional error.

This case highlights a critical dual reality. While the higher courts are willing to preserve substantive justice, there is a professional responsibility to cross-verify AI-assisted research. It remains absolute to protect systemic credibility.

[A.2] Consequences of conducting a general meeting with inadequate quorum

The quorum required for a general meeting is governed by Section 103 (Chapter VII Management and Administration) of the Companies Act, 2013. Unless the articles of the company stipulate a higher number, the statutory minimum requirements for members present at a meeting are as follows: (1) For public company having up to 1,000 members, it is 5 members; with more than 1,000 but up to 5,000 members, it is 15 members; and exceeding 5,000 members, it is 30 members (2) A private company is 2 members.

The presence of a quorum is not merely a technical requirement but a foundational requirement for corporate governance. If the quorum is not present within half an hour from the appointed time, the meeting stands adjourned to the same day in the next week at the same time and place unless the board decides otherwise.

Regulators are actively imposing significant monetary penalties on companies and their directors for conducting meetings with inadequate quorum, treating it as a serious violation of the Companies Act.

In a significant regulatory action, the Registrar of Companies (ROC), Kanpur, recently penalised M/s. Chartered Mercantile Mutual Benefits Limited (February 10th, 2026) and its directors for violating the quorum requirements stipulated under Section 103(1) of the Companies Act, 2013. An inspection revealed that the company had conducted five consecutive annual general meetings (between 2016 and 2020) with only 18 members present, despite a statutory requirement of 30 members for a company with a membership base exceeding 5,000.

The ROC held that failure to meet the minimum quorum renders a meeting and its business invalid. Consequently, an ex parte order was issued imposing a total penalty of ₹3,00,000 on the company and its current and past directors for non-compliance.

This order serves as a stern reminder that quorum compliance is not merely procedural but foundational.

[A.3] Supply of sanction order after SFIO investigation is must to avoid miscarriage of justice

A sanction order is a formal and mandatory administrative authorisation issued by a competent government authority that permits the initiation of criminal prosecution against an individual or entity.

In the context of company law, a sanction order passed by the central government serves as a critical procedural safeguard when the investigation is done by the SFIO. It ensures that the competent authority has reviewed the investigative findings and there exists a prima facie (sufficient) case to proceed to trial.

In Naveen Aggarwal v. Union of India (High Court of Punjab & Haryana, May 11th, 2026), the Serious Fraud Investigation Office (SFIO) had launched a massive probe into the SRS Group for allegedly fabricating financial statements to syphon off public bank credit worth over ₹1,500 crore. The Special Court subsequently summoned 81 accused individuals, including a chartered accountant who had signed off on the group’s past balance sheets.

However, the regulatory authorities failed to provide the chartered accountant with a copy of the official Ministry-issued sanction order that authorised his prosecution alongside the main complaint. The petitioner challenged his prosecution, claiming that withholding this foundational document was deeply defective, time-barred, and severely undermined his right to build a proper legal defence strategy.

The High Court issued a mandamus compelling the government to immediately furnish the sanction order to the petitioner, ruling that depriving an accused of such an essential regulatory document constitutes a grave miscarriage of justice.

This ruling serves as a vital shield, and it firmly establishes that enforcement agencies cannot weaponise administrative secrecy.

B. Legislative Updates

[B.1] MCA allows CSR spending through zero coupon zero principal instruments

In the context of the Companies Act, 2013, corporate social responsibility (CSR) is a statutory obligation for profitable companies. Under section 135, companies meeting specific thresholds of net worth, turnover, or net profit must spend at least 2% of their average net profits made during the last three financial years on CSR activities. These activities are mandated to align with Schedule VII of the Act, which includes areas like promoting healthcare and education; ensuring environmental sustainability and ecological balance; reducing inequality faced by social and economically backward groups; and rural development projects.

The MCA issued a notification dated May 27th, 2026, that broadens the methods by which a company can fulfil the legal mandate of CSR spending. It has added zero coupon zero principal (ZCZP) instruments as a recognised vehicle for CSR spending.

ZCZP instruments are defined as securities issued by non-profit organisations registered on the social stock exchange segment of recognised stock exchanges. A company’s expenditure through these instruments is capped at 10% of its total CSR expenditure for that financial year, and companies subscribing to these instruments are exempt from conducting an impact assessment for projects funded through this mechanism.

[B.2] Renewable energy projects qualify as public private partnership projects for InvITs

An infrastructure company approached SEBI with a question: do renewable energy projects secured via tariff-based competitive bidding from the government satisfy the strict legal definition of a public-private partnership (PPP)?

In its informal guidance, SEBI clarified that such green energy projects undertaken by Special Purpose Vehicles (SPVs) of an Infrastructure Investment Trust (InvIT), either through open competitive bidding or by a Memorandum of Understanding (MoU) with public entities, can indeed be classified as PPP projects under Regulation 2(1)(zm) of the SEBI (InvIT) Regulations, 2014.

This interpretation expands the scope of the infrastructure framework from traditional asset-heavy frameworks to modern green energy setups.