The Supreme Court on Tuesday, 1 September 2026, reiterated the principle that a litigant cannot be placed in a worse position merely for having availed a remedy provided under law. The bench comprising Justice JB Pardiwala and Justice Ujjal Bhuyan delivered the judgment while adjudicating an appeal filed by Saudi Arabian Airlines against a penalty imposed under Section 38(3) of the Finance Act, 1979 for delayed deposit of Foreign Travel Tax (FTT).
The airline was authorised to collect FTT from passengers on international journeys under Section 35 of the Finance Act, 1979. It delayed depositing the tax into the government treasury on six occasions between 1994 and 1997. In five instances, demand drafts had been purchased before the due dates but could not be deposited on time due to security restrictions. The sixth delay was attributed to an employee being on emergency leave. The adjudicating authority, in the original order-in-original, imposed a penalty of Rs. 12,000 for the six instances of delayed deposit.
Aggrieved by this order, the appellant filed an appeal. The matter was remanded for fresh adjudication. On remand, the adjudicating authority passed a de novo order enhancing the penalty to Rs. 71,29,140. The appellant then approached successive forums—the appellate authority, the revisional authority under the Ministry of Finance, and the Bombay High Court—arguing that the enhancement placed it in a position far worse than if it had never appealed. Had the airline accepted the original order, its liability would have remained at Rs. 12,000. By exercising its statutory right of appeal, it faced a penalty over 590 times higher.
These contentions were rejected at every stage. The appellate authority held that the original penalty of Rs. 12,000 was erroneous, being less than the statutory minimum under Section 38(3), and that this inadvertent error had merely been corrected on remand. The revisional authority and the Bombay High Court concurred, holding that since the remand was not limited, the adjudicating authority was free to re-examine and enhance the penalty in accordance with the statute.
However, the Supreme Court disagreed. It held that all three forums had erred in upholding the enhanced penalty. The bench posed the central issue: whether a litigant can be worse off by approaching the appellate forum as provided under the law or by approaching a court of law. Answering in the negative, the Court relied on its earlier decision in Jyoti Plastic Works Pvt. Ltd. v. Union of India, authored by Justice Ujjal Bhuyan, which had affirmed that an appellant cannot be worse off by reason of filing an appeal.
The Court explained that the maxim reformatio in peius means a change towards the worse. In many jurisdictions, the practice of a higher forum making a lower order worse for the very party who appealed it is forbidden. The principle, when read as 'no reformatio in peius' or 'prohibition of reformatio in peius', denotes a rule of fair procedure under which using a legal remedy should not aggravate the situation of the person availing it. This principle is part of natural justice as well as a principle of equality.
The Court further invoked its recent decision in Nagarajan v. State of Tamil Nadu, wherein the principle had been endorsed and applied, holding that no appellant, by filing an appeal, can be placed in a position worse than what existed prior to the filing of the appeal.
Applying the principle, the bench held that the enhancement of penalty from Rs. 12,000 to Rs. 71,29,140 ensued solely because the appellant had exercised its right to appeal. Such an outcome could not be countenanced, regardless of whether the original penalty computation was technically erroneous. Consequently, the Court set aside the penalty imposed on the appellant in its entirety.